Travelers 2009 Annual Report Download - page 66

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 keep track of the monetary amount being sought in those few claims which
indicate a monetary amount.
Asbestos and Environmental Claims. Uncertainties surrounding the final resolution of these claims
continue, and it is difficult to determine the ultimate exposure for asbestos and environmental 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 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, future developments pertaining
to our ability to recover reinsurance for asbestos and environmental claims and the unavailability of
other insurance sources potentially available to policyholders, whether through exhaustion of policy
limits or through the insolvency of other participating insurers. In addition, uncertainties arise from the
insolvency or bankruptcy of policyholders and other defendants. It is also not possible to predict
changes in the legal, regulatory and legislative environment and their impact on the future development
of asbestos and environmental claims. This development will be affected by future court and regulatory
decisions and interpretations, as well as changes in applicable legislation. It is also difficult to predict
the ultimate outcome of complex coverage disputes until settlement negotiations near completion and
significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is
particularly the case with policyholders in bankruptcy where negotiations often involve a large number
of claimants and other parties and require court approval to be effective.
While the ongoing evaluation of asbestos and environmental claims and associated liabilities
considers the inconsistencies of court decisions as to coverage, plaintiffs’ expanded theories of liability
and the risks inherent in complex litigation and other uncertainties, in the opinion of our management,
it is possible that the outcome of the continued uncertainties regarding these claims could result in
liability in future periods that differs from current reserves by an amount that could materially and
adversely affect our results of operations. See the ‘‘Asbestos Claims and Litigation’’ and
‘‘Environmental Claims and Litigation’’ sections of ‘‘Item 7—Management’s Discussion and Analysis of
Financial Condition and Results of Operations.’’ Also see ‘‘Item 3—Legal Proceedings.’’
We are exposed to, and may face adverse developments involving, mass tort claims such as those
relating to exposure to potentially harmful products or substances. In addition to asbestos and
environmental claims, we face exposure to other types of mass tort claims, including claims related to
exposure to potentially harmful products or substances, including lead paint, silica and welding rod
fumes. Establishing claims and claim adjustment expense reserves for mass tort claims is subject to
uncertainties because of many factors, including expanded theories of liability, disputes concerning
medical causation with respect to certain diseases, geographical concentration of the lawsuits asserting
the claims and the potential for a large rise in the total number of claims without underlying
epidemiological developments suggesting an increase in disease rates. Moreover, evolving judicial
interpretations regarding the application of various tort theories and defenses, including application of
various theories of joint and several liabilities, as well as the application of insurance coverage to these
claims, impede our ability to estimate our ultimate liability for such claims.
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