Honeywell 2002 Annual Report Download - page 136

personal injury and property damage claims, regulatory approval of cleanup
projects, remedial techniques to be utilized and agreements with other parties.
Although we do not currently possess sufficient information to reasonably
estimate the amounts of liabilities to be recorded upon future completion of
studies, litigation or settlements, and neither the timing nor the amount of the
ultimate costs associated with environmental matters can be determined, they
could be material to our consolidated results of operations. However,
considering our past experience and existing reserves, we do not expect that
these matters will have a material adverse effect on our consolidated financial
position.
ASBESTOS MATTERS - Like more than a thousand other industrial companies,
Honeywell is a defendant in personal injury actions related to asbestos. Our
involvement is limited because we did not mine or produce asbestos, nor did we
make or sell insulation products or other construction materials that have been
identified as the primary cause of asbestos-related disease in the vast majority
of claimants. Rather, we made several products that contained small amounts of
asbestos.
Honeywell's Bendix Friction Materials business manufactured automotive
brake pads that included asbestos in an encapsulated form. There is a limited
group of potential claimants consisting largely of professional brake mechanics.
From 1981 through September 30, 2002, we have resolved approximately 56,000
Bendix claims at an average cost per claim of approximately one thousand two
hundred dollars. Through the second quarter of 2002, Honeywell had no
out-of-pocket costs for these cases since its insurance deductible was satisfied
many years ago. There are currently approximately 50,000 claims pending and we
have no reason to believe that the historic rate of dismissal will change. We
have $2 billion of insurance remaining, which we expect to cover the vast
majority of claims. Although it is impossible to predict the outcome of pending
or future claims, in light of our potential exposure, our prior experience in
resolving these claims, and our insurance coverage, we do not believe that the
Bendix asbestos-related claims will have a material adverse effect on our
consolidated results of operations or financial position.
Another source of claims is refractory products (high temperature bricks
and cement) sold largely to the steel industry in the East and Midwest by North
American Refractories Company (NARCO), a business we owned from 1979 to 1986.
Less than 2 percent of NARCO's products contained asbestos.
When we sold the NARCO business in 1986, we agreed to indemnify NARCO with
respect to personal injury claims for products that had been discontinued prior
to the sale (as defined in the sale agreement). NARCO retained all liability for
all other claims. NARCO has resolved approximately 176,000 claims through
January 4, 2002 at an average cost per claim of two thousand two hundred
dollars. Of those claims, 43 percent were dismissed on the ground that there was
insufficient evidence that NARCO was responsible for the claimant's asbestos
exposure. There are approximately 116,000 claims currently pending against
NARCO, including approximately 7 percent in which Honeywell is also named as a
defendant. During the past 18 years, Honeywell and our insurers have contributed
to the cost of the NARCO defense. We have
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