Travelers 2006 Annual Report Download - page 238

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
On October 1, 2003, Gulf entered into a final settlement agreement with Employers, and all claims
and counterclaims with respect to Employers have beendismissed. On May 26, 2004, the Court denied
Gulf’s motion to dismiss certain claims asserted by Transatlantic and denied a joint motion by
Transatlantic, XL and Odyssey for summary judgment against Gulf. On December 22, 2006, Gulf and XL
entered into a final settlement agreement which resolves all claims between Gulf and XL under the
reinsurance agreements at issue in the litigation. Fact and expert discovery are complete with respect to
the remaining parties: Transatlantic, Odyssey and Gerling. Gulf, Transatlantic and Gerling have filed
motions for partial summary judgment. The Court has not yet set a trial date. Gulf denies the reinsurers’
allegations, believes that it has a strong legal basis to collect the amounts due under thereinsurance
contracts andintends to vigorously pursue the actions.
Based on the Company’s beliefs about its legal positions in its various reinsurance recovery
proceedings, the Companydoes not expect any of these matters will have a material adverse effect on its
results of operations in a future period.
The Company is a defendant in three consolidated lawsuits in the United States District Court for the
Eastern District of Louisiana arising out of disputes with certain policyholders over whether insurance
coverage is available for flood losses arising fromHurricane Katrina: Chehardy, et al. v. State Farm, et al. ,
C.A. No. 06-1672, 06-1673 and06-1674, Vanderbrook, et al. v. State Farm Fire & Cas. Co., et al. C.A.
No. 05-6323;and Xavier University of Louisiana v. Travelers Property Ca. Co. of America, C.A. No. 06-516.
Chehardy and Vanderbrook are proposed class actions in which the Company is one of several insurer
defendants.Xavier is an individual suit involving a property insurance policy brought by one of the
Company’s insureds. The losses involved in all of these suits allegedly were caused by the failure of the
New Orleans levees. On November 27, 2006, the Court issued a ruling in the three consolidated cases
denying the motions of the Company and certain other insurers for a summary disposition of the cases.
The Court’s ruling does not determine that any additional amounts are owed under any of the Company’s
policiesor otherwise reach the merits of the policyholders’ claims.The Company disagrees with the ruling
and, along withcertain other insurers named in the consolidated lawsuits, filed a motion with the United
States Court of Appeals for the Fifth Circuit, seeking to have the Court of Appeals accept an immediate
appeal from the District Court’s ruling. OnFebruary 1, 2007, the Fifth Circuit accepted the appeal.
As part of ongoing, industry-wide investigations, the Company and its affiliates have received
subpoenas and written requests for information from government agencies and authorities. The areas of
pending inquiry addressed to the Company include its relationship with brokers and agents, and the
Company’s involvement with “non-traditional insurance and reinsurance products.” The Company or its
affiliates have received subpoenas or requests for information, in each case with respect to one or both of
the areas described above, from: (i) State of California Office of the Attorney General; (ii) State of
California Department of Insurance; (iii) Licensing and Market Conduct Compliance Division, Financial
Services Commission of Ontario, Canada; (iv) State of Connecticut InsuranceDepartment; (v) State of
Connecticut Office of the Attorney General; (vi) State of Delaware Department of Insurance; (vii) State of
Florida Department of Financial Services; (viii) State of Florida Office of Insurance Regulation; (ix) State
of Florida Department of Legal Affairs Office of the Attorney General; (x) State of Georgia Office of the
Commissioner of Insurance; (xi) State ofHawaii Office of the Attorney General; (xii) State of Illinois
Office of the Attorney General; (xiii) State of Illinois Department of Financial andProfessional
Regulation; (xiv) State of Iowa Insurance Division; (xv) State of Maryland Office of the Attorney General;