3M 2005 Annual Report Download - page 94

68
produced those compounds) granted the Company’s motion to abate the case, effectively putting the case on hold
pending the resolution of class certification issues in the action described above filed in the same court in 2002.
Six residents of Washington County, Minnesota, filed in October 2004 a purported class action in the District Court of
Washington County on behalf of Washington county residents whose property has allegedly been harmed and who
have allegedly suffered personal injury from alleged emissions from the former perfluorooctanyl production facility
at Cottage Grove, Minnesota. The lawsuit seeks unspecified damages in excess of $50,000 per plaintiff and class
member. After the District Court granted the Company’s motion to dismiss the claims for medical monitoring and
public nuisance in April 2005, the plaintiffs filed an amended complaint adding additional allegations involving
other perfluoronated compounds manufactured by the Company, alleging additional legal theories in support of
their claims, and seeking relief based on alleged contamination of the City of Oakdale municipal water supply and
certain private wells in the vicinity of Lake Elmo, Minnesota. Pretrial proceedings are in progress and a hearing on
plaintiffs’ motion to certify the action as a class action has been scheduled by the court for the fall of 2006.
Several hundred plaintiffs who claim to have lived in the vicinity of the ACME Barrel Company’s storage drum
reconditioning facility in Chicago, Illinois, filed a lawsuit in the third quarter of 2003 in the Circuit Court of Cook
County, Illinois, against 3M and a number of other companies that allegedly were customers of ACME Barrel. The
complaint seeks unspecified damages for personal injuries allegedly caused by the plaintiffs’ exposure to chemicals
migrating from ACME Barrel’s drum reconditioning operations. The plaintiffs also assert that a class should be
certified on behalf of all persons similarly situated. A separate wrongful death lawsuit was filed in the Circuit Court of
Cook County, Illinois, against 3M and a number of other companies on behalf of the estate and family of a person
who worked at the Cook County Juvenile Detention Center in the vicinity of the ACME Barrel facility. The lawsuit
alleges unspecified damages from personal injuries and death allegedly caused by exposure to chemicals migrating
from ACME Barrel’s drum reconditioning operations.
Accrued Liabilities and Insurance Receivables Related to Legal Proceedings
The Company complies with the requirements of Statement of Financial Accounting Standards No. 5, “Accounting for
Contingencies”, and related guidance, and records liabilities for legal proceedings in those instances where it can
reasonably estimate the amount of the loss and where liability is probable. Where the reasonable estimate of the
probable loss is a range, the Company records the most likely estimate of the loss, or the low end of the range if there
is no one best estimate. The Company either discloses the amount of a possible loss or range of loss in excess of
established reserves if estimable, or states that such an estimate cannot be made. For those insured matters where
the Company has taken a reserve, the Company also records receivables for the amount of insurance that it expects
to recover under the Company’s insurance program. For those insured matters where the Company has not taken a
reserve because the liability is not probable or the amount of the liability is not estimable, or both, but where the
Company has incurred an expense in defending itself, the Company records receivables for the amount of insurance
that it expects to recover for the expense incurred. The Company discloses significant legal proceedings even where
liability is not probable or the amount of the liability is not estimable, or both, if the Company believes there is at least
a reasonable possibility that a loss may be incurred.
Because litigation is subject to inherent uncertainties, and unfavorable rulings or developments could occur, there
can be no certainty that the Company may not ultimately incur charges in excess of presently recorded liabilities. A
future adverse ruling, settlement, or unfavorable development could result in future charges that could have a
material adverse effect on the Company’s results of operations or cash flows in the period in which they are
recorded. The Company currently believes that such future charges, if any, would not have a material adverse effect
on the consolidated financial position of the Company, taking into account its significant available insurance
coverage. Based on experience and developments, the Company periodically reexamines its estimates of probable
liabilities and associated expenses and receivables, and whether it is able to estimate a liability previously
determined to be not estimable and/or not probable. Where appropriate, the Company makes additions to or
adjustments of its estimated liabilities. As a result, the current estimates of the potential impact on the Company’s
consolidated financial position, results of operations and cash flows for the legal proceedings and claims pending
against the Company could change in the future.
The Company estimates insurance receivables based on an analysis of its numerous policies, including their
exclusions, pertinent case law interpreting comparable policies, its experience with similar claims, and assessment of
the nature of the claim, and records an amount it has concluded is likely to be recovered.