Dow Chemical 2014 Annual Report Download - page 126

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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 most of the carriers involved in the Insurance Litigation and continues to pursue a settlement with
the remaining carrier. Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $10 million at
December 31, 2014 and $25 million at December 31, 2013.
At December 31, 2014 and December 31, 2013, 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 2014 2013
Receivables for defense and resolution costs – carriers with settlement agreements $ 69 $ 66
Receivables for insurance recoveries – carriers without settlement agreements 10 25
Total $ 79 $ 91
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.
Union Carbide expenses defense costs as incurred. The pretax impact for defense and resolution costs, net of insurance, was
$108 million in 2014, $107 million in 2013 and $100 million in 2012, and was reflected in “Cost of sales” in the consolidated
statements of income.
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 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 impact on the Company’s results of operations and cash
flows for a particular period and on the consolidated financial position of the Company.