Travelers 2009 Annual Report Download - page 253

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
Currently, it is not possible to predict legal outcomes and their impact on the future development
of claims and litigation relating to asbestos and environmental claims. Any such development will be
affected by future court decisions and interpretations, as well as changes in applicable legislation.
Because of these uncertainties, additional liabilities may arise for amounts in excess of the current
related reserves. In addition, the Company’s estimate of ultimate claims and claim adjustment expenses
may change. These additional liabilities or increases in estimates, or a range of either, cannot now be
reasonably estimated and could result in income statement charges that could be material to the
Company’s results of operations in future periods.
Other Proceedings
Reinsurance Litigation—From time to time, the Company is involved in proceedings addressing
disputes with its reinsurers regarding the collection of amounts due under the Company’s reinsurance
agreements. These proceedings may be initiated by the Company or the reinsurers and may involve the
terms of the reinsurance agreements, the coverage of particular claims, exclusions under the
agreements, as well as counterclaims for rescission of the agreements. One of these disputes is the
action described in the following paragraphs.
The Company’s Gulf operation brought an action on May 22, 2003 in the Supreme Court of New
York, County of New York (Gulf Insurance Company v. Transatlantic Reinsurance Company, et al.),
against several reinsurers, later amended to include Gerling Global Reinsurance Corporation of
America (Gerling), to recover amounts due under reinsurance contracts issued to Gulf and related to
Gulf’s February 2003 settlement of a coverage dispute under a vehicle residual value protection
insurance policy. Gerling has sought rescission of the reinsurance contracts and unspecified damages
for breach of contract. In prior years, Gulf entered into final settlement agreements with the reinsurers
other than Gerling.
In November 2007, the trial court issued rulings denying Gulf’s motion for partial summary
judgment against Gerling and granting Gerling’s motion for partial summary judgment on certain
claims and counterclaims. Gulf appealed the trial court’s decision to the Supreme Court of New York
Appellate Division, First Department. On October 1, 2009, the Appellate Division issued an opinion
reversing certain portions of the trial court’s summary judgment rulings, while affirming other portions
of those rulings and remanded the case to the trial court. In November 2009, Gulf entered into a final
settlement agreement with Gerling. Accordingly, this entire matter is now concluded.
Based on the Company’s beliefs about its legal positions in its various reinsurance recovery
proceedings, the Company does not expect any of these matters will have a material adverse effect on
its results of operations in a future period.
Industry-Wide Investigations—As previously disclosed, as part of industry-wide investigations that
commenced in October 2004, the Company and its affiliates 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 (SEC). The areas of pending inquiry addressed
to the Company included 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.
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