Travelers 2012 Annual Report Download - page 66

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.
The Company has been, and continues to be, involved in litigation involving insurance coverage
issues pertaining to environmental claims. The Company believes that some court decisions have
interpreted the insurance coverage to be broader than the original intent of the insurers and
policyholders. These decisions continue to be inconsistent and vary from jurisdiction to jurisdiction.
Uncertainties surrounding the final resolution of these asbestos and environmental claims continue,
and it is difficult to estimate our ultimate liability for such 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;
• the unavailability of other insurance sources potentially available to policyholders, whether
through exhaustion of policy limits or through the insolvency of other participating insurers; and
• uncertainties arising 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.
See the ‘‘Asbestos Claims and Litigation’’ and ‘‘Environmental Claims and Litigation’’ sections of
‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’
Also see ‘‘Item 3—Legal Proceedings.’’
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