Travelers 2010 Annual Report Download - page 247

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
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. Court of Appeals for the Third Circuit. On August 16, 2010, the Third Circuit affirmed the
district court’s dismissal of all Sherman Act and RICO claims against certain defendants, including the
Company, except for Sherman Act and RICO claims involving the sale of excess casualty insurance
through one defendant broker, as well as all state law claims, which they remanded to the district court
for further proceedings. On October 1, 2010, defendants, including the Company, filed renewed
motions to dismiss the remanded claims. The Company continues to believe that these claims are
without merit and intends to defend them vigorously.
Additional individual actions have been brought in state and federal courts against the Company
involving allegations similar to those in In re Insurance Brokerage Antitrust Litigation, and further actions
may be brought. The Company believes that all of these lawsuits have no merit and intends to defend
vigorously.
Other—In addition to those described above, the Company is involved in numerous lawsuits, not
involving asbestos and environmental claims, arising mostly in the ordinary course of business
operations, either as a liability insurer defending third-party claims brought against policyholders or as
an insurer defending claims brought against it relating to coverage or the Company’s business practices.
In addition, 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. While
the ultimate resolution of these legal proceedings could be material to the Company’s results of
operations in a future period, in the opinion of the Company’s management, none would likely have a
material adverse effect on the Company’s financial position or liquidity.
Gain Contingency
On August 20, 2010, in a reinsurance dispute in New York state court captioned United States
Fidelity & Guaranty Company v. American Re-Insurance Company, et al., the trial court granted summary
judgment for the Company, and on October 25, 2010, entered judgment awarding the Company
$251 million plus pre-judgment interest in the amount of $169 million. United States Fidelity and
Guaranty Company is a subsidiary of the Company. The $251 million awarded by the court represents
the amount owed to the Company under the terms of the reinsurance agreements and is reported as
part of reinsurance recoverables in the Company’s consolidated balance sheet. The interest awarded by
the Court is treated for accounting purposes as a gain contingency in accordance with FASB Topic 450,
Contingencies, and accordingly has not been recognized in the Company’s consolidated financial
statements. Post-judgment interest continues to accrue at the rate of 9 percent (without compounding)
on the total judgment of $420 million. The judgment, including the award of interest, has been
appealed. The Company intends to vigorously pursue collection of the judgment.
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