Travelers 2008 Annual Report Download - page 104

2007 totaled $224 million, compared with $207 million in 2006. The net losses in this category for 2007
and 2006 were reduced by the favorable resolution of various prior year tax matters.
ASBESTOS CLAIMS AND LITIGATION
The Company believes that the property and casualty insurance industry has suffered from court
decisions and other trends that have attempted to expand insurance coverage for asbestos claims far
beyond the intent of insurers and policyholders. While the Company has experienced a decrease in
asbestos claims over the past several years, the Company continues to receive a significant number of
asbestos claims from the Company’s policyholders (which includes others seeking coverage under a
policy), including claims against the Company’s policyholders by individuals who do not appear to be
impaired by asbestos exposure. Factors underlying these claim filings include intensive advertising by
lawyers seeking asbestos claimants and the focus by plaintiffs on previously peripheral defendants. The
focus on these defendants is primarily the result of the number of traditional asbestos defendants who
have sought bankruptcy protection in previous years. In addition to contributing to the overall number
of claims, bankruptcy proceedings may increase the volatility of asbestos-related losses by initially
delaying the reporting of claims and later by significantly accelerating and increasing loss payments by
insurers, including the Company. Bankruptcy proceedings have also caused increased settlement
demands against those policyholders who are not in bankruptcy but that remain in the tort system.
Currently, in many jurisdictions, those who allege very serious injury and who can present credible
medical evidence of their injuries are receiving priority trial settings in the courts, while those who have
not shown any credible disease manifestation are having their hearing dates delayed or placed on an
inactive docket. This trend of prioritizing claims involving credible evidence of injuries, along with the
focus on previously peripheral defendants, contributes to the loss and loss expense payments
experienced by the Company. The Company’s asbestos-related claims and claim adjustment expense
experience also has been impacted by the unavailability of other insurance sources potentially available
to policyholders, whether through exhaustion of policy limits or through the insolvency of other
participating insurers.
The Company continues to be involved in coverage litigation concerning a number of
policyholders, some of whom have filed for bankruptcy, who in some instances have asserted that all or
a portion of their asbestos-related claims are not subject to aggregate limits on coverage. In these
instances, policyholders also may assert that each individual bodily injury claim should be treated as a
separate occurrence under the policy. It is difficult to predict whether these policyholders will be
successful on both issues. To the extent both issues are resolved in a policyholders’ favor and other
Company defenses are not successful, the Company’s coverage obligations under the policies at issue
would be materially increased and bounded only by the applicable per-occurrence limits and the
number of asbestos bodily injury claims against the policyholders. Accordingly, although the Company
has seen a moderation in the overall risk associated with these lawsuits, it remains difficult to predict
the ultimate cost of these claims.
Many coverage disputes with policyholders are only resolved through settlement agreements.
Because many policyholders make exaggerated demands, it is difficult to predict the outcome of
settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases
which are favorable to the Company but which could result in settlements for larger amounts than
originally anticipated. There also may be instances where a court may not approve a proposed
settlement, which may result in additional litigation and potentially less beneficial outcomes for the
Company. As in the past, the Company will continue to pursue settlement opportunities.
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, Inc. (ACandS), formerly a
national distributor and installer of products containing asbestos. Pursuant to that agreement, the
Company placed $449 million into escrow. The settlement was subject to a number of contingencies, all
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