Dow Chemical 2011 Annual Report Download - page 208

114
At December 31, 2011, approximately 18 percent of the recorded liability related to pending claims and approximately 82
percent related to future claims. At December 31, 2010, approximately 21 percent of the recorded liability related to pending
claims and approximately 79 percent related to future claims.
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. The Insurance Litigation is ongoing.
Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $40 million at December 31, 2011
and $50 million at December 31, 2010. At December 31, 2011 and December 31, 2010, 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 following table summarizes Union Carbide’s receivables related to its asbestos-related liability:
Receivables for Asbestos-Related Costs at December 31
In millions
Receivables for defense costs – carriers with settlement agreements
Receivables for resolution costs – carriers with settlement agreements
Receivables for insurance recoveries – carriers without settlement agreements
Total
2011
$ 20
158
40
$ 218
2010
$ 12
236
50
$ 298
Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance,
was $88 million in 2011, $73 million in 2010 and $58 million in 2009, and was reflected in “Cost of sales” in the consolidated
statements of income.
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.