3M 2015 Annual Report Download - page 105

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TableofContents
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aresultoftheCompany’scostofresolvingclaimsofpersonswhoclaimmoreseriousinjuries,includingmesotheliomaandother
malignancies,theCompanyincreaseditsaccrualsin2015forrespiratormask/asbestosliabilitiesby$50million.In2015,the
Companymadepaymentsforlegalfeesandsettlementsof$46millionrelatedtotherespiratormask/asbestoslitigation.Asof
December31,2015,theCompanyhadaccrualsforrespiratormask/asbestosliabilitiesof$144million(excludingAearoaccruals).
Thisaccrualrepresentsthelowendinarangeofloss.TheCompanycannotestimatetheamountorupperendoftherangeof
amountsbywhichtheliabilitymayexceedtheaccrualtheCompanyhasestablishedbecauseofthe(i)inherentdifficultyin
projectingthenumberofclaimsthathavenotyetbeenassertedorthetimeperiodinwhichfutureclaimsmaybeasserted,(ii)the
complaintsnearlyalwaysassertclaimsagainstmultipledefendantswherethedamagesallegedaretypicallynotattributedto
individualdefendantssothatadefendant’sshareofliabilitymayturnonthelawofjointandseveralliability,whichcanvaryby
state,(iii)themultiplefactorsdescribedabovethattheCompanyconsidersinestimatingitsliabilities,and(iv)theseveralpossible
developmentsdescribedabovethatmayoccurthatcouldaffecttheCompany’sestimateofliabilities.
AsofDecember31,2015,theCompany’sreceivableforinsurancerecoveriesrelatedtotherespiratormask/asbestoslitigationwas
$39million.TheCompanyestimatesinsurancereceivablesbasedonananalysisofitspolicies,includingtheirexclusions,pertinent
caselawinterpretingcomparablepolicies,itsexperiencewithsimilarclaims,andanassessmentofthenatureofeachclaimand
remainingcoverage.TheCompanythenrecordsanamountithasconcludedislikelytoberecovered.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Companyhasunresolvedcoveragewithclaims-madecarriersforrespiratormaskclaims.TheCompanyisalsoseekingcoverage
underthepoliciesofcertaininsolventinsurers.Oncethoseclaimsforcoverageareresolved,theCompanywillhavecollected
substantiallyallofitsremaininginsurancecoverageforrespiratormask/asbestosclaims.
RespiratorMask/AsbestosLitigation—AearoTechnologies
OnApril1,2008,asubsidiaryoftheCompanypurchasedthestockofAearoHoldingCorp.,theparentofAearoTechnologies
(“Aearo”).Aearomanufacturedandsoldvariousproducts,includingpersonalprotectionequipment,suchaseye,ear,head,face,fall
andcertainrespiratoryprotectionproducts.
AsofDecember31,2015,Aearoand/orothercompaniesthatpreviouslyownedandoperatedAearo’srespiratorbusiness(American
OpticalCorporation,Warner-LambertLLC,AOCorp.andCabotCorporation(“Cabot”))arenameddefendants,withmultipleco-
defendants,includingtheCompany,innumerouslawsuitsinvariouscourtsinwhichplaintiffsallegeuseofmaskandrespirator
productsandseekdamagesfromAearoandotherdefendantsforallegedpersonalinjuryfromworkplaceexposurestoasbestos,
silica-related,orotheroccupationaldustsfoundinproductsmanufacturedbyotherdefendantsorgenerallyintheworkplace.
AsofDecember31,2015,theCompany,throughitsAearosubsidiary,hadaccrualsof$21millionforproductliabilitiesanddefense
costsrelatedtocurrentandfutureAearo-relatedasbestosandsilica-relatedclaims.Responsibilityforlegalcosts,aswellasfor
settlementsandjudgments,iscurrentlysharedinaninformalarrangementamongAearo,Cabot,AmericanOpticalCorporationanda
subsidiaryofWarnerLambertandtheirrespectiveinsurers(the“PayorGroup”).Liabilityisallocatedamongthepartiesbasedonthe
numberofyearseachcompanysoldrespiratory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
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