Travelers 2008 Annual Report Download - page 65

To the extent both issues are resolved in a policyholder’s favor and our other defenses are not
successful, our 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 policyholder. Accordingly, 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 us 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 us. As in the past, we will
continue to pursue settlement opportunities.
In addition to claims against policyholders, proceedings have been launched directly against
insurers, including us, by individuals challenging insurers’ conduct with respect to the handling of past
asbestos claims and by individuals seeking damages arising from alleged asbestos-related bodily injuries.
We anticipate the filing of other direct actions against insurers, including us, in the future. It is difficult
to predict the outcome of these proceedings, including whether the plaintiffs will be able to sustain
these actions against insurers based on novel legal theories of liability.
Environmental Claims. We continue to receive claims from policyholders who allege that they are
liable for injury or damage arising out of their alleged disposition of toxic substances. Mostly, these
claims are due to various legislative as well as regulatory efforts aimed at environmental remediation.
For instance, the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), enacted in 1980 and later modified, enables private parties as well as federal and state
governments to take action with respect to releases and threatened releases of hazardous substances.
This federal statute permits the recovery of response costs from some liable parties and may require
liable parties to undertake their own remedial action. Liability under CERCLA may be joint and
several with other responsible parties.
We have been, and continue to be, involved in litigation involving insurance coverage issues
pertaining to environmental claims. We believe that some court decisions have interpreted the
insurance coverage to be broader than the original intent of the insurers and policyholders. These
decisions often pertain to insurance policies that were issued by us prior to the mid-1980s. These
decisions continue to be inconsistent and vary from jurisdiction to jurisdiction. Environmental claims
when submitted rarely indicate the monetary amount being sought by the claimant from the
policyholder, and we do not track the monetary amounts being sought in those few claims which
indicate a monetary amount.
Asbestos and Environmental Claims. Uncertainties surrounding the final resolution of asbestos and
environmental claims continue, and it is difficult to determine the ultimate exposure for these claims
and related litigation. As a result, these reserves are subject to revision as new information becomes
available and as claims develop. The continuing uncertainties include, without limitation, the risks and
lack of predictability inherent in complex litigation, any impact from the bankruptcy protection sought
by various asbestos producers and other asbestos defendants, a further increase or decrease in asbestos
and environmental claims beyond that which is anticipated, the role of any umbrella or excess policies
we have issued, the resolution or adjudication of some disputes pertaining to the amount of available
coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment
of these claims, the number and outcome of direct actions against us and future developments
pertaining to our ability to recover reinsurance for asbestos and environmental claims. It is also not
possible to predict changes in the legal and legislative environment and their impact on the future
development of asbestos and environmental claims. This development will be affected by future court
decisions and interpretations, as well as changes in applicable legislation, including legislation related to
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