Travelers 2007 Annual Report Download - page 71

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.
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. The plaintiffs allege that the 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. Similar lawsuits were filed in West Virginia, Massachusetts and Hawaii state courts
(these suits are collectively referred to as the Statutory and Hawaii Actions).
In March 2002, the plaintiffs in consolidated asbestos actions pending before a mass tort panel of
judges in West Virginia state court amended their complaint to include TPC as a defendant, alleging
that TPC and other insurers breached alleged duties to certain users of asbestos products. The
plaintiffs seek damages, including punitive damages. Lawsuits seeking similar relief and raising similar
allegations, primarily violations of purported common law duties to third parties, 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 to as the Common Law
Claims).
The federal bankruptcy court that had presided over the bankruptcy of TPC’s former policyholder
Johns-Manville Corporation issued a temporary injunction prohibiting the prosecution of the Statutory
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