3M 2014 Annual Report Download - page 109

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Legal Proceedings:
The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States,
and regulatory proceedings worldwide. These include various products liability (involving products that the Company now
or formerly manufactured and sold), intellectual property, and commercial claims and lawsuits, including those brought
under the antitrust laws, and environmental proceedings. Unless otherwise stated, the Company is vigorously defending
all such litigation.
Process for Disclosure and Recording of Liabilities and Insurance Receivables Related to Legal Proceedings
Many lawsuits and claims involve highly complex issues relating to causation, scientific evidence, and whether there are
actual damages and are otherwise subject to substantial uncertainties. Assessments of lawsuits and claims can involve a
series of complex judgments about future events and can rely heavily on estimates and assumptions. The Company
complies with the requirements of ASC Topic 450, Contingencies, and related guidance, and records liabilities for legal
proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable.
Where the reasonable estimate of the probable loss is a range, the Company records the most likely estimate of the loss,
or the low end of the range if there is no one best estimate. The Company either discloses the amount of a possible loss
or range of loss in excess of established accruals if estimable, or states that such an estimate cannot be made. The
Company discloses significant legal proceedings even where liability is not probable or the amount of the liability is not
estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may be incurred.
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. Although the
Company cannot estimate its exposure to all legal proceedings, it 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 sections first describe the significant legal proceedings in which the Company is involved, and then describe
the liabilities and associated insurance receivables the Company has accrued relating to its significant legal proceedings.
Respirator Mask/Asbestos Litigation
As of December 31, 2014, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various
courts that purport to represent approximately 2,220 individual claimants, compared to approximately 2,200 individual
claimants with actions pending at December 31, 2013.
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 it experienced at the peak of filings in
2003. 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