Honeywell to Fund Asbestos Trust With $1.3 BillionLegislation & Litigation
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Povtak, T. (2022, November 28). Honeywell to Fund Asbestos Trust With $1.3 Billion. Asbestos.com. Retrieved January 30, 2023, from https://www.asbestos.com/news/2022/11/28/honeywell-funding-asbestos-trust/
Povtak, Tim. "Honeywell to Fund Asbestos Trust With $1.3 Billion." Asbestos.com, 28 Nov 2022, https://www.asbestos.com/news/2022/11/28/honeywell-funding-asbestos-trust/.
Povtak, Tim. "Honeywell to Fund Asbestos Trust With $1.3 Billion." Asbestos.com. Last modified November 28, 2022. https://www.asbestos.com/news/2022/11/28/honeywell-funding-asbestos-trust/.
To eliminate future funding obligations, Honeywell International Inc. has agreed to a one-time, lump sum payment of $1.325 billion to the asbestos trust fund it first established in 2013.
If approved by the U.S. Bankruptcy Court for the Western District of Pennsylvania, the buyout agreement would likely end any additional asbestos-related liabilities for Honeywell.
The payment is a significant investment toward future financial stability for the industrial giant, which is based in Charlotte, North Carolina.
Honeywell’s costly asbestos trust fund obligation stems from North American Refractories Company, which it owned from 1979 to 1986.
NARCO was once one of America’s largest manufacturers of asbestos refractory materials. It created heat-resistant products for Honeywell that were used to line high-temperature equipment .
Although asbestos was once used widely for its strength and heat resistance, its toxicity led to serious health problems – including mesothelioma cancer – for those who worked with the products. It has led to decades of costly legal ramifications.
Honeywell Payout Will Resolve Legal Battle
Asbestos litigation drove NARCO into bankruptcy in 2002, leaving Honeywell responsible for future damages. The North American Refractories Asbestos Personal Injury Settlement Trust was created in 2013. It has paid out an estimated $523 million, periodically funded by Honeywell, to those harmed by NARCO asbestos products.
The harm caused by NARCO asbestos products went well beyond what was used by Honeywell. In the 1970s, for example, NARCO was manufacturing automobile brake pads, also contaminated by asbestos.
Workers in shipyards, power plants, rubber factories, paper mills and railyards also were harmed by NARCO products.
In 2021, Honeywell sued the trust, claiming it was making undeserved payouts to too many claimants. The trust filed its own lawsuit against Honeywell, claiming the company was trying to evade its original obligation, which was estimated at $150 million annually.
This one-time payout is expected to resolve the legal issues between the trust and Honeywell and end future obligations for the company. The current NARCO reserve of $695 million – once projected to cover asbestos-related claims through 2059 – would be removed from Honeywell’s balance sheet.
“Honeywell is hopeful that the bankruptcy court will approve the buyout so that we can permanently extinguish the liability on our books,” the company said in a statement first published by Bloomberg News.
According to the recent regulatory filing with the U.S. Securities and Exchange Commission, Honeywell will still have the right to collect proceeds from its insurance policies related to NARCO. The trust reported legal fees alone at $21 million for 2021.
“Should the Buyout Agreement be approved by the Bankruptcy Court, the Buyout Closing would resolve all outstanding litigation currently ongoing between Honeywell and the trust,” according to the regulatory filing.
Asbestos Trusts Pay Billions to Claimants
The NARCO trust fund is just one of 60 asbestos-related trust funds, worth a combined $30 billion, that exist today. Other companies with asbestos trust funds include Owens Corning Corporation, United States Gypsum, W.R. Grace and Company, Armstrong World Industries, Western MacArthur and Johns-Manville Corporation.
Since the 1980s, they have paid out an estimated $20 billion to claimants. They were created by bankrupt companies, often overwhelmed by the thousands of lawsuits sparked by asbestos contamination.
Trust claim payouts often range from $7,000 to $1.2 million, with a median value estimated at $180,000. Claimants often seek money from more than one trust in a lawsuit.