Travelers 2007 Annual Report Download - page 239

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
decision in Sher may be relevant to the outcome of the district court cases. Oral argument in Sher is
scheduled for February 26, 2008.
As previously disclosed, as part of ongoing, industry-wide investigations, the Company and its
affiliates have received subpoenas and written requests for information from a number of government
agencies and authorities, including, among others, state attorneys general, state insurance departments,
the U.S. Attorney for the Southern District of New York and the U.S. Securities and Exchange
Commission. 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 and its affiliates may receive additional subpoenas and requests for
information with respect to these matters.
The Company is cooperating with these subpoenas and requests for information. In addition,
outside counsel, with the oversight of the Company’s board of directors, conducted an internal review
of certain of the Company’s business practices. This review initially focused on the Company’s
relationship with brokers and was commenced after the announcement of litigation brought by the New
York Attorney General’s office against a major broker.
The internal review was expanded to address the various requests for information described above
and to verify whether the Company’s business practices in these areas have been appropriate. The
Company’s review has been extensive, involving the examination of e-mails and underwriting files, as
well as interviews of current and former employees.
In its review, the Company found only a few instances of conduct that were inconsistent with the
Company’s employee code of conduct and has responded appropriately. The Company’s internal review
with respect to finite reinsurance considered finite products the Company both purchased and sold. The
Company has completed its review with respect to the identified finite products purchased and sold,
and has concluded that no adjustment to previously issued financial statements is required.
Any authority with open inquiries or investigations could ask that additional work be performed or
reach conclusions different from the Company’s. Accordingly, it would be premature to reach any
conclusions as to the likely outcome of the regulatory inquiries described above.
In 2005, four putative class action lawsuits were brought against a number of insurance brokers
and insurers, including the Company and/or certain of its affiliates, by plaintiffs who allegedly
purchased insurance products through one or more of the defendant brokers. The plaintiffs alleged that
various insurance brokers conspired with each other and with various insurers, including the Company
and/or certain of its affiliates, to artificially inflate premiums, allocate brokerage customers and rig bids
for insurance products offered to those customers. To the extent they were not originally filed there,
the federal class actions were transferred to the U.S. District Court for the District of New Jersey and
were consolidated for pre-trial proceedings with other class actions under the caption In re Insurance
Brokerage Antitrust Litigation. 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 included 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. The complaint sought monetary damages, including
punitive damages and trebled damages, permanent injunctive relief, restitution, including disgorgement
of profits, interest and costs, including attorneys’ fees. All defendants moved to dismiss the complaint
for failure to state a claim. After giving plaintiffs multiple opportunities to replead, the court dismissed
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