Dow Chemical 2009 Annual Report Download - page 105

Table of Contents
The average resolution payment per asbestos claimant and the rate of new claim filings has fluctuated both up and down since the beginning of 2001.
Union Carbide’s management expects such fluctuations to continue in the future based upon a number of factors, including the number and type of claims
settled in a particular period, the jurisdictions in which such claims arose, and the extent to which any proposed legislative reform related to asbestos litigation
is being considered.
Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was $58 million in 2009,
$53 million in 2008 and $84 million in 2007, and was reflected in “Cost of sales” in the consolidated statements of income.
Insurance Receivables
At December 31, 2002, Union Carbide increased the receivable for insurance recoveries related to its asbestos liability to $1.35 billion, substantially
exhausting its asbestos product liability coverage. The insurance receivable related to the asbestos liability was determined by Union Carbide after a thorough
review of applicable insurance policies and the 1985 Wellington Agreement, to which Union Carbide and many of its liability insurers are signatory parties,
as well as other insurance settlements, with due consideration given to applicable deductibles, retentions and policy limits, and taking into account the
solvency and historical payment experience of various insurance carriers. The Wellington Agreement and other agreements with insurers are designed to
facilitate an orderly resolution and collection of Union Carbide’s insurance policies and to resolve issues that the insurance carriers may raise.
In September 2003, Union Carbide filed a comprehensive insurance coverage case, now proceeding in the Supreme Court of the State of New York,
County of New York, seeking to confirm its rights to insurance for various asbestos claims and to facilitate an orderly and timely collection of insurance
proceeds (the “Insurance Litigation”). The Insurance Litigation was filed against insurers that are not signatories to the Wellington Agreement and/or do not
otherwise have agreements in place with Union Carbide regarding their asbestos-related insurance coverage, in order to facilitate an orderly resolution and
collection of such insurance policies and to resolve issues that the insurance carriers may raise. Since the filing of the case, Union Carbide has reached
settlements with several of the carriers involved in the Insurance Litigation, including settlements reached with two significant carriers in the fourth quarter of
2009, resulting in a shift between receivable balances further discussed below. The Insurance Litigation is ongoing.
Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $84 million at December 31, 2009 and $403 million at
December 31, 2008. The decrease in the receivable was principally due to settlements reached in the fourth quarter of 2009 with two significant carriers
involved in the Insurance Litigation. At December 31, 2009 and December 31, 2008, all of the receivable for insurance recoveries was related to insurers that
are not signatories to the Wellington Agreement and/or do not otherwise have agreements in place regarding their asbestos-related insurance coverage.
In addition to the receivable for insurance recoveries related to its asbestos liability, Union Carbide had receivables for defense and resolution costs
submitted to insurance carriers that have settlement agreements in place regarding their asbestos-related insurance coverage. The balance of these receivables
increased in 2009 principally as a result of settlements reached in the fourth quarter of 2009 with two significant carriers involved in the Insurance Litigation.
Receivables for Costs Submitted to Insurance Carriers With Settlement Agreements
at December 31
In millions 2009 2008
Receivables for defense costs $ 91 $ 28
Receivables for resolution costs 357 244
Total $ 448 $ 272
After a review of its insurance policies, with due consideration given to applicable deductibles, retentions and policy limits, after taking into account the
solvency and historical payment experience of various insurance carriers; existing insurance settlements; and the advice of outside counsel with respect to the
applicable insurance coverage law relating to the terms and conditions of its insurance policies, Union Carbide continues to believe that its recorded receivable
for insurance recoveries from all insurance carriers is probable of collection.
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