Honeywell 2008 Annual Report Download - page 124

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Disease Distribution of Unresolved Claims December 31,
2008 2007
Mesothelioma and Other Cancer Claims 5,575 5,011
Other Claims 46,376 46,647
Total Claims 51,951 51,658
Approximately 45 percent of the approximately 52,000 pending claims at December 31, 2008 are on the
inactive, deferred, or similar dockets established in some jurisdictions for claimants who allege minimal or no
impairment. The approximately 52,000 pending claims also include claims 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 intend to assert 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 per claim excluding legal costs as follows:
Years Ended December 31,
2008 2007 2006
(in whole dollars)
Malignant claims $ 65,000 $ 33,000 $ 33,000
Nonmalignant claims $ 1,500 $ 500 $ 250
It is not possible to predict whether resolution values for Bendix related asbestos claims will increase,
decrease or stabilize in the future.
Our consolidated financial statements reflect an estimated liability for resolution of pending and future Bendix
related asbestos claims of $578 and $517 million at December 31, 2008 and 2007, respectively. Prior to
December 2006, we only accrued for the estimated cost of pending Bendix related asbestos claims as we could
not reasonably estimate losses which could arise from future Bendix related asbestos claims. In December 2006,
due to the steady three-year decline in the rate of Bendix related asbestos claims filed and reduced volatility in
those rates, we felt that it was possible to determine a reasonable estimate of the costs that would be incurred for
claims filed over the next five years. Accordingly, we recorded a reserve of $335 million for the estimated cost of
future Bendix related asbestos claims based on the historic claims filing experience, disease classifications,
expected resolution values, and historic dismissal rates. In the fourth quarter of each year we update our analysis
of the estimated cost of future Bendix related asbestos claims. Such updates resulted in a reduction of the
reserve to $327 million at December 31, 2007 and an increase of the reserve to $370 million at December 31,
2008. In December 2006, we also changed our methodology for valuing Bendix pending and future claims from
using average resolution values for the previous five years to using average resolution values for the previous
two years which resulted in a reduction of $118 million in the reserve for pending Bendix claims in the fourth
quarter of 2006. The claims filing experience and resolution data for Bendix related claims has become more
reliable over the past several years. Accordingly, in the fourth quarter of 2007, we updated our methodology for
valuing Bendix pending and future claims using the average resolution values for the past three years of data,
which resulted in a $10 million reduction in the reserve for pending Bendix claims. In the fourth quarter of 2008,
we updated the resolution values used to estimate the cost of pending and future Bendix claims resulting in a $5
million increase in the reserve for pending Bendix claims. We will continue to update the expected resolution
values used to estimate the cost of pending and future Bendix claims during the fourth quarter each year.
The estimated liability for future claims represents the estimated value of future asbestos related bodily injury
claims expected to be asserted against Bendix over the next five years. In light of the uncertainties inherent in
making long-term projections, as well as certain factors unique to friction
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