Travelers 2015 Annual Report Download - page 56

We also continue 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 our other defenses are not
successful, our 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 we have seen a moderation in the overall risk associated with these
lawsuits, it remains difficult to predict the ultimate cost of these claims.
Further, in addition to claims against policyholders, proceedings have been launched directly
against insurers, including us, 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 us, 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.
With regard to environmental claims, we have received and continue to receive claims from
policyholders who allege that they are liable for injury or damage arising out of their alleged
disposition of toxic substances. Mostly, these claims arise under various legislative as well as regulatory
efforts aimed at environmental remediation. For instance, the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), enacted in 1980 and later modified, enables private parties
as well as federal and state governments to take action with respect to releases and threatened releases
of hazardous substances. This federal statute permits the recovery of response costs from some liable
parties and may require liable parties to undertake their own remedial action. Liability under CERCLA
and similar state laws may be imposed on certain parties even if they did not cause the release or
threatened release of hazardous substances and may be joint and several with other responsible parties.
The Company has been, and continues to be, involved in litigation involving insurance coverage
issues pertaining to asbestos and environmental claims. The Company believes that some court
decisions have interpreted the insurance coverage to be broader than the original intent of the insurers
and policyholders. These decisions continue to be inconsistent and vary from jurisdiction to jurisdiction.
Uncertainties surrounding the final resolution of these asbestos and environmental claims continue,
and it is difficult to estimate our ultimate liability for such claims and related litigation. As a result,
these reserves are subject to revision as new information becomes available and as claims develop. The
continuing uncertainties include, without limitation:
• the risks and lack of predictability inherent in complex litigation;
• a further increase in the cost to resolve, and/or the number of, asbestos and environmental
claims beyond that which is anticipated;
• the emergence of a greater number of asbestos claims than anticipated as a result of extended
life expectancies resulting from medical advances and lifestyle improvements;
• the role of any umbrella or excess policies we have issued;
• the resolution or adjudication of disputes concerning coverage for asbestos and environmental
claims in a manner inconsistent with our previous assessment of these disputes;
• the number and outcome of direct actions against us;
• future developments pertaining to our ability to recover reinsurance for asbestos and
environmental claims;
56