Dow Chemical 2013 Annual Report Download - page 126

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Union Carbide regarding their asbestos-related insurance coverage, in order to facilitate an orderly resolution and collection of
such insurance policies and to resolve issues that the insurance carriers may raise. Since the filing of the case, Union Carbide
has reached settlements with several of the carriers involved in the Insurance Litigation and continues to pursue settlements
with the remaining carriers.
Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $25 million at December 31, 2013 and
$25 million at December 31, 2012. At December 31, 2013 and December 31, 2012, all of the receivable for insurance
recoveries was related to insurers that are not signatories to the Wellington Agreement and/or do not otherwise have agreements
in place regarding their asbestos-related insurance coverage.
In addition to the receivable for insurance recoveries related to its asbestos liability, Union Carbide had receivables for defense
and resolution costs submitted to insurance carriers that have settlement agreements in place regarding their asbestos-related
insurance coverage.
The following table summarizes Union Carbide’s receivables related to its asbestos-related liability:
Receivables for Asbestos-Related Costs at December 31
In millions 2013 2012
Receivables for defense and resolution costs – carriers with settlement agreements $ 66 $ 154
Receivables for insurance recoveries – carriers without settlement agreements 25 25
Total $ 91 $ 179
The decrease in 2013 in the receivables for asbestos-related costs was principally due to the resolution of receivables related to
two insolvent insurance carriers.
Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was
$107 million in 2013, $100 million in 2012 and $88 million in 2011, and was reflected in “Cost of sales” in the consolidated
statements of income.
After a review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits,
after taking into account the solvency and historical payment experience of various insurance carriers; existing insurance
settlements; and the advice of outside counsel with respect to the applicable insurance coverage law relating to the terms and
conditions of its insurance policies, Union Carbide continues to believe that its recorded receivable for insurance recoveries
from all insurance carriers is probable of collection.
Summary
The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable described above were
based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each
year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various
insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the
actual costs and insurance recoveries for Union Carbide to be higher or lower than those projected or those recorded.
Because of the uncertainties described above, Union Carbide’s management cannot estimate the full range of the cost of
resolving pending and future asbestos-related claims facing Union Carbide and Amchem. Union Carbide’s management
believes that it is reasonably possible that the cost of disposing of Union Carbide’s asbestos-related claims, including future
defense costs, could have a material impact on Union Carbide’s results of operations and cash flows for a particular period and
on the consolidated financial position of Union Carbide.
It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-
related claims, including future defense costs, could have a material impact on the Company’s results of operations and cash
flows for a particular period and on the consolidated financial position of the Company.
Synthetic Rubber Industry Matters
In 2003, the U.S., Canadian and European competition authorities initiated separate investigations into alleged anticompetitive
behavior by certain participants in the synthetic rubber industry. Certain subsidiaries of the Company (but as to the investigation
in Europe only) responded to requests for documents and otherwise cooperated in the investigations.