2.2.0.25falsefalse0209 - Disclosure - Commitments and Contingenciestruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Note 9. Commitments and Contingencies</b>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">In the ordinary course of conducting business, the Company’s subsidiaries are involved in various
legal proceedings, either indirectly as insurers for parties or directly as defendants. Most of
these proceedings are claims litigation involving the Company’s subsidiaries as either (a)
liability insurers defending or providing indemnity for third party claims brought against insureds
or (b) insurers defending first party coverage claims brought against them. The Company accounts
for such activity through the establishment of unpaid loss and loss adjustment reserves. The
Company’s management believes that the ultimate liability, if any, with respect to such
ordinary-course claims litigation, after consideration of provisions made for potential losses and
cost of defense, will not be material to the Company’s consolidated financial condition, results of
operations, or cash flows.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company’s subsidiaries are also from time-to-time involved with other legal actions, some of
which assert claims for substantial amounts. These actions include claims asserting extra
contractual obligations, such as claims involving allegations of bad faith in the handling of
claims or the underwriting of policies. In general, the Company believes it has valid defenses to
these cases. The Company’s management expects that the ultimate liability if any, with respect to
future extra-contractual matters will not be material to its’ consolidated financial position.
Nonetheless, given the large or indeterminate amounts sought in certain of these matters, and the
inherent unpredictability of litigation, an adverse outcome in such matters could, from
time-to-time, have a material adverse outcome on the Company’s consolidated results of operations
or cash flows in a particular fiscal quarter or year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">In October 2010, Equitas represented by Resolute Management Services Limited (the “Resolute”)
commenced litigation and arbitration proceedings (the “Resolute Proceedings”) against Navigators
Management Company (“NMC”) Inc., a wholly-owned subsidiary of the Company. The arbitration demand
and complaint in the Resolute Proceedings allege that NMC failed to make timely payments to
Resolute under certain reinsurance agreements in connection with subrogation recoveries received by
NMC with respect to several catastrophe losses that occurred in the late 1980’s and early 1990’s.
Resolute alleges that it suffered damages of approximately $7.5 million as a result of the alleged
delays in payment.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company believes that the claims of Resolute are without merit and it intends to vigorously
contest the claims. While it is too early to predict with any certainty the outcome of the Resolute
Proceedings, the Company believes that the ultimate outcome would not be expected to have a
significant adverse effect on its results of operations, financial condition or liquidity, although
an unexpected adverse resolution of the Resolute Proceedings could have a material adverse effect
on the Company’s results of operations in a particular fiscal quarter or year.
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