3M 2012 Annual Report Download - page 108
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The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as
claimed when used in the intended manner and in the intended circumstances. Consequently the Company believes that
claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company’s
respiratory protection products. Nonetheless the Company’s litigation experience indicates that claims of persons with
malignant conditions are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost
of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods
when the vast majority of claims were asserted by the unimpaired.
As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the
Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia
and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages
primarily for reimbursement of the costs allegedly incurred by the State for worker’s compensation and healthcare benefits
provided to all workers with occupational pneumoconiosis and unspecified punitive damages. While the case has been
inactive since the fourth quarter of 2007, the Court held a case management conference in March 2011, but no further
activity has occurred in the case since that conference. No liability has been recorded for this matter because the Company
believes that liability is not probable and estimable at this time. In addition, the Company is not able to estimate a possible
loss or range of loss given the minimal activity in this case and the fact that the complaint asserts claims against two other
manufacturers where a defendant’s share of liability may turn on the law of joint and several liability and by the amount of
fault a jury allocates to each defendant if a case is ultimately tried.
Plaintiffs have asserted specific dollar claims for damages in approximately 40% of the 1,149 lawsuits that were pending
against the Company at the end of 2012 in all jurisdictions. A majority of states restrict or prohibit specifying damages in
tort cases such as these, and most of the remaining jurisdictions do not require such specification. In those cases in which
plaintiffs choose to assert specific dollar amounts in their complaints, brought in states that permit such pleading, the
amounts claimed are typically not meaningful as an indicator of the Company’s potential liability. This is because (a) the
amounts claimed typically bear no relation to the extent of the plaintiff’s injury, if any; (b) the complaints nearly always
assert claims against multiple defendants with the typical complaint asserting claims against as few as a dozen different
defendants to upwards of 100 different defendants, the damages alleged are not attributed to individual defendants, and a
defendant’s share of liability may turn on the law of joint and several liability, which can vary by state, and by the amount
of fault a jury allocates to each defendant if a case is ultimately tried before a jury; (c) many cases are filed against the
Company even though the plaintiffs did not use any of the Company’s products and, ultimately, are withdrawn or
dismissed without any payment; and (d) many cases are brought on behalf of plaintiffs who have not suffered any medical
injury, and, ultimately, are resolved without any payment or a payment that is a small fraction of the damages initially
claimed. Of the 465 pending cases in which purported damage amounts are specified in the complaints, 281 cases
involve claims of $100,000 or less (18 of which also allege punitive damages of $15,000, 13 of which also allege punitive
damages of $10 million, and 3 of which also allege punitive damages of $20 million); 59 cases involve claims between
$100,000 and $3 million (45 of which also allege punitive damages of $250,000, and 8 of which also allege punitive
damages of $1 million); 7 cases involve claims between $3 million and $7.5 million (all of which also allege punitive
damages of $5 million); 5 cases involve claims of $10 million (4 of which also allege punitive damages of $10 million); 72
cases involve claims of $10 million to $50 million (all of which also allege punitive damages of $13 million); 4 cases
involve claims of $50 million (all of which also allege punitive damages of $50 million) and 37 cases involve claims of over
$50 million (36 of which allege punitive damages of $100 million). Some complaints allege that the compensatory and
punitive damages are at least the amounts specified. As previously stated, the Company’s experience and the other
reasons cited indicate that the damage amounts specified in complaints are not a meaningful factor in any assessment of
the Company’s potential liability.
Respirator Mask/Asbestos Liabilities and Insurance Receivables: The Company estimates its respirator mask/asbestos
liabilities, including the cost to resolve the claims and defense costs, by examining: (i) the Company’s experience in
resolving claims, (ii) apparent trends, (iii) the apparent quality of claims (e.g., whether the claim has been asserted on
behalf of asymptomatic claimants), (iv) changes in the nature and mix of claims (e.g., the proportion of claims asserting
usage of the Company’s mask or respirator products and alleging exposure to each of asbestos, silica, coal or other
occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company),
(v) the number of current claims and a projection of the number of future asbestos and other claims that may be filed
against the Company, (vi) the cost to resolve recently settled claims, and (vii) an estimate of the cost to resolve and
defend against current and future claims.
Developments may occur that could affect the Company’s estimate of its liabilities. These developments include, but are not
limited to, significant changes in (i) the number of future claims, (ii) the average cost of resolving claims, (iii) the legal costs of
defending these claims and in maintaining trial readiness, (iv) changes in the mix and nature of claims received, (v) trial and
appellate outcomes, (vi) changes in the law and procedure applicable to these claims, and (vii) the financial viability of other
co-defendants and insurers.