Travelers 2009 Annual Report Download - page 77

actions against TPC to first be approved by the bankruptcy court before proceeding in state or federal
court.
Various parties appealed the district court’s March 29, 2006 ruling to the U.S. Court of Appeals
for the Second Circuit. On February 15, 2008, the Second Circuit issued an opinion vacating on
jurisdictional grounds the District Court’s approval of the Clarifying Order. On February 29, 2008, TPC
and certain other parties to the appeals filed petitions for rehearing and/or rehearing en banc,
requesting reinstatement of the district court’s judgment, which were denied. TPC and certain other
parties filed Petitions for Writ of Certiorari in the United States Supreme Court seeking review of the
Second Circuit’s decision, and on December 12, 2008, the Petitions were granted.
On June 18, 2009, the Supreme Court ruled in favor of the Company, reversing the Second
Circuit’s February 15, 2008 decision, finding, among other things, that the 1986 Orders are final and
generally bar the Statutory and Hawaii actions and substantially all Common Law Claims against TPC.
Further, the Supreme Court ruled that the bankruptcy court had jurisdiction to issue the Clarifying
Order. However, since the Second Circuit had not ruled on certain additional issues, principally related
to procedural matters and the adequacy of notice provided to certain parties, the Supreme Court
remanded the case to the Second Circuit for further proceedings on those specific issues. Accordingly,
the settlements are not yet final. On October 21, 2009, all but one of the objectors to the Clarifying
Order requested that the Second Circuit dismiss their appeal of the order approving the settlement,
and that request was granted. Oral argument on the issues remaining to be considered on remand took
place on October 22, 2009. The parties await a decision from the Second Circuit.
SPC, which is not covered by the Manville bankruptcy court rulings or the settlements described
above, is a party to pending direct action cases in Texas state court asserting common law claims. All
such cases that are still pending and in which SPC has been served are currently on the inactive docket
in Texas state court. If any of those cases becomes active, SPC intends to litigate those cases vigorously.
SPC was previously a defendant in similar direct actions in Ohio state court. Those actions have all
been dismissed following favorable rulings by Ohio trial and appellate courts.
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
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