Honeywell 2004 Annual Report Download - page 219

Projecting future events is subject to many uncertainties that could
cause the NARCO related asbestos liabilities to be higher or lower than those
projected and recorded. There is no assurance that a plan of reorganization will
be proposed or confirmed, that insurance recoveries will be timely or whether
there will be any NARCO related asbestos claims beyond 2018. Given the inherent
uncertainty in predicting future events, we review our estimates periodically,
and update them based on our experience and other relevant factors. Similarly we
will reevaluate our projections concerning our probable insurance recoveries in
light of any changes to the projected liability or other developments that may
impact insurance recoveries.
Friction Products -- Honeywell's Bendix Friction Materials (Bendix)
business manufactured automotive brake pads that contained chrysotile asbestos
in an encapsulated form. There is a group of existing and potential claimants
consisting largely of individuals that allege to have performed brake
replacements.
From 1981 through June 30, 2004, we have resolved approximately
69,000 Bendix related asbestos claims including trials covering 120 plaintiffs,
which resulted in 115 favorable verdicts. Trials covering five individuals
resulted in adverse verdicts; however, two of these verdicts were reversed on
appeal and the remaining three claims were settled.
Through the second quarter of 2002, Honeywell had no out-of-pocket
costs for Bendix related asbestos claims since its insurance deductible was
satisfied many years ago. Beginning with claim payments made in the third
quarter of 2002, Honeywell began advancing indemnity and defense claim costs.
During the first six months of 2004, those indemnity and defense costs were
approximately $72 million. During the years ended December 31, 2003 and 2002,
those indemnity and defense costs amounted to approximately $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 Bendix related
asbestos claims activity:
Years Ended
December 31,
------------
Claims Activity Six Months Ended 2003 2002
--------------- June 30, 2004 ---- ----
-------------
Claims Unresolved at the beginning of period 72,976 50,821 47,000
Claims Filed 5,999 25,765 10,000
Claims Resolved (4,797) (3,610) (6,179)
------- ------- -------
Claims Unresolved at the end of period 74,178 72,976 50,821
====== ====== ======
December 31,
------------
Disease Distribution of Unresolved Claims June 30, 2004 2003 2002
----------------------------------------- ------------- ---- ----
Mesothelioma and Other Cancer Claims 3,731 3,277 3,810
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