Target 2014 Annual Report Download - page 51

Litigation and Governmental Investigations
In addition, more than 100 actions have been filed in courts in many states, along with one action in Canada, and other
claims have been or may be asserted against us on behalf of guests, payment card issuing banks, shareholders or
others seeking damages or other related relief allegedly arising out of the Data Breach. State and federal agencies,
including State Attorneys General, the Federal Trade Commission and the SEC, are investigating events related to
the Data Breach, including how it occurred, its consequences and our responses. Our accruals for estimated probable
loss discussed below include accruals for what we believe to be the vast majority of both actual and potential claims
from these matters.
Expenses Incurred and Amounts Accrued
Data Breach Balance Sheet Rollforward
(millions) Liabilities Insurance receivable
Balance at February 1, 2014
Expenses incurred/insurance receivable recorded (a)
$ 61
191
$ 44
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Payments made/received (81) (30)
Balance at January 31, 2015 $ 171 $ 60
(a) Includes expenditures and accruals for Data Breach-related costs and expected insurance recoveries as discussed below.
During 2014, we recorded $191 million of Data Breach-related expenses, partially offset by expected insurance
proceeds of $46 million, for net expenses of $145 million. Since the Data Breach, we have incurred $252 million of
cumulative expenses, partially offset by expected insurance recoveries of $90 million, for net cumulative expenses of
$162 million. These expenses were included in our Consolidated Statements of Operations as Selling, General and
Administrative Expenses (SG&A), but were not part of segment results. Along with legal and other professional services,
these expenses include an accrual for estimated probable losses for what we believe to be the vast majority of actual
and potential breach related claims, including claims by the payment card networks. Our probable loss estimate is
based on the expectation of reaching negotiated settlements, and not on any determination that it is probable we would
be found liable for the losses we have accrued were these claims to be litigated. Given the varying stages of claims
and related proceedings, and the inherent uncertainty surrounding them, our estimates involve significant judgment
and are based on currently available information, historical precedents and an assessment of the validity of certain
claims. Our estimates may change as new information becomes available, and although we do not believe it is probable,
it is reasonably possible that we may incur a material loss in excess of the amount accrued. We are not able to estimate
the amount of such reasonably possible excess loss exposure at this time because many of the matters are in the
early stages, alleged damages have not been specified, and there are significant factual and legal issues to be resolved.
The accrual does not reflect future breach-related legal, consulting or administrative fees, which are expensed as
incurred and not expected to be material to our consolidated financial statements in any individual period.
Insurance Coverage
To limit our exposure to losses relating to data breach and other claims, we maintain $100 million of network-security
insurance coverage, above a $10 million deductible and with a $50 million sublimit for settlements with the payment
card networks. This coverage, and certain other customary business-insurance coverage, has reduced our exposure
related to the Data Breach. We will pursue recoveries to the maximum extent available under the policies. Since the
Data Breach, we have received $30 million from our network-security insurance carriers.
Canada Exit
See Note 6 for information related to Canada Exit-related contingent liabilities.
Other Contingencies
We are exposed to other claims and litigation arising in the ordinary course of business and use various methods to
resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents.
We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and
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