Honeywell 2015 Annual Report Download - page 68

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS —(Continued)
(Dollars in millions, except per share amounts)
Our consolidated financial statements reflect an estimated liability for resolution of pending (claims actually filed as of
the financial statement date) and future Bendix-related asbestos claims. We have valued Bendix pending and future claims
using average resolution values for the previous five years. We update the resolution values used to estimate the cost of
Bendix pending and future claims during the fourth quarter each year.
The liability for future claims represents the estimated value of future asbestos related bodily injury claims expected to
be asserted against Bendix over the next five years. Such estimated cost of future Bendix-related asbestos claims is based
on historic claims filing experience and dismissal rates, disease classifications, and resolution values in the tort system for
the previous five years. In light of the uncertainties inherent in making long-term projections, as well as certain factors
unique to friction product asbestos claims, we do not believe that we have a reasonable basis for estimating asbestos claims
beyond the next five years. The methodology used to estimate the liability for future claims is similar to that used to estimate
the liability for future NARCO-related asbestos claims.
Our insurance receivable corresponding to the liability for settlement of pending and future Bendix asbestos claims
reflects coverage which is provided by a large number of insurance policies written by dozens of insurance companies in
both the domestic insurance market and the London excess market. Based on our ongoing analysis of the probable
insurance recovery, insurance receivables are recorded in the financial statements simultaneous with the recording of the
estimated liability for the underlying asbestos claims. This determination is based on our analysis of the underlying
insurance policies, our historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial
determinations relevant to our insurance programs, and our consideration of the impacts of any settlements reached with
our insurers.
Honeywell believes it has sufficient insurance coverage and reserves to cover all pending Bendix-related asbestos
claims and Bendix-related asbestos claims estimated to be filed within the next five years. Although it is impossible to predict
the outcome of either pending or future Bendix-related asbestos claims, we do not believe that such claims would have a
material adverse effect on our consolidated financial position in light of our insurance coverage and our prior experience in
resolving such claims. If the rate and types of claims filed, the average resolution value of such claims and the period of time
over which claim settlements are paid (collectively, the Variable Claims Factors) do not substantially change, Honeywell
would not expect future Bendix-related asbestos claims to have a material adverse effect on our results of operations or
operating cash flows in any fiscal year. No assurances can be given, however, that the Variable Claims Factors will not
change.
Other Matters
We are subject to a number of other lawsuits, investigations and disputes (some of which involve substantial amounts
claimed) arising out of the conduct of our business, including matters relating to commercial transactions, government
contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and
environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and
reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as
potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each
matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters are the
following:
Honeywell v. United Auto Workers (UAW) et. al—In July 2011, Honeywell filed an action in federal court (District of
New Jersey) against the UAW and all former employees who retired under a series of Master Collective Bargaining
Agreements (MCBAs) between Honeywell and the UAW seeking a declaratory judgment that certain express limitations on its
obligation to contribute toward the healthcare coverage of such retirees (the CAPS) set forth in the MCBAs may be
implemented, effective January 1, 2012. The UAW and certain retiree defendants filed a mirror suit in the Eastern
64