Honeywell 2012 Annual Report Download - page 107

January 2002, we do not believe that we have a reasonable basis for estimating NARCO asbestos
claims beyond 2018. In the absence of actual trust experience on which to base the estimate,
Honeywell projected the probable value, including trust claim handling costs, of asbestos related future
liabilities based on Company specific and general asbestos claims filing rates, expected rates of
disease and anticipated claim values. Specifically, the valuation methodology included an analysis of
the population likely to have been exposed to asbestos containing products, epidemiological studies
estimating the number of people likely to develop asbestos related diseases, NARCO asbestos claims
filing history, general asbestos claims filing rates in the tort system and in certain operating asbestos
trusts, and the claims experience in those forums, the pending inventory of NARCO asbestos claims,
disease criteria and payment values contained in the Trust Distribution Procedures and an estimated
approval rate of claims submitted to the NARCO Trust. This methodology used to estimate the liability
for future claims has been commonly accepted by numerous bankruptcy courts addressing 524(g)
trusts 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.
Our insurance receivable corresponding to the estimated liability for pending and future NARCO
asbestos claims reflects coverage which reimburses Honeywell for portions of NARCO-related
indemnity and 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, 2012, a significant portion of this coverage is with insurance companies with whom we
have agreements to pay full policy limits. 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 2006, Travelers Casualty and Insurance Company (“Travelers”) filed a declaratory judgment
action in the Supreme Court of New York, County of New York against Honeywell and other insurance
carriers that provide coverage for NARCO asbestos claims, seeking a declaration regarding coverage
obligations for NARCO asbestos claims under high excess insurance coverage issued by Travelers
and the other insurance carriers. The other insurance carriers asserted cross claims against Honeywell
seeking declarations regarding their coverage obligations for NARCO asbestos claims under high
excess insurance coverage issued by them. Since then, the Company has entered into settlement
agreements resolving all NARCO-related asbestos coverage issues with almost all of these insurance
carriers, including Travelers. Honeywell believes it is entitled to the remaining coverage at issue. While
Honeywell expects to prevail in this matter, an adverse outcome is not expected to have a material
impact on our consolidated results of operations, 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 related asbestos claims beyond 2018. Given the inherent
uncertainty in predicting future events, we review our estimates periodically, and update them based
on our experience and other relevant factors. Similarly, we will reevaluate our projections concerning
our probable insurance recoveries in light of any changes to the projected liability or other
developments that may impact insurance recoveries.
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)