Honeywell 2004 Annual Report Download - page 100

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
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
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 as follows:
Years Ended December 31,
2004 2003 2002
(in whole dollars)
Malignant claims $90,000 $95,000 $166,000
Nonmalignant claims $ 1,600 $ 3,500 $ 1,300
It is not possible to predict whether resolution values for Bendix related asbestos claims will increase, decrease or stabilize in the
future.
We have accrued for the estimated cost of pending Bendix related asbestos claims. The estimate is based on the number of pending
claims at December 31, 2004, disease classifications, expected settlement values and historic dismissal rates. Honeywell retained the
expert services of HR&A (see discussion of HR&A under Refractory products above) to assist in developing the estimated 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, a comprehensive policy buy-back settlement with Equitas in 2003 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, 2004 we had amounts receivable from our insurers of
approximately $340 million representing probable reimbursements associated with our liability for pending claims as well as amounts
due to us for previously settled and paid claims related to the estimated liabilities for pending claims.
In the fourth quarter of 2002, we recorded a charge of $167 million which consisted of a $127 million accrual for our Bendix
related asbestos liabilities to be settled by the then contemplated sale of Bendix to Federal-Mogul, net of insurance recoveries, and a
$40 million accrual for other costs which we expected to be required in order to complete the transaction (completion costs). In 2003,
we paid $112 million to settle Bendix related asbestos claims, which were charged to this accrual. When the deal negotiations ended,
the $40 million accrual for the expected completion costs was reversed and
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