Travelers 2006 Annual Report Download - page 240

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
Companies, Inc., et al. (N.D.Ill. Jan. 21, 2005), Boros v. Marsh & McLennan Companies, Inc., et al. (N.D.
Cal. Feb.4,2005), Mulcahy v. Arthur J. Gallagher & Co., et al. (D.N.J. Feb. 23, 2005) and Golden Gate
Bridge, Highway, and Transportation District v. Marsh & McLennan Companies, Inc., et al. (D.N.J. Feb. 23,
2005). To the extent they were not originally filed there, the federal class actions were transferred by the
Judicial Panel on Multidistrict Litigation to the United States District Court for the District of New Jersey
and have been consolidated with other class actions under the caption In re Insurance Brokerage Antitrust
Litigation, a multidistrict litigation proceeding in that District. On August 1, 2005, various plaintiffs,
including the four named plaintiffs in the above-referenced class actions, filed an amended consolidated
class action complaint naming various brokers and insurers, including the Company and certain of its
affiliates, on behalf of a putative nationwide class of policyholders. The complaint includes causes of action
under the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state
common law and the laws of the various states prohibiting antitrust violations. Plaintiffs seek monetary
damages, includingpunitive damages and trebled damages, permanent injunctive relief, restitution,
including disgorgement of profits, interest and costs, including attorneys’ fees. On November 29, 2005, all
defendants moved to dismiss the complaint for failure to state a claim. Oral arguments on the defendants’
motion to dismiss were heard on July 26, 2006. On October 3, 2006, the court ruled that the complaint
failed to plead actionable claims under the Sherman Act or RICO, provided plaintiffs an opportunity to
replead those claims and reserved decision with respect to remaining state law claims. On November 30,
2006, defendants renewed their motions to dismiss. On February 13, 2006, the named plaintiffs moved to
certify a nationwide class consisting of all persons who between August 26, 1994 and the date of class
certification engaged the services of a broker defendant (or related entity) in connection with the
procurement or renewal of insurance and who entered into or renewed a contract of insurance with one or
more of the insurer defendants, including the Company. The renewed motion to dismiss and class
certification motion remain pending. Also, additional individual actions have been brought in state and
federal courts against the Company involving allegations similar to those in In re Insurance Brokerage
Antitrust Litigation and further actions may be brought. The Company believes that all of these lawsuits
have no merit and intends to defend vigorously.
In addition to those described above, the Company is involved in numerous lawsuits, not involving
asbestos and environmental claims, arising mostly in the ordinary course of business operations either as a
liability insurer defending third-party claims brought against policyholders, or as an insurer defending
claims brought against it relating to coverage or the Company’s business practices. While the ultimate
resolution of these legal proceedings could be material to the Company’s results of operations in a future
period, in the opinion of the Company’s management, none would likely have a materialadverse effect on
the Company’s financial condition or liquidity.
On July 23, 2004, the Company announced that it was seeking guidance from thestaff of the Division
of CorporationFinance of the SEC with respect to the appropriate purchase accounting treatment for
certain second quarter 2004 adjustments totaling $1.63 billion ($1.07billion after-tax). The Company
recorded these adjustments as charges in its consolidated statement of income in the second quarter of
2004. Through an informal comment process, thestaff of the Division of Corporation Finance has
subsequently asked for further information, which the Company has provided. Specifically, the staff has
asked for information concerning the Company’s adjustments to certain of SPC’s insurance reserves and
reserves for reinsurance recoverables andpremiums due from policyholders, and how those adjustments
may relate to SPC’s reserves for periods prior to the merger of SPC and TPC. After reviewing the staff’s