3M 2013 Annual Report Download - page 111

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products under the “AO Safety” brand and/or owned the AO Safety Division of American Optical Corporation and the alleged
years of exposure of the individual plaintiff. Aearo’s share of the contingent liability is further limited by an agreement entered
into between Aearo and Cabot on July 11, 1995. This agreement provides that, so long as Aearo pays to Cabot a quarterly
fee of $100,000, Cabot will retain responsibility and liability for, and indemnify Aearo against, any product liability claims
involving exposure to asbestos, silica, or silica products for respirators sold prior to July 11, 1995. Because of the difficulty in
determining how long a particular respirator remains in the stream of commerce after being sold, Aearo and Cabot have
applied the agreement to claims arising out of the alleged use of respirators involving exposure to asbestos, silica or silica
products prior to January 1, 1997. With these arrangements in place, Aearo’s potential liability is limited to exposures alleged
to have arisen from the use of respirators involving exposure to asbestos, silica, or silica products on or after January 1,
1997. To date, Aearo has elected to pay the quarterly fee. Aearo could potentially be exposed to additional claims for some
part of the pre-July 11, 1995 period covered by its agreement with Cabot if Aearo elects to discontinue its participation in this
arrangement, or if Cabot is no longer able to meet its obligations in these matters.
In March 2012, Cabot CSC Corporation and Cabot Corporation filed a lawsuit against Aearo in the Superior Court of Suffolk
County, Massachusetts seeking declaratory relief as to the scope of Cabot’s indemnity obligations under the July 11, 1995
agreement, including whether Cabot has retained liability for coal workers' pneumoconiosis claims, and seeking damages for
breach of contract.
Developments may occur that could affect the estimate of Aearo’s liabilities. These developments include, but are not limited
to: (i) significant changes in the number of future claims, (ii) significant changes in the average cost of resolving claims, (iii)
significant changes in the legal costs of defending these claims, (iv) significant changes in the mix and nature of claims
received, (v) trial and appellate outcomes, (vi) significant changes in the law and procedure applicable to these claims, (vii)
significant changes in the liability allocation among the co-defendants, (viii) the financial viability of members of the Payor
Group including exhaustion of available coverage limits, and/or (ix) a determination that the interpretation of the contractual
obligations on which Aearo has estimated its share of liability is inaccurate. The Company cannot determine the impact of
these potential developments on its current estimate of Aearo’s share of liability for these existing and future claims. If any of
the developments described above were to occur, the actual amount of these liabilities for existing and future claims could be
significantly larger than the amount accrued.
Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, the complexity of
allocating responsibility for future claims among the Payor Group, and the several possible developments that may occur
that could affect the estimate of Aearo’s liabilities, the Company cannot estimate the amount or range of amounts by which
Aearo’s liability may exceed the accrual the Company has established.
Environmental Matters and Litigation
The Company’s operations are subject to environmental laws and regulations including those pertaining to air emissions,
wastewater discharges, toxic substances, and the handling and disposal of solid and hazardous wastes enforceable by
national, state, and local authorities around the world, and private parties in the United States and abroad. These laws and
regulations provide, under certain circumstances, a basis for the remediation of contamination, for restoration of or
compensation for damages to natural resources, and for personal injury and property damage claims. The Company has
incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending
personal injury and property damage claims, and modifying its business operations in light of its environmental
responsibilities. In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations,
the Company has established, and periodically updates, policies relating to environmental standards of performance for its
operations worldwide.
Under certain environmental laws, including the United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and similar state laws, the Company may be jointly and severally liable, typically with other companies,
for the costs of remediation of environmental contamination at current or former facilities and at off-site locations. The
Company has identified numerous locations, most of which are in the United States, at which it may have some liability.
Please refer to the section entitled “Environmental Liabilities and Insurance Receivables” that follows for information on the
amount of the accrual.
Environmental Matters
As previously reported, the Company has been voluntarily cooperating with ongoing reviews by local, state, national
(primarily the U.S. Environmental Protection Agency (EPA)), and international agencies of possible environmental and health
effects of various perfluorinated compounds (“PFCs”), including perfluorooctanyl compounds such as perfluorooctanoate
(“PFOA”) and perfluorooctane sulfonate (“PFOS”). As a result of its phase-out decision in May 2000, the Company no longer
manufactures perfluorooctanyl compounds. The company ceased manufacturing and using the vast majority of these
compounds within approximately two years of the phase-out announcement, and ceased all manufacturing and the last
significant use of this chemistry by 2008. Through its ongoing life cycle management and its raw material composition