Honeywell 2005 Annual Report Download - page 241

filed in jurisdictions such as Texas, Virginia and Mississippi that historically allowed for consolidated filings. In these jurisdictions, plaintiffs were 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. 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 June 30,
2005, 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. HR&A updates
expected settlement values for pending claims during the second quarter each year. Such update resulted in a reduction in the Bendix related net asbestos
liability of $70 million during the three months ended June 30, 2005. 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 currently has approximately $1.9 billion of insurance coverage remaining with respect to pending and potential future Bendix related
asbestos claims. 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. Insurance receivables are recorded in the financial statements simultaneous with the recording of the liability for the
estimated value of the underlying asbestos claims. The amount of the insurance receivable recorded is based on our ongoing analysis of the insurance that we
estimate is probable of recovery. This determination is based on our analysis of the underlying insurance policies, our historical experience with our insurers,
our ongoing review of the solvency of our insurers, our interpretation of judicial determinations relevant to our insurance programs, and our consideration of
the impacts of any settlements reached with our insurers. Insurance receivables are also recorded when structured insurance settlements provide for future
fixed payment streams that are not contingent upon future claims or other events. Such amounts are recorded at the net present value of the fixed payment
stream.
During the six months ended June 30, 2005, we entered into a structured insurance settlement which converted policies into future fixed, non-contingent
payment streams, resulting in a gain of approximately $160 million. Additionally, during the six months ended June 30,
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