Travelers 2009 Annual Report Download - page 78

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.
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 these
matters. 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. In particular, upon completion of its
review with respect to non-traditional insurance and reinsurance products, 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.
Broker Anti-Trust Litigation—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 appealed the district court’s decisions to the U.S.
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