Travelers 2010 Annual Report Download - page 65

We anticipate the filing of other direct actions against insurers, including us, 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. We believe we have meritorious
defenses to these claims and have received favorable rulings in certain jurisdictions.
Environmental Claims. We continue to receive claims from policyholders who allege that they are
liable for injury or damage arising out of their alleged disposition of toxic substances. Mostly, these
claims are due to various legislative as well as regulatory efforts aimed at environmental remediation.
For instance, the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), enacted in 1980 and later modified, enables private parties as well as federal and state
governments to take action with respect to releases and threatened releases of hazardous substances.
This federal statute permits the recovery of response costs from some liable parties and may require
liable parties to undertake their own remedial action. Liability under CERCLA may be joint and
several with other responsible parties.
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 in the cost to resolve,
and/or the number of, 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 environment could be affected by
changes in applicable legislation and future court and regulatory decisions and interpretations, including
the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for
the pursuit of asbestos claims. 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 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.
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