Dow Chemical 2014 Annual Report Download - page 125

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Asbestos-Related Matters of Union Carbide Corporation
Introduction
Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved in a large
number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege
personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages.
The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing
products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former
Union Carbide subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they
have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to
Union Carbide’s products.
Union Carbide expects more asbestos-related suits to be filed against Union Carbide and Amchem in the future, and will
aggressively defend or reasonably resolve, as appropriate, both pending and future claims.
Estimating the Liability
Based on a study completed by Analysis, Research & Planning Corporation (“ARPC”) in January 2003, Union Carbide
increased its December 31, 2002 asbestos-related liability for pending and future claims for the 15-year period ending in 2017
to $2.2 billion, excluding future defense and processing costs. Since then, Union Carbide has compared current asbestos claim
and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine whether the accrual
continues to be appropriate. In addition, Union Carbide has requested ARPC to review Union Carbide’s historical asbestos
claim and resolution activity each year since 2004 to determine the appropriateness of updating the most recent ARPC study.
In October 2012, Union Carbide requested ARPC to review its historical asbestos claim and resolution activity and determine
the appropriateness of updating its then most recent study completed in December 2010. In response to that request, ARPC
reviewed and analyzed data through September 30, 2012. In December 2012, based upon ARPC's December 2012 study and
Union Carbide's own review of the asbestos claim and resolution activity for 2012, it was determined that no adjustment to the
accrual was required at December 31, 2012. Union Carbide's asbestos-related liability for pending and future claims was
$602 million at December 31, 2012.
In October 2013, Union Carbide requested ARPC to review its historical asbestos claim and resolution activity and determine
the appropriateness of updating its December 2012 study. In response to that request, ARPC reviewed and analyzed data
through September 30, 2013. In December 2013, ARPC stated that an update of its study would not provide a more likely
estimate of future events than the estimate reflected in its December 2012 study and, therefore, the estimate in that study
remained applicable. Based on Union Carbide’s own review of the asbestos claim and resolution activity and ARPC’s response,
Union Carbide determined that no change to the accrual was required. At December 31, 2013, the asbestos-related liability for
pending and future claims was $501 million.
In October 2014, Union Carbide requested ARPC to review its historical asbestos claim and resolution activity and determine
the appropriateness of updating its December 2012 study. In response to that request, ARPC reviewed and analyzed data
through September 30, 2014. The resulting study, completed by ARPC in December 2014, estimates that the undiscounted cost
of disposing of pending and future claims against Union Carbide and Amchem, excluding future defense and processing costs,
to be between $540 million and $640 million through 2029 based on the data as of September 30, 2014. As in earlier studies,
ARPC provided longer periods of time in its December 2014 study, but also reaffirmed that forecasts for shorter periods of time
are more accurate than those for longer periods of time.
In December 2014, based on ARPC's December 2014 study and Union Carbides's own review of the asbestos claim and
resolution activity, Union Carbide determined that an adjustment to the accrual was required due to the increase in
mesothelioma claim activity compared with what had been forecasted in the December 2012 study. Accordingly, Union Carbide
increased its asbestos-related liability for pending and future claims by $78 million, included in "Asbestos-related charge" in
the consolidated statements of income. At December 31, 2014, the asbestos-related liability for pending and future claims was
$513 million. At December 31, 2014, approximately 22 percent of the recorded liability related to pending claims and
approximately 78 percent related to future claims. At December 31, 2013, approximately 19 percent of the recorded liability
related to pending claims and approximately 81 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