Honeywell 2008 Annual Report Download - page 122

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
as fair and equitable, Honeywell as well as NARCO will be entitled to a permanent channeling injunction barring
all present and future individual actions in state or federal courts and requiring all asbestos related claims based
on exposure to NARCO products to be made against the federally-supervised trust. Honeywell has reached
agreement with the representative for future NARCO claimants and the Asbestos Claimants Committee to cap its
annual contributions to the trust with respect to future claims at a level that would not have a material impact on
Honeywell's operating cash flows.
In November 2007, the Bankruptcy Court entered an amended order confirming the NARCO Plan without
modification and approving the 524(g) trust and channeling injunction in favor of NARCO and Honeywell. In
December 2007, certain insurers filed an appeal of the Bankruptcy Court Order in the United States District Court
for the Western District of Pennsylvania. The District Court affirmed the Bankruptcy Court Order in July 2008. In
August 2008, insurers filed a notice of appeal to the Third Circuit Court of Appeals. No assurances can be given
as to the time frame or outcome of this appeal. We expect that the stay enjoining litigation against NARCO and
Honeywell will remain in effect during the pendency of these proceedings.
Our consolidated financial statements reflect an estimated liability for settlement of pending and future
NARCO-related asbestos claims as of December 31, 2008 and 2007 of $1.1 billion. The estimated liability for
pending claims is based on terms and conditions, including evidentiary requirements, in definitive agreements
with approximately 260,000 current claimants, and an estimate of the unsettled claims pending as of the time
NARCO filed for bankruptcy protection. Substantially all settlement payments with respect to current claims have
been made. Approximately $100 million of payments due pursuant to these settlements is due only upon
establishment of the NARCO trust.
The estimated liability for future claims represents the estimated value of future asbestos related bodily injury
claims expected to be asserted against NARCO through 2018 and the aforementioned obligations to NARCO's
parent. In light of the uncertainties inherent in making long-term projections we do not believe that we have a
reasonable basis for estimating asbestos claims beyond 2018 under SFAS No. 5, "Accounting for
Contingencies". The estimate is based upon the disease criteria and payment values contained in the NARCO
Trust Distribution Procedures negotiated with the NARCO Asbestos Claimants Committee and the NARCO future
claimants' representative. Honeywell projected the probable number and value, including trust claim handling
costs, of asbestos related future liabilities based upon experience of asbestos claims filing rates in the tort
system and in certain operating asbestos trusts, and the claims experience in those forums. The valuation
methodology also includes an analysis of the population likely to have been exposed to asbestos containing
products, epidemiological studies to estimate the number of people likely to develop asbestos related diseases,
NARCO claims filing history, the pending inventory of NARCO asbestos related claims and payment rates
expected to be established by the NARCO trust. This methodology used to estimate the liability for future claims
has been commonly accepted by numerous courts and resulted in a range of estimated liability for future claims
of $743 to $961 million. We believe that no amount within this range is a better estimate than any other amount
and accordingly, in December 2006 we recorded the minimum amount in the range which resulted in a reduction
of $207 million in our estimated liability for future NARCO-related asbestos claims. There has been no new data
or developments during 2008 or 2007 which would warrant a change in our estimated liability for future NARCO-
related asbestos claims.
As of December 31, 2008 and 2007, our consolidated financial statements reflect an insurance receivable
corresponding to the liability for settlement of pending and future NARCO-related asbestos claims of $877 and
$939 million, respectively. This coverage reimburses Honeywell for portions of the costs incurred to settle
NARCO related claims and court judgments as well as defense costs and 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. At December 31, 2008, a significant
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