Travelers 2007 Annual Report Download - page 235

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES
Contingencies
The following section describes the major pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to
which any of the Company’s property is subject.
Asbestos- and Environmental-Related Proceedings
In the ordinary course of its insurance business, the Company receives claims for insurance arising
under policies issued by the Company asserting alleged injuries and damages from asbestos- and
environmental-related exposures that are the subject of related coverage litigation, including, among
others, the litigation described below. The Company continues to be subject to aggressive asbestos-
related litigation. The conditions surrounding the final resolution of these claims and the related
litigation continue to change. The Company is defending its asbestos- and environmental-related
litigation vigorously and believes that it has meritorious defenses; however, the outcomes of these
disputes are 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 ‘‘Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Asbestos Claims and Litigation,’’ ‘‘—Environmental Claims and
Litigation’’ and ‘‘—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.’’
Travelers Property Casualty Corp. (TPC), a wholly-owned subsidiary of the Company, is involved in
three significant proceedings relating to ACandS, Inc. (ACandS), formerly a national distributor and
installer of products containing asbestos. The proceedings, which are pending in the U.S. Bankruptcy
Court for the District of Delaware (In re: ACandS, Inc.) and the U.S. District Court for the District of
Pennsylvania (ACandS, Inc. v. Travelers Casualty and Surety Co., No. 03-MC-222 and ACandS, Inc. v.
Travelers Casualty and Surety Co., 00-CV-4633), involve disputes as to whether and to what extent any of
ACandS’ potential liabilities for current or future bodily injury asbestos claims are covered by insurance
policies issued by TPC.
On July 6, 2007, the Company announced that it entered into a settlement to resolve fully all
current and future asbestos-related coverage claims relating to ACandS, including the three proceedings
mentioned above. Under the settlement agreement, the Company will contribute $449 million to a trust
to be established pursuant to ACandS’ plan of reorganization. In exchange, the Company will be
released from any obligations it has to ACandS for asbestos-related claims and will be protected from
any such claims by injunctions to be issued in the Company’s favor by the federal court overseeing
ACandS’ bankruptcy case. The settlement is subject to a number of contingencies. Pursuant to the
settlement agreement, ACandS and the Company have agreed to stay the claims against each other in
the three proceedings described above. Once all of the contingencies of the settlement are satisfied,
these claims will be dismissed with prejudice.
On August 27, 2007, the bankruptcy court overseeing ACandS’ bankruptcy approved the settlement
and no appeals from that approval were taken. As a result, the Company has placed $449 million into
escrow. Upon fulfillment of all contingencies, including final court approval of a plan of reorganization
for ACandS and the issuance of the injunctions described above, those funds will be released from
escrow to the trust created under ACandS’ plan of reorganization. The release of the funds to the trust
will be recorded as a paid claim and reduction in claim reserves, and accordingly, there will be no
effect on the Company’s results of operations. The Company expects to seek to recover approximately
$84 million of the $449 million from reinsurers.
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