Travelers 2008 Annual Report Download - page 249

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
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 (SEC). 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 cooperated 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 was commenced after the announcement of
litigation brought in October 2004 by the New York Attorney General’s office against a major broker.
The Company completed its review. With respect to the identified finite products purchased and sold,
the Company concluded that no adjustment to previously issued financial statements was required. Any
authority with open inquiries or investigations could ask that additional work be performed or reach
conclusions different from the Company’s.
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
the Sherman Act claims on August 31, 2007 and the RICO claims on September 28, 2007, both with
prejudice, and declined to exercise supplemental jurisdiction over the state law claims. The plaintiffs
are appealing the district court’s decisions to the U.S. Court of Appeals for the Third Circuit.
Additional individual actions have been brought in state and federal courts against the Company
involving allegations similar to those in In re Insurance Brokerage Antitrust Litigation, and further actions
may be brought. The Company believes that all of these lawsuits have no merit and intends to defend
vigorously.
In addition to those described above, the Company is involved in numerous lawsuits, not involving
asbestos and environmental claims, arising mostly in the ordinary course of business operations, either
as a liability insurer defending third-party claims brought against policyholders, or as an insurer
defending claims brought against it relating to coverage or the Company’s business practices. While the
ultimate resolution of these legal proceedings could be material to the Company’s results of operations
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