US Postal Service 2012 Annual Report Download - page 96

2012 Report on Form 10-K United States Postal Service- 95 -
NOTE 7 — CONTINGENT LIABILITIES
Contingent liabilities consist mainly of claims and lawsuits resulting from labor, employment, environmental
matters, property damage claims, injuries on postal properties, issues arising from postal contracts,
personal claims, and traffic accidents.
Each quarter, significant new claims and litigation are evaluated for the probability of an adverse outcome. If
the claim is deemed probable of an unfavorable outcome and the amount of the potential resolution is
reasonably estimable, a liability for the loss is recorded. Each quarter, any pre-existing claims and litigation
are reviewed and adjusted for resolutions or revisions to prior estimates. This evaluation of cases resulted
in an increase to the liability of $51 million and $448 million for the years ended September 30, 2012, and
2011, respectively.
The following table summarizes contingent liabilities provided for in the financial statements at September
30, 2012, and 2011.
As previously reported, on January 14, 2010, the Equal Employment Opportunity Commission's (EEOC)
Office of Federal Operations certified a class action case against the Postal Service in a matter captioned
McConnell v. Donahoe (first instituted as McConnell v. Potter in 2006). The class currently consists of all
permanent rehabilitation employees and limited duty employees who have been subjected to the National
Reassessment Process (NRP) from May 5, 2006, to July 1, 2011. The Postal Service used the NRP to
ensure that its records were correct and that employees receiving workers' compensation benefits were
placed in jobs consistent with their abilities. The case alleges violations of the Rehabilitation Act of 1973
resulting from the NRP's failure to provide a reasonable accommodation, the NRP's wrongful disclosure of
medical information, the creation by the NRP of a hostile work environment, and the NRP's adverse impact
on disabled employees. The class is seeking injunctive relief and damages of an uncertain amount on
behalf of a yet unidentified population of employees. If the plaintiffs were able to prove their allegations in
this matter and to establish the damages they assert, then an adverse ruling could have a material adverse
impact on the Postal Service. However, the Postal Service disputes the claims asserted in this class action
case and is vigorously contesting the matter. There was no material change in the status of this case during
the twelve months ended September 30, 2012.
Contingent Liabilities
(Dollars in millions)
Labor- Employment
$
722
$
662
Environmental
48
48
Tort
43
39
Contractual
-
13
Total Contingent Liabilities
$
813
$
762
2012
2011
Based on currently available information, adequate provision has been made for probable losses arising
from all claims and suits. The current portion of this liability is $61 million at September 30, 2012, and $72
million as of September 30, 2011, and is included on the Balance Sheets in “Trade payables and accrued
expenses”. The long-term portion of this liability at September 30, 2012, was $752 million and $690 million
at September 30, 2011. These amounts are accrued in “Contingent liabilities and other” on the Balance
Sheets.
In addition to the amounts accrued in the financial statements, the Postal Service also has claims and
lawsuits which it deems reasonably possible of an unfavorable outcome which range from $375 million to
$425 million at September 30, 2012. No provisions for these possible losses are accrued or included in the
financial statements.