Travelers 2013 Annual Report Download - page 111

ASBESTOS CLAIMS AND LITIGATION
The Company believes that the property and casualty insurance industry has suffered from court
decisions and other trends that have expanded insurance coverage for asbestos claims far beyond the
original intent of insurers and policyholders. The Company has received and continues to receive a
significant number of asbestos claims from the Company’s policyholders (which includes others seeking
coverage under a policy). Factors underlying these claim filings include continued intensive advertising
by lawyers seeking asbestos claimants and the continued focus by plaintiffs on defendants who were not
traditionally primary targets of asbestos litigation. The focus on these defendants is primarily the result
of the number of traditional asbestos defendants who have sought bankruptcy protection in previous
years. In addition to contributing to the overall number of claims, bankruptcy proceedings may increase
the volatility of asbestos-related losses by initially delaying the reporting of claims and later by
significantly accelerating and increasing loss payments by insurers, including the Company. The
bankruptcy of many traditional defendants has also caused increased settlement demands against those
policyholders who are not in bankruptcy but remain in the tort system. Currently, in many jurisdictions,
those who allege very serious injury and who can present credible medical evidence of their injuries are
receiving priority trial settings in the courts, while those who have not shown any credible disease
manifestation are having their hearing dates delayed or placed on an inactive docket. Prioritizing claims
involving credible evidence of injuries, along with the focus on defendants who were not traditionally
primary targets of asbestos litigation, contributes to the claims and claim adjustment expense payment
patterns experienced by the Company. The Company’s asbestos-related claims and claim adjustment
expense experience also has been impacted by the unavailability of other insurance sources potentially
available to policyholders, whether through exhaustion of policy limits or through the insolvency of
other participating insurers.
The Company continues to be involved in coverage litigation concerning a number of
policyholders, some of whom have filed for bankruptcy, who in some instances have asserted that all or
a portion of their asbestos-related claims are not subject to aggregate limits on coverage. In these
instances, policyholders also may assert that each individual bodily injury claim should be treated as a
separate occurrence under the policy. It is difficult to predict whether these policyholders will be
successful on both issues. To the extent both issues are resolved in a policyholder’s favor and other
Company defenses are not successful, the Company’s coverage obligations under the policies at issue
would be materially increased and bounded only by the applicable per-occurrence limits and the
number of asbestos bodily injury claims against the policyholders. Although the Company has seen a
moderation in the overall risk associated with these lawsuits, it remains difficult to predict the ultimate
cost of these claims.
Many coverage disputes with policyholders are only resolved through settlement agreements.
Because many policyholders make exaggerated demands, it is difficult to predict the outcome of
settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases
which are favorable to the Company but which could result in settlements for larger amounts than
originally anticipated. There also may be instances where a court may not approve a proposed
settlement, which may result in additional litigation and potentially less beneficial outcomes for the
Company. As in the past, the Company will continue to pursue settlement opportunities.
In addition to claims against policyholders, proceedings have been launched directly against
insurers, including the Company, by individuals challenging insurers’ conduct with respect to the
handling of past asbestos claims and by individuals seeking damages arising from alleged asbestos-
related bodily injuries. It is possible that the filing of other direct actions against insurers, including the
Company, could be made 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. The Company believes it has meritorious defenses to these claims and has
received favorable rulings in certain jurisdictions.
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