Travelers 2010 Annual Report Download - page 104

settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases
which are favorable to the Company 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 the
Company. As in the past, the Company will continue to pursue settlement opportunities.
In addition to claims against policyholders, proceedings have been launched directly against
insurers, including the Company, 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. The Company anticipates the filing of other direct actions against insurers,
including the Company, 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. The Company believes it has meritorious defenses to these claims and has
received favorable rulings in certain jurisdictions.
Travelers Property Casualty Corp. (TPC), a wholly-owned subsidiary of the Company, had entered
into settlement agreements, which are subject to a number of contingencies, in connection with a
number of these direct action claims. These settlement agreements had been approved by the court in
connection with proceedings initiated by TPC in the Johns Manville bankruptcy court. On March 29,
2006, the U.S. District Court for the Southern District of New York substantially affirmed the
bankruptcy court’s orders, while vacating that portion of the bankruptcy court’s orders which required
all future direct 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 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 bankruptcy court’s order that barred the filing
of certain direct action claims against TPC in the future. 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. Those petitions were granted and on June 18, 2009, the Supreme Court ruled in favor of the
Company, reversing the Second Circuit’s decision. However, since the Second Circuit had not ruled on
several 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. On March 22, 2010, the Second Circuit issued an opinion in which it found
that the notice of the 1986 Orders provided to the remaining objector was insufficient to bar
contribution claims by that objector against TPC. On April 5, 2010, TPC filed a Petition for Rehearing
and Rehearing En Banc with the Second Circuit, requesting further review of its March 22, 2010
opinion, which was denied on May 25, 2010. On August 18, 2010, TPC filed a Petition for Writ of
Certiorari in the United States Supreme Court seeking review of the Second Circuit’s March 22, 2010
opinion, and a Petition for a Writ of Mandamus seeking an order from the Supreme Court requiring
the Second Circuit to comply with the Supreme Court’s June 18, 2009 ruling in TPC’s favor. The
Supreme Court denied the Petitions on November 29, 2010. The plaintiffs in the Statutory and Hawaii
actions and the Common Law Claims actions (as defined in note 15 to the consolidated financial
statements) filed Motions to Compel with the bankruptcy court on September 2, 2010 and
September 3, 2010, respectively, arguing that all conditions precedent to the settlements have been met
and seeking to require TPC to pay the settlement amounts. On September 30, 2010, TPC filed an
Opposition to the plaintiffs’ Motions to Compel on the grounds that the conditions precedent to the
settlements, principally the requirement that all contribution claims be barred, have not been met in
light of the Second Circuit’s March 22, 2010 opinion. On December 16, 2010, the bankruptcy court
granted the plaintiffs’ motions and ruled that TPC was required to fund the settlements. On
January 20, 2011, the bankruptcy court entered judgment in accordance with its December 16, 2010
ruling and ordered TPC to pay the settlement amounts plus prejudgment interest. On January 21, 2011,
TPC filed an appeal with the U.S. District Court for the Southern District of New York from the
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