Travelers 2006 Annual Report Download - page 69

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United States Supreme Court denied TPC’s petition for a writ of certiorari seekingreview of the Third
Circuit’s decision. As a result, the matter has been remanded to district court and TPC has asked the
district court to remand the arbitration to the panel that initially ruled in favor of TPC for further
proceedings consistent with the Third Circuit’s decision. ACandS has opposed that request.
In the other proceeding, a related case pending before the same court and commenced in
September 2000 (ACandS v. Travelers Casualty and Surety Co., U.S.D.Ct., E.D. Pa.), ACandS sought a
declaration of the extent to which the asbestos bodily injury claims against ACandS are subject to
occurrence limits under insurance policies issued by TPC. TPC filed a motion to dismiss this action based
upon the July 31, 2003 arbitration decision described above. The district court found the dispute was moot
as a result of the arbitration panel’s decision and dismissed the case. As a result of the January 19, 2006
ruling bythe Third Circuit and the Supreme Court’s denial of certiorari, described in the paragraph above,
this case has been reinstated.
The Company continues to believe it has meritorious positions in these ACandS-related proceedings
and intends to litigate vigorously.
In October 2001 and April 2002, two purported class action suits ( Wise v. Travelers and
Meninger v. Travelers) were filed against TPC and other insurers (not including SPC) in state court in West
Virginia. These cases were subsequently consolidated into a single proceeding in the Circuit Court of
Kanawha County, West Virginia. Plaintiffs allege thatthe insurer defendants engaged in unfair trade
practices by inappropriately handling and settling asbestos claims. The plaintiffs seek to reopen large
numbers of settled asbestos claims and to impose liability for damages, including punitive damages, directly
on insurers. Lawsuits similar to Wisewere filed in Massachusetts and Hawaii (these suits are collectively
referred to as the “Statutory and Hawaii Actions”). Also, in November 2001, plaintiffs in consolidated
asbestos actions pending before a mass tort panel of judges in West Virginia state court moved to amend
their complaint to name TPC as a defendant, alleging thatTPC and other insurers breached alleged duties
to certain users of asbestos products. In March 2002, the court granted the motion to amend. Plaintiffs
seek damages, including punitive damages. Lawsuits seeking similar relief and raisingallegations similar to
those presented in the West Virginia amended complaint are also pending in Texas state court against
TPC and SPC, and in Louisiana state court against TPC (the claims asserted in these suits, together with
the West Virginia suit, are collectively referred toas the “Common Law Claims”). Lawsuits seeking similar
relief in Ohio have been dismissed.
All of the actions against TPC described in the preceding paragraph, other than the Hawaii Actions,
had been subject to a temporary restraining order entered by the federal bankruptcy court in New York
that had previously presided over and approved the reorganization in bankruptcy of TPC’s former
policyholder Johns-Manville Corporation and affiliated entities. In August 2002, the bankruptcy court held
a hearing on TPC’s motion for a preliminary injunction prohibiting further prosecution of the lawsuits
pursuant to the reorganization plan and related orders. At the conclusion of this hearing, the court ordered
the parties to mediation, appointed a mediator and continued the temporary restraining order. During
2003, the same bankruptcy court extended the existing injunction to apply to an additional set of cases filed
in various state courts in Texas and Ohio as well as to the attorneys who are prosecuting these cases. The
order also enjoined these attorneys and their respective law firms from commencing any further lawsuits
against TPC based upon these allegations without the prior approval of the court. Notwithstanding the
injunction, additional Common Law Claims were filed and served on TPC.
On November 19, 2003, the parties advised the bankruptcy court that a settlement of the Statutory
and Hawaii Actions had been reached. This settlement includes a lump-sum payment of up to $412 million
by TPC, subject to a number of significant contingencies. After continued meetings with the mediator, the
parties advised the bankruptcy court on May 25, 2004 that a settlement resolving substantially all pending
and similar future Common Law Claims against TPC had also been reached. This settlement requires a