The Hartford 2015 Annual Report Download - page 204

Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies
F-73
Contingencies Relating to Corporate Litigation and Regulatory Matters
Management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management
establishes liabilities for these contingencies at its “best estimate,” or, if no one number within the range of possible losses is more
probable than any other, the Company records an estimated liability at the low end of the range of losses.
Litigation
The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing
indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford
accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties in
the following discussion under the caption “Asbestos and Environmental Claims,” management expects that the ultimate liability, if any,
with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense,
will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.
The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include,
among others, and in addition to the matters in the following discussion, putative state and federal class actions seeking certification of a
state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices
in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland
marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the
handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has
been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers
of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying
asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions
made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or
indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters
could, from time to time, have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or
annual periods.
In addition to the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek
substantial damages for unsubstantiated conduct spanning a multi-year period based on novel applications of complex legal theories. The
alleged damages are not quantified or factually supported in the complaint, and, in any event, the Company's experience shows that
demands for damages often bear little relation to a reasonable estimate of potential loss. The court has made no substantive legal
decisions defining the scope of the claims or the potentially available damages, and no legal precedent has been identified that would aid
in determining a reasonable estimate of potential loss. Accordingly, management cannot reasonably estimate the possible loss or range of
loss, if any.
Mutual Funds Litigation - In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United
States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect
subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36
(b) of the Investment Company Act of 1940. HIFSCO moved to dismiss and, in September 2011, the motion was granted in part and
denied in part, with leave to amend the complaint. In November 2011, plaintiffs filed an amended complaint on behalf of The Hartford
Global Health Fund, The Hartford Conservative Allocation Fund, The Hartford Growth Opportunities Fund, The Hartford Inflation Plus
Fund, The Hartford Advisors Fund, and The Hartford Capital Appreciation Fund. Plaintiffs seek to rescind the investment management
agreements and distribution plans between HIFSCO and these funds and to recover the total fees charged thereunder or, in the
alternative, to recover any improper compensation HIFSCO received, in addition to lost earnings. HIFSCO filed a partial motion to
dismiss the amended complaint and, in December 2012, the court dismissed without prejudice the claims regarding distribution fees and
denied the motion with respect to the advisory fees claims. In March 2014, the plaintiffs filed a new complaint that, among other things,
added as new plaintiffs The Hartford Floating Rate Fund and The Hartford Small Company Fund and named as a defendant Hartford
Funds Management Company, LLC (“HFMC”), an indirect subsidiary of the Company which assumed the role as advisor to the funds as
of January 2013. In March 2015, the plaintiffs filed a new complaint that, among other things, removed The Hartford Small Company
Fund as a plaintiff. HFMC and HIFSCO dispute the allegations and moved for summary judgment in June 2015. At the same time,
plaintiffs moved for partial summary judgment with respect to The Hartford Capital Appreciation Fund.