Honeywell 2010 Annual Report Download - page 92

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
enjoining litigation against NARCO and Honeywell will remain in effect until the effective date of the NARCO Plan of Reorganization.
Our consolidated financial statements reflect an estimated liability for settlement of pending and future NARCO-related asbestos claims of $1,125
million and $1,128 million as of December 31, 2010 and December 31, 2009, respectively. 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. 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, 2010 and December 31, 2009, our consolidated financial statements reflect an insurance receivable corresponding to the liability
for settlement of pending and future NARCO-related asbestos claims of $718 and $831 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, 2010, 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. In July 2010, the Company entered into a settlement agreement resolving all asbestos coverage issues with
certain plaintiffs. Approximately $180 million of unsettled coverage under these policies is included in our NARCO-related insurance receivable at December
31, 2010. 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 Court of
Appeals, 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 period recognized but would not be material to our consolidated financial position or operating cash flows.
Projecting future events is subject to many uncertainties that could cause the NARCO related asbestos liabilities or assets to be higher or lower than
those projected and recorded. There is no assurance that the plan of reorganization will become final, that insurance recoveries will be timely or whether there
will be any NARCO
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