Dow Chemical 2009 Annual Report Download - page 48

Table of Contents
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.
Summary
The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable described above were based upon current, known
facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim,
coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos
litigation in the United States, could cause the actual costs and insurance recoveries for Union Carbide to be higher or lower than those projected or those
recorded.
Because of the uncertainties described above, Union Carbide’s management cannot estimate the full range of the cost of resolving pending and future
asbestos-related claims facing Union Carbide and Amchem. Union Carbide’s management believes that it is reasonably possible that the cost of disposing of
Union Carbide’s asbestos-related claims, including future defense costs, could have a material adverse impact on Union Carbide’s results of operations and
cash flows for a particular period and on the consolidated financial position of Union Carbide.
It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-related claims, including
future defense costs, could have a material adverse impact on the Company’s results of operations and cash flows for a particular period and on the
consolidated financial position of the Company.
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