Travelers 2006 Annual Report Download - page 236

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
in June of 2005, has deniedthe insurers’ initial challenges to thepleadings. That ruling was contrary to the
rulings by other courts in similar cases, and SPC and the other insurer defendants have filed a mandamus
petition with the Texas Court of Appeals.
The Company is defending its asbestos- and environmental-related litigation vigorously and believes
that it has meritorious defenses; however, the outcome of these disputes is uncertain. In this regard, the
Company employs dedicated specialists and aggressive resolution strategies to manage asbestos and
environmental loss exposure, including settling litigation under appropriate circumstances. For a
discussion of other information regarding the Company’s asbestos and environmental exposure, see
“Item7—Management’sDiscussion and Analysis ofFinancial Condition and Results of Operations—
Asbestos Claims and Litigation”, “—Environmental Claims and Litigation” and “—Uncertainty Regarding
Adequacy of Asbestos and Environmental Reserves.”
Currently, it is not possible to predict legal outcomes and their impact on the future development of
claims and litigation relating to asbestos and environmental claims. Any such development will be affected
by future court decisions and interpretations, as well as changes in applicable legislation. Because of these
uncertainties, additional liabilities may arise for amounts in excess of the current related reserves. In
addition, the Company’s estimate of ultimate claims and claim adjustment expenses may change. These
additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and
could result in income statement charges that could bematerial to the Company’s results of operations in
future periods.
Shareholder Litigation and Related Proceedings
Three actions against the Company and certain of its current and former officers and directors are
pending in the United States District Court for the District of Minnesota. Two of these actions, which were
originally captioned Kahn v. The St. Paul Travelers Companies, Inc., et al. (Nov. 2, 2004) and Michael A.
Bernstein Profit Sharing Plan v. The St. Paul Travelers Companies, Inc., et al. (Nov. 10, 2004), are putative
class actions brought by certain shareholders of the Company against the Company and certain of its
current and former officers and directors. These actions have been consolidated as In re St. Paul Travelers
Securities Litigation II, and a lead plaintiff and lead counsel have been appointed. On July 11, 2005, the
lead plaintiff filed an amended consolidated complaint. The amended consolidated complaint alleges
violations of federal securities laws in connection with the Company’s alleged failure to make disclosure
relating to the practice of paying brokers commissions on a contingent basis, the Company’s alleged
involvement in a conspiracy to rig bids and the Company’s allegedly improper use of finite reinsurance
products. On September 26, 2005, the Company and the other defendants inIn re St. Paul Travelers
Securities Litigation II moved to dismiss the amended consolidated complaint for failure to state a claim.
Oral argument on the Company’s motionto dismiss was presented on June15, 2006. By order dated
September 25, 2006, the Court denied the Company’s motion to dismiss. Discovery has commenced. On
November 3, 2006, the Company and the other defendants in In re St. Paul Travelers Securities Litigation II
moved for partial judgmenton the pleadings seeking dismissal of the allegations relating to the allegedly
improper use of finite reinsuranceproducts. That motion remainspending. In the third action, an alleged
beneficiary of the Company’s 401(k) savings plan commenced a putative class action against the Company
and certain of its current and former officers and directors captioned Spiziri v. TheSt. Paul Travelers
Companies, Inc., et al. (Dec. 28, 2004). The complaint alleges violations of the Employee Retirement
Income Security Act based on the theory that defendants were allegedly aware of issues concerning the