Honeywell 2009 Annual Report Download - page 122

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
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. 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, we have recorded the minimum amount in the range.
As of December 31, 2009 and 2008, our consolidated financial statements reflect an insurance receivable
corresponding to the liability for settlement of pending and future NARCO-related asbestos claims of $831 and
$877 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, 2009, a significant portion of this coverage is with insurance companies
with whom we have agreements to pay full policy limits based on corresponding Honeywell claims costs. We
conduct analyses to determine the amount of insurance that we estimate is probable of recovery in relation to
payment of current and estimated future claims. 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.
In the second quarter of 2006, Travelers Casualty and Insurance Company ("Travelers") filed a lawsuit
against Honeywell and other insurance carriers in the Supreme Court of New York, County of New York,
disputing obligations for NARCO-related asbestos claims under high excess insurance coverage issued by
Travelers and other insurance carriers. Approximately $300 million of coverage under these policies is included in
our NARCO-related insurance receivable at December 31, 2009. Honeywell believes it is entitled to the coverage
at issue and expects to prevail in this matter. In the third quarter of 2007, Honeywell prevailed on a critical choice
of law issue concerning the appropriate method of allocating NARCO-related asbestos liabilities to triggered
policies. The plaintiffs appealed and the trial court's ruling was upheld by the intermediate appellate court in the
second quarter of 2009. Plaintiffs' further appeal to the New York Appellate Division, the highest court in New
York, was denied in October 2009. A related New Jersey action brought by Honeywell has been dismissed, but
all coverage claims against plaintiffs have been preserved in the New York action. Based upon (i) our
understanding of relevant facts and applicable law, (ii) the terms of insurance policies at issue, (iii) our experience
on matters of this nature, and (iv) the advice of counsel, we believe that the amount due from Travelers and other
insurance carriers is probable of recovery. While Honeywell expects to prevail in this matter, an adverse outcome
could have a material impact on our results of operations in the
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