Honeywell 2003 Annual Report Download - page 407

$112 and $70 million, respectively. Approximately 50 percent of these amounts
are deemed probable to be reimbursed by insurance. During the year ended
December 31, 2003 Honeywell collected $90 million in insurance reimbursements
and settlements related to asbestos claims. See further discussion of insurance
coverage below.
The following tables present information regarding asbestos claims activity
during the past two years:
Claims Activity 2003 2002
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Claims Unresolved at the beginning of year .................. 50,821 47,000
Claims Filed ................................................ 25,765 10,000
Claims Resolved ............................................. (3,610) (6,179)
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Claims Unresolved at the end of year ........................ 72,976 50,821
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Disease Distribution of Unresolved Claims 2003 2002
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Mesothelioma and Other Cancer Claims ........................ 3,277 3,810
Other Claims ................................................ 69,699 47,011
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Total Claims ................................................ 72,976 50,821
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Approximately 20 percent of the 73,000 pending claims are on the inactive,
deferred, or similar dockets established in some jurisdictions for claimants who
allege minimal or no impairment. The approximately 73,000 pending claims also
include claims filed in jurisdictions such as Texas, Virginia and Mississippi
that allow for consolidated filings. In these jurisdictions, plaintiffs are
permitted to file complaints against a pre-determined master list of defendants,
regardless of whether they have claims against each individual defendant. Many
of these plaintiffs may not actually have claims against Honeywell. Based on
state rules and prior experience in these jurisdictions, we anticipate that many
of these claims will ultimately be dismissed. During the second quarter of 2003,
Honeywell was served with numerous complaints filed in Mississippi in advance of
the January 1, 2003 effective date for tort reform in that state. Also during
2003, Honeywell experienced an increase in nonmalignancy filings that we believe
were in response to the possibility of federal legislation. Based on prior
experience, we anticipate that many of these claims will be placed on deferred,
inactive or similar dockets or be dismissed. Honeywell has experienced average
resolution values excluding legal costs for malignant claims of approximately
ninety five thousand and one hundred sixty six thousand dollars in 2003 and
2002, respectively. Honeywell has experienced average resolution values
excluding legal costs for nonmalignant claims of approximately three thousand
five hundred and one thousand three hundred dollars in 2003 and 2002,
respectively. It is not possible to predict whether resolution values for Bendix
related asbestos claims will increase, decrease or stabilize in the future.
At December 31, 2003, we had accrued approximately $250 million for pending
asbestos related liability claims. Honeywell retained the expert services of
HR&A (see discussion of HR&A under Refractory products above) to assist in
developing the estimated liability. The estimate is based on the number of
pending claims at December 31, 2003, disease classifications, expected
settlement values and historic dismissal rates. We cannot reasonably estimate
losses which could arise from future Bendix related asbestos claims because we
cannot predict how many additional claims may be brought against us, the
allegations in such claims or their probable outcomes and resulting settlement
values in the tort system.
Honeywell presently has approximately $1.9 billion of insurance coverage
remaining with respect to pending Bendix related asbestos claims as well as
claims which may be filed against us in the future. This coverage is provided by
a large number of insurance policies written by dozens of insurance companies in
both the domestic insurance market and the London excess market. Although
Honeywell has approximately $1.9 billion in insurance, there are gaps in our
coverage due to insurance company insolvencies, the comprehensive policy
buy-back settlement with Equitas as discussed below and certain uninsured
periods. We analyzed the amount of insurance that we estimate is probable that
we will recover in relation to payment of asbestos related claims and determined
that approximately 50 percent of expenditures for such claims are recoverable by
insurance. While the substantial majority of our insurance carriers are solvent,
some of our individual carriers are insolvent, which has been considered in our
analysis of probable recoveries. We made judgments concerning insurance coverage
that we believe are reasonable and consistent with our historical dealings with
our insurers, our knowledge of any pertinent solvency issues surrounding
insurers and various judicial determinations relevant to our insurance programs.
Based on our analysis, at December 31, 2003 we had amounts receivable from our
insurers of approximately $210 million representing probable reimbursements
associated with our liability for pending claims as well as amounts due to us