3M 2006 Annual Report Download - page 101

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The Company recorded $40 million in the second quarter of 2006 with respect to the settlement in principle reached in
that quarter with respect to the antitrust class action brought on behalf of direct purchasers who did not purchase
private label tape. For those significant pending legal proceedings that do not appear in the table and that are not the
subject of pending settlement agreements, the Company has determined that liability is not probable or the amount of
the liability is not estimable, or both, and the Company is unable to estimate the possible loss or range of loss at this
time. The amounts in the preceding table with respect to breast implant and environmental remediation represent the
&RPSDQ\¶VEHVWHVWLPDWHRIWKHUHVSHFtive liabilities. The Company does not believe that there is any single best
estimate of the respirator/mask/asbestos liability or the other liabilities shown above, nor that it can reliably estimate
the amount or range of amounts by which those liabilities may exceed the reserves the Company has established.
Breast Implant Insurance Receivables: As of December 31, 2006, the Company had receivables for insurance
recoveries related to the breast implant matter of $93 million, representing amounts expected to be recovered pursuant to
WKH0LQQHVRWD6XSUHPH&RXUW¶VUXOLQJRI$XJXVWEXW\Ht to be received and other amounts that have been claimed
from various reinsurers, the Minnesota Insurance Guaranty Association, and the estates of certain insolvent insurance
carriers. The Company received about $1 million in the fourth quarter of 2006 (bringing total recoveries in 2006 to
$43 million), pursuant to settlements that were consistent with WKH&RPSDQ\¶VRYHUDOOH[SHFWDWLon of recovery as a result
of the Minnesota Supreme Court ruling. This recovery reduced the previously recorded receivable, which was separately
raised in the fourth quarter by $6 million reflecting a revised estimate of likely total remaining recoveries. With these
recent settlements and the previously disclosed settlements, 21 of the 29 insurers have withdrawn from the pending
SURFHHGLQJVDQGKDYHVHWWOHGWKH&RPSDQ\¶VFODLPVXQGHUWKH0Lnnesota Supreme Court decision. Various factors could
affect the timing and amount of recoveryRIWKHEDODQFHRIWKH&RPSDQ\¶VLQVXrance receivables, including (i) additional
delays in or avoidance of payment by insurers; (ii) the extent to which insurers may become insolvent in the future, and
(iii) the outcome of the pending legal proceedings involving the insurers. The Company expects the District Court in
Ramsey County Minnesota will enter in the first quarter of 2007 a comprehensive order and judgment setting forth the
amount (plus interest) that each of the insurers remaining in the case owe the Company.
Respirator Mask/Asbestos Liabilities and Insurance Receivables: The Company estimates its respirator
mask/asbestos liabilities, including the cost to resolve the claim and defense costVE\H[DPLQLQJLWKH&RPSDQ\¶V
experience in resolving claims, (ii) apparent trends, (iii) the apparent quality of claims (e.g., whether the claim has
been asserted on behalf of asymptomatic claimants), (iv) changes in the nature and mix of claims (e.g., the proportion
RIFODLPVDVVHUWLQJXVDJHRIWKH&RPSDQ\¶VPDVNRUUHVSirator products and alleging exposure to each of asbestos,
silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly
manufactured by the Company), (v) the number of current claims and a projection of the number of future asbestos
and other claims that may be filed against the Company, (vi) the cost to resolve recently settled claims, and (vii) an
estimate of the cost to resolve and defend against current and future claims. Because of the inherent difficulty in
projecting the number of claims that have not yet been asserted, particularly with respect to the Company's respiratory
products that themselves did not contain any harmful materials (which makes the various published studies that
purport to project future asbestos claims substantially removed from the Company's principal experience and which
themselves vary widely), the Company does not believe that there is any single best estimate of this liability, nor that it
can reliably estimate the amount or range of amounts by which the liability may exceed the reserve the Company has
established. No liability has been recorded regarding the pending action brought by the West Virginia Attorney General
previously described.
'HYHORSPHQWVPD\RFFXUWKDWFRXOGDIIHFWWKH&RPSDQ\¶VHVWimate of its liabilities. These developments include, but are
not limited to, significant changes in (i) the number of future claims, (ii) the average cost of resolving claims, (iii) the legal
costs of defending these claims and in maintaining trial readiness, (iv) changes in the mix and nature of claims received,
(v) trial and appellate outcomes, (vi) changes in the law and procedure applicable to these claims, and (vii) the financial
viability of other co-defendants and insurers.
$VRI'HFHPEHUWKH&RPSDQ\¶VUHFHLYDEOHIRULQVXrance recoveries related to the respirator mask/asbestos
litigation was $380 million. The Company collected $17 million in the fourth quarter and $75 million in 2006 from several
of its insurers, reducing this receivable by that amount. While the Company has substantial remaining claims-made and
occurrence (pre-1986) insurance coverage, as previously disclosed this additional receivable represents a lower
percentage of the additional liability than was the case with receivables recorded prior to 2004 primarily because of
YDU\LQJGHJUHHVRISULRUVHWWOHPHQWVZLWKWKH&RPSDQ\¶VLQsurers, insolvencies of certain insurers, uncertainties
concerning the precise manner of assigning particular costs to specific policies, potential exhaustion of policies, and the
types of claims asserted. Various factors could affect the timing and amount of recovery of this receivable, including (i)
delays in or avoidance of payment by insurers; (ii) the extent to which insurers may become insolvent in the future, and
(iii) the outcome of negotiations with insurers and possible legal proceedings, if necessary, with respect to respirator
mask/asbestos liability insurance coverage. On January 5, 2007 the Company was served with a declaratory judgment
action filed on behalf of two of its insurers (Continental Casualty and Continental Insurance Co.) disclaiming coverage for
respirator/mask claims. The action was filed in Hennepin County, Minnesota and names, in addition to the Company,