Travelers 2011 Annual Report Download - page 248

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
In November 2003, the parties reached a settlement of the Statutory and Hawaii Actions. This
settlement includes a lump-sum payment of up to $412 million by TPC, subject to a number of
significant contingencies. In May 2004, the parties reached a settlement resolving substantially all
pending and similar future Common Law Claims against TPC. This settlement requires a payment of
up to $90 million by TPC, subject to a number of significant contingencies. Among the contingencies
for each of these settlements is a final order of the bankruptcy court clarifying that all of these claims,
and similar future asbestos-related claims against TPC, are barred by prior orders entered by the
bankruptcy court (‘‘the 1986 Orders’’).
On August 17, 2004, the bankruptcy court entered an order approving the settlements and
clarifying that the 1986 Orders barred the pending Statutory and Hawaii Actions and substantially all
Common Law Claims pending against TPC (‘‘the Clarifying Order’’). The Clarifying Order also applies
to similar direct action claims that may be filed in the future.
On March 29, 2006, the U.S. District Court for the Southern District of New York substantially
affirmed the Clarifying Order while vacating that portion of the order that 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 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 TPC, 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. 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.
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.
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