Travelers 2013 Annual Report Download - page 255

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
intends to litigate those cases vigorously. SPC was previously a defendant in similar direct actions in
Ohio state court, which have been dismissed following favorable rulings by Ohio trial and appellate
courts. From time to time, SPC and/or its subsidiaries have been named in similar individual direct
actions in other jurisdictions.
Outcome and Impact of Asbestos and Environmental Claims and Litigation. Currently, it is not
possible to predict legal outcomes and their impact on the future development of claims and litigation
relating to asbestos and environmental claims. Any such development will be affected by future court
decisions and interpretations, as well as changes in applicable legislation. Because of these
uncertainties, additional liabilities may arise for amounts in excess of the Company’s current reserves.
In addition, the Company’s estimate of ultimate claims and claim adjustment expenses may change.
These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably
estimated and could result in income statement charges that could be material to the Company’s results
of operations in future periods.
Other Proceedings Not Arising Under Insurance Contracts or Reinsurance Agreements
The Company is involved in other lawsuits, including lawsuits alleging extra-contractual damages
relating to insurance contracts or reinsurance agreements, that do not arise under insurance contracts
or reinsurance agreements. Based upon currently available information, the Company does not believe
it is reasonably possible that any such lawsuit or related lawsuits would be material to the Company’s
results of operations or would have a material adverse effect on the Company’s financial position or
liquidity.
Gain Contingencies
On August 17, 2010, in a reinsurance dispute in New York state court captioned United States
Fidelity & Guaranty Company v. American Re-Insurance Company, et al., the trial court granted summary
judgment for United States Fidelity and Guaranty Company (USF&G), a subsidiary of the Company,
and denied summary judgment for American Re-Insurance Company, a subsidiary of Munich Re
(American Re), and three other reinsurers. By order dated October 22, 2010, the trial court corrected
certain clerical errors and made certain clarifications to the August 17, 2010 order. On October 25,
2010, judgment was entered against American Re and the other three insurers, awarding USF&G
$420 million, comprising $251 million ceded under the terms of the disputed reinsurance contract plus
interest of 9% amounting to $169 million as of that date. The judgment, including the award of
interest, was appealed by the reinsurers to the New York Supreme Court, Appellate Division, First
Department. On January 24, 2012, the Appellate Division affirmed the judgment. On January 30, 2012,
the reinsurers filed a motion with the Appellate Division seeking permission to appeal its decision to
the New York Court of Appeals, and on March 12, 2012, the Appellate Division granted the reinsurers’
motion. On February 7, 2013, the Court of Appeals issued an opinion that largely affirmed the
summary judgment in USF&G’s favor, while modifying in part the summary judgment with respect to
two discrete issues and remanding the case to the trial court for determination of those issues. The
Company believes it has a meritorious position on each of these issues and intends to pursue its claim
vigorously. On May 2, 2013, the Court of Appeals denied a motion by reinsurers to reconsider the
February 7, 2013 opinion. In November 2013, the Company entered into a settlement agreement with
one of the reinsurers. At December 31, 2013, the claim totaled $466 million, comprising the
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