Travelers 2014 Annual Report Download - page 246

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
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.
After the parties reached the settlements of the Statutory and Hawaiian Actions and the Common Law Claims (collectively "the
Settlements"), numerous proceedings took place in the bankruptcy, district and appellate courts concerning the approval of the Settlements
and their effect on other parties. As a result of certain rulings in those proceedings, TPC concluded that it was not obligated to go forward
with the Settlements because certain conditions precedent to the Settlements had not been met.
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 Settlements 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. The plaintiffs appealed the district court's March 1, 2012 decision to the Second
Circuit Court of Appeals. On July 22, 2014, the Second Circuit issued an opinion reversing the district court's decision and reinstating the
bankruptcy court's January 20, 2011 order which ordered TPC to pay the Settlements plus prejudgment interest. On August 5, 2014, TPC
filed a Petition for Rehearing and Rehearing En Banc with the Second Circuit, which was denied on January 5, 2015. At December 31, 2014,
the amount of the Company's payment was recognized in the Company's consolidated financial statements in the amount of $579 million,
comprising the $502 million settlement amount described above, plus pre
- judgment and post - judgment interest totaling $77 million. On
January 15, 2015, the bankruptcy court entered an order directing TPC to pay $579 million to the plaintiffs, and the Company has made that
payment.
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. The legal costs associated with such lawsuits are
expensed in the period in which the costs are incurred. 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
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