3M 2007 Annual Report Download - page 85

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Breast Implant Insurance Receivables: In the breast implant insurance coverage litigation, the District Court in Ramsey
County Minnesota entered an order in September 2007 dismissing from the suit the last of the insurers that were still
contesting the extent of their coverage for the Company’s breast implant product liability claims. The dismissal was
pursuant to a settlement the Company reached with those insurers during the third quarter of 2007. As of December 31,
2007, the Company had receivables for insurance recoveries related to the breast implant matter of $64 million. The
Company received $29 million in 2007, reducing this receivable by that amount. The Company also received $48 million
in January 2008 and expects to receive an additional $10 million by the end of 2008 pursuant to a settlement agreement
with three insurers. The Company continues to pursue recovery against its remaining insurers and expects to collect the
remaining receivable.
Respirator Mask/Asbestos Liabilities and Insurance Receivables: The Company estimates its respirator
mask/asbestos liabilities, including the cost to resolve the claim and defense costs, by examining: (i) the Company’s
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
of claims asserting usage of the Company’s mask or respirator 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.
Developments may occur that could affect the Company’s estimate 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.
As of December 31, 2007, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos
litigation was $332 million. 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 legal proceedings with respect to respirator mask/asbestos liability
insurance coverage. The difference between the accrued liability and insurance receivable represents in part the time
delay between payment of claims on the one hand and receipt of insurance reimbursements on the other hand. Because
of the lag time between settlement and payment of a claim, no meaningful conclusions may be drawn from quarterly
changes in the amount of receivables for expected insurance recoveries and the quarterly changes in the number of
claimants at the end of each quarter.
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, over 60 of the Company’s insurers. This
action is similar in nature to an action filed in 1994 with respect to breast implant coverage, which ultimately resulted in
the Minnesota Supreme Court’s ruling of 2003 that was largely in the Company’s favor. At the company’s request, the
case was transferred to Ramsey County, over the objections of the insurers. The Minnesota Supreme Court agreed to
hear the insurers’ appeal of that decision. Oral argument on the appeal is scheduled for March 2008.
Environmental and Other Liabilities and Insurance Receivables: As of December 31, 2007, the Company had recorded
liabilities of $37 million for estimated environmental remediation costs based upon an evaluation of currently available
facts with respect to each individual site and also recorded related insurance receivables of $15 million. The Company
records liabilities for remediation costs on an undiscounted basis when they are probable and reasonably estimable,
generally no later than the completion of feasibility studies or the Company’s commitment to a plan of action. Liabilities for
estimated costs of environmental remediation, depending on the site, are based primarily upon internal or third-party
environmental studies, and estimates as to the number, participation level and financial viability of any other potentially
responsible parties, the extent of the contamination and the nature of required remedial actions. The Company adjusts
recorded liabilities as further information develops or circumstances change. The Company expects that it will pay the
amounts recorded over the periods of remediation for the applicable sites, currently ranging up to 30 years.