Travelers 2014 Annual Report Download - page 102

Table of Contents
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. Travelers Property Casualty Corp. (TPC) had previously entered into settlement agreements in connection with a
number of these direct action claims (Direct Action Settlements). The Company had been involved in litigation concerning whether all of the
conditions of the Direct Action Settlements had been satisfied. On July 22, 2014, the United States Court of Appeals for the Second Circuit ruled
that all of the conditions of the Direct Action Settlements had been satisfied. On January 15, 2015, the bankruptcy court entered an order directing
the Company to pay $579 million to the plaintiffs, and the Company has made that payment. For a full discussion of these settlement agreements
and related litigation, see the "Asbestos Direct Action Litigation" section of note 16 of notes to the consolidated financial statements herein. 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.
Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each
policyholder at least annually. Among the factors which the Company may consider in the course of this review are: available insurance coverage,
including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the
policyholder's potential liability; the jurisdictions involved; past and anticipated future
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