Travelers 2014 Annual Report Download - page 247

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
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 Court set a trial date for August 3, 2015. 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, 2014, the claim totaled $488 million, comprising the $238 million of reinsurance recoverable plus interest amounting to
$250 million as of that date. Interest will continue to accrue at an annual rate of 9% until the claim is paid. The $238 million of reinsurance
recoverable owed to USF&G under the terms of the disputed reinsurance contract has been reported as part of reinsurance recoverables in the
Company's consolidated balance sheet. The interest that would be owed as part of any judgment ultimately entered in favor of USF&G is treated
for accounting purposes as a gain contingency in accordance with FASB Topic 450, Contingencies, and accordingly has not been recognized in
the Company's consolidated financial statements.
Resolution of Gain Contingency
The Travelers Indemnity Company was one of the Settlement Class plaintiffs and a class member in a class action lawsuit captioned
Safeco Insurance Company of America, et al. v American International Group, Inc. et al. (U.S. District Court, N.D. Ill.) in which the
defendants were alleged to have engaged in the under
- reporting of workers' compensation premium in connection with a workers'
compensation reinsurance pool in which several subsidiaries of the Company participate. In February 2012, the district court issued a
written opinion approving the class settlement pursuant to which the defendants agreed to pay $450 million to the class. In March 2012,
three parties who objected to the settlement appealed the court's orders approving the settlement to the U.S. Court of Appeals for the
Seventh Circuit. In January 2013, all parties, including the three parties who had objected to the settlement, filed a Stipulation of Dismissal
indicating that there were no longer any objections to the settlement, and in March 2013, the Seventh Circuit dismissed the appeals. In April
2013, the Seventh Circuit issued its mandate returning the case to the district court for administration of the settlement. In June and
November 2013, the Company received two payments totaling approximately $93 million, comprising its allocation from the settlement fund.
The combination of the payments received in June and November 2013 totaling $93 million, less approximately $2 million remitted to another
insurer, resulted in a net gain of $91 million that was reported in "Other revenues" in the Company's consolidated statement of income for
the year ended December 31, 2013.
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