Honeywell 2013 Annual Report Download - page 116

Our insurance receivable corresponding to the liability for settlement of pending and future Bendix
asbestos claims reflects coverage which 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.
Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded
in the financial statements simultaneous with the recording of the estimated liability for the underlying
asbestos claims. This determination is based on our analysis of the underlying insurance policies, our
historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial
determinations relevant to our insurance programs, and our consideration of the impacts of any
settlements reached with our insurers.
On a cumulative historical basis, Honeywell has recorded insurance receivables equal to
approximately 36 percent of the value of the underlying asbestos claims recorded. However, because
there are gaps in our coverage due to insurance company insolvencies, certain uninsured periods, and
insurance settlements, this rate is expected to decline for any future Bendix-related asbestos liabilities
that may be recorded. Future recoverability rates may also be impacted by numerous other factors,
such as future insurance settlements, insolvencies and judicial determinations relevant to our coverage
program, which are difficult to predict. Assuming continued defense and indemnity spending at current
levels, we estimate that the cumulative recoverability rate could decline over the next five years to
approximately 30 percent.
Honeywell believes it has sufficient insurance coverage and reserves to cover all pending Bendix-
related asbestos claims and Bendix-related asbestos claims estimated to be filed within the next five
years. Although it is impossible to predict the outcome of either pending or future Bendix-related
asbestos claims, we do not believe that such claims would have a material adverse effect on our
consolidated financial position in light of our insurance coverage and our prior experience in resolving
such claims. If the rate and types of claims filed, the average resolution value of such claims and the
period of time over which claim settlements are paid (collectively, the “Variable Claims Factors”) do not
substantially change, Honeywell would not expect future Bendix-related asbestos claims to have a
material adverse effect on our results of operations or operating cash flows in any fiscal year. No
assurances can be given, however, that the Variable Claims Factors will not change.
Other Matters
We are subject to a number of other lawsuits, investigations and disputes (some of which involve
substantial amounts claimed) arising out of the conduct of our business, including matters relating to
commercial transactions, government contracts, product liability, prior acquisitions and divestitures,
employee benefit plans, intellectual property, and environmental, health and safety matters. We
recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We
continually assess the likelihood of adverse judgments of outcomes in these matters, as well as
potential ranges of possible losses (taking into consideration any insurance recoveries), based on a
careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other
experts. Included in these other matters are the following:
Honeywell v. United Auto Workers (“UAW”) et. al—In July 2011, Honeywell filed an action in
federal court (District of New Jersey) against the UAW and all former employees who retired under a
series of Master Collective Bargaining Agreements (“MCBAs”) between Honeywell and the UAW. The
Company is seeking a declaratory judgment that certain express limitations on its obligation to
contribute toward the healthcare coverage of such retirees (the “CAPS”) set forth in the MCBAs may
be implemented, effective January 1, 2012. In September 2011, the UAW and certain retiree
defendants filed a motion to dismiss the New Jersey action and filed suit in the Eastern District of
Michigan alleging that the MCBAs do not provide for CAPS on the Company’s liability for healthcare
coverage. The UAW and retiree plaintiffs subsequently filed a motion for class certification and a
motion for partial summary judgment in the Michigan action, seeking a ruling that retirees who retired
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)