Quest Diagnostics 2011 Annual Report Download - page 41

the qui tam provisions of the federal False Claims Act, allow private individuals to bring lawsuits against
healthcare companies on behalf of government or private payers. The Company is aware of certain pending
individual or class action lawsuits, and has received several subpoenas, related to billing practices filed under the
qui tam provisions of the Civil False Claims Act and/or other federal and state statutes, regulations or other laws.
The Company understands that there may be other pending qui tam claims brought by former employees or other
“whistle blowers” as to which the Company cannot determine the extent of any potential liability.
Management cannot predict the outcome of such matters. Although management does not anticipate that the
ultimate outcome of such matters will have a material adverse effect on the Company’s financial condition, given
the high degree of judgment involved in establishing accruals for loss estimates related to these types of matters,
the outcome of such matters may be material to the Company’s results of operations or cash flows in the period
in which the impact of such matters is determined or paid.
Reserves for Legal Matters
These matters are in different stages. Some of these matters are in their early stages. Matters may involve
responding to and cooperating with various government investigations and related subpoenas. As of December 31,
2011, the Company does not believe that any losses related to the legal matters described above are probable.
While the Company believes that a reasonable possibility exists that losses may have been incurred related to the
legal matters described above, based on the nature and status of these matters, potential losses, if any, cannot be
estimated.
Reserves for General and Professional Liability Claims
As a general matter, providers of clinical testing services may be subject to lawsuits alleging negligence or
other similar legal claims. These suits could involve claims for substantial damages. Any professional liability
litigation could also have an adverse impact on the Company’s client base and reputation. The Company
maintains various liability insurance coverages for, among other things, claims that could result from providing,
or failing to provide, clinical testing services, including inaccurate testing results, and other exposures. The
Company’s insurance coverage limits its maximum exposure on individual claims; however, the Company is
essentially self-insured for a significant portion of these claims. Reserves for such matters, including those
associated with both asserted and incurred but not reported claims, are established by considering actuarially
determined losses based upon the Company’s historical and projected loss experience. Such reserves totaled
approximately $127 million and $130 million as of December 31, 2011 and 2010, respectively. Management
believes that established reserves and present insurance coverage are sufficient to cover currently estimated
exposures. Management cannot predict the outcome of any claims made against the Company. Although
management does not anticipate that the ultimate outcome of any such proceedings or claims will have a material
adverse effect on the Company’s financial condition, given the high degree of judgment involved in establishing
accruals for loss estimates related to these types of matters, the outcome may be material to the Company’s
results of operations or cash flows in the period in which the impact of such claims is determined or paid.
Item 4. Mine Safety Disclosures
Not applicable.
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