Travelers 2012 Annual Report Download - page 250

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
the parties reached a settlement of the Statutory and Hawaii Actions, which included 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, which included a payment of up to $90 million by TPC, subject to similar
contingencies. Among the contingencies for each of these settlements was that the bankruptcy court
issue an order, which must become a final order, clarifying that all of these claims, and similar future
asbestos-related claims against TPC, as well as related contribution claims, are barred by 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. Although the District Court substantially
affirmed the Clarifying Order, on February 15, 2008, the Second Circuit issued an opinion vacating on
jurisdictional grounds the District Court’s approval of the Clarifying Order.
On December 12, 2008, the United States Supreme Court granted TPC’s Petition for Writ of
Certiorari and, on June 18, 2009, the Supreme Court reversed the Second Circuit’s February 15, 2008
decision, finding, among other things, that the 1986 Orders are final and therefore may not be
collaterally challenged on jurisdictional grounds. The Supreme Court further 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 March 22, 2010, the Second Circuit issued an opinion in which it found that the notice of the
1986 Orders provided to one remaining objector was insufficient to bar contribution claims by that
objector against TPC. TPC’s Petition for Rehearing and Rehearing En Banc were denied May 25, 2010
and, its Petition for Writ of Certiorari and Petition for a Writ of Mandamus were denied by the United
States Supreme Court on November 29, 2010.
The plaintiffs in the Statutory and Hawaii actions and the Common Law Claims actions thereafter
filed motions in the bankruptcy court to compel TPC to make payment under the settlement
agreements, arguing that all conditions precedent to the settlements had been met. On December 16,
2010, the bankruptcy court granted the plaintiffs’ motions and ruled that TPC was required to fund the
settlements. The court entered judgment against TPC on January 20, 2011 in accordance with this
ruling and ordered TPC to pay the settlement amounts plus prejudgment interest. The bankruptcy
court’s judgment was reversed by the district court on March 1, 2012, the district court having found
that the conditions to the settlements had not been met in view of the Second Circuit’s March 22, 2010
ruling permitting the filing of contribution claims against TPC. The plaintiffs appealed the district
court’s March 1, 2012 decision to the Second Circuit Court of Appeals. Oral argument before the
Second Circuit took place on January 10, 2013, and the parties await the court’s decision.
SPC, which is not covered by the Manville bankruptcy court rulings or the settlements described
above, from time to time has been named as a defendant in direct action cases in Texas state court
asserting common law claims. All such cases that are still pending and in which SPC has been served
are currently on the inactive docket in Texas state court. If any of those cases becomes active, SPC
intends to litigate those cases vigorously. SPC was previously a defendant in similar direct actions in
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