3M 2012 Annual Report Download - page 107

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The Company estimates insurance receivables based on an analysis of its numerous policies, including their exclusions,
pertinent case law interpreting comparable policies, its experience with similar claims, and assessment of the nature of
the claim and remaining coverage, and records an amount it has concluded is likely to be recovered. For those insured
matters where the Company has taken an accrual, the Company also records receivables for the amount of insurance
that it expects to recover under the Company’s insurance program. For those insured matters where the Company has
not taken an accrual because the liability is not probable or the amount of the liability is not estimable, or both, but where
the Company has incurred an expense in defending itself, the Company records receivables for the amount of insurance
that it expects to recover for the expense incurred.
Because litigation is subject to inherent uncertainties, and unfavorable rulings or developments could occur, there can be
no certainty that the Company may not ultimately incur charges in excess of presently recorded liabilities. A future
adverse ruling, settlement, or unfavorable development could result in future charges that could have a material adverse
effect on the Company’s results of operations or cash flows in the period in which they are recorded. The Company
currently believes that such future charges, if any, would not have a material adverse effect on the consolidated financial
position of the Company. Based on experience and developments, the Company reexamines its estimates of probable
liabilities and associated expenses and receivables each period, and whether it is able to estimate a liability previously
determined to be not estimable and/or not probable. Where appropriate, the Company makes additions to or adjustments
of its estimated liabilities. As a result, the current estimates of the potential impact on the Company’s consolidated
financial position, results of operations and cash flows for the legal proceedings and claims pending against the Company
could change in the future.
The following table shows the major categories of significant legal matters – respirator mask/asbestos litigation (including
Aearo – described below), environmental remediation and other environmental liabilities -- for which the Company has
been able to estimate its probable liability and for which the Company has taken accruals and the related insurance
receivables:
Liability and Receivable Balances
At December 31
(Millions)
2012
2011
2010
Respirator mask/asbestos liabilities
$
154
$
130
$
126
Respirator mask/asbestos insurance receivables
87
121
122
Environmental remediation liabilities
$
29
$
28
$
24
Environmental remediation insurance receivables
11
15
15
Other environmental liabilities
$
57
$
75
$
90
Other environmental insurance receivables
15
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Respirator Mask/Asbestos Litigation
As of December 31, 2012, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various
courts that purport to represent approximately 2,060 individual claimants compared to approximately 2,260 individual
claimants with actions pending at December 31, 2011.
The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of
the Company’s mask and respirator products and seek damages from the Company and other defendants for alleged
personal injury from workplace exposures to asbestos, silica, coal mine dust or other occupational dusts found in products
manufactured by other defendants or generally in the workplace. A minority of the lawsuits and claims resolved by and
currently pending against the Company generally allege personal injury from occupational exposure to asbestos from
products previously manufactured by the Company, which are often unspecified, as well as products manufactured by other
defendants, or occasionally at Company premises.
The Company’s current volume of new and pending matters is substantially lower than its historical experience. The
Company expects that filing of claims by unimpaired claimants in the future will continue to be at much lower levels than in
the past. Accordingly, the number of claims alleging more serious injuries, including mesothelioma and other malignancies,
will represent a greater percentage of total claims than in the past. The Company has prevailed in all nine cases taken to
trial, including seven of the eight cases tried to verdict (such trials occurred in 1999, 2000, 2001, 2003, 2004, and 2007), and
an appellate reversal in 2005 of the 2001 jury verdict adverse to the Company. The ninth case, tried in 2009, was dismissed
by the Court at the close of plaintiff’s evidence, based on the Court’s legal finding that the plaintiff had not presented
sufficient evidence to support a jury verdict. The plaintiffs appealed but in February 2012 the California Court of Appeals
granted the plaintiff’s voluntary dismissal of the appeal.