Casualty, Environmental and Other Reserves

Activity related to casualty, environmental and other reserves is as follows:



	Casualty			Environmental			Other
(Dollars in Millions)	Reserves			Reserves			Reserves			Total
December 30, 2011	$	372		$	83		$	64		$	519
Charged to Expense	51			35			36			122
Payments	(98		)	(30		)	(36		)	(164		)
December 28, 2012	325			88			64			477
Charged to Expense	54			48			38			140
Payments	(99		)	(36		)	(31		)	(166		)
December 27, 2013	280			100			71			451
Charged to Expense ^(a)	89			57			30			176
Payments	(104		)	(63		)	(42		)	(209		)
December 26, 2014	$	265		$	94		$	59		$	418


^(a)	Increase in expense in 2014 is primarily due to the resolution of personal injury claims for prior years.

NOTE 5. Casualty, Environmental and Other Reserves, continued

These reserves are considered critical accounting estimates due to the need for significant management judgment. They are provided for in the consolidated balance sheets as follows:



	December 2014						December 2013
(Dollars in Millions)	Current		Long-term		Total		Current		Long-term		Total
Casualty:
Personal Injury	$	68	$	123	$	191	$	59	$	148	$	207
Occupational	3		15		18		3		20		23
Asbestos	5		51		56		10		40		50
Total Casualty	76		189		265		72		208		280
Environmental	48		46		94		59		41		100
Other	18		41		59		20		51		71
Total	$	142	$	276	$	418	$	151	$	300	$	451

These liabilities are accrued when estimable and probable in accordance with the Contingencies Topic in the ASC. Actual settlements and claims received could differ and final outcome of these matters cannot be predicted with certainty. Considering the legal defenses currently available, the liabilities that have been recorded and other factors, it is the opinion of management that none of these items individually, when finally resolved, will have a material effect on the Company's financial condition, results of operations or liquidity. Should a number of these items occur in the same period, however, they could have a material effect on the Company's financial condition, results of operations or liquidity in that particular period.

Casualty

Casualty reserves of $265 million for 2014 represent accruals for personal injury, occupational injury and asbestos claims. The Company's self-insured retention amount for these claims is $50 million per occurrence. Currently, no individual claim is expected to exceed the self-insured retention amount. In accordance with the Contingencies Topic in the ASC, to the extent the value of an individual claim exceeds the self-insured retention amount, the Company would present the liability on a gross basis with a corresponding receivable for insurance recoveries. These reserves fluctuate based upon the timing of payments as well as changes in independent third-party estimates, which are reviewed by management. Actual results may vary from estimates due to the number, type and severity of the injury, costs of medical treatments and uncertainties in litigation. Most of the Company's casualty claims relate to CSXT unless otherwise noted below. Defense and processing costs, which historically have been insignificant and are anticipated to be insignificant in the future, are not included in the recorded liabilities. During 2014, 2013 and 2012, there were no significant changes in estimate recorded to adjust casualty reserves.

Personal Injury

Personal injury reserves represent liabilities for employee work-related and third-party injuries. Work-related injuries for CSXT employees are primarily subject to FELA. In addition to FELA liabilities, employees of other CSX subsidiaries are covered by various state workers’ compensation laws, the Federal Longshore and Harbor Workers’ Compensation Program or the Maritime Jones Act.

CSXT retains an independent actuary to assist management in assessing the value of personal injury claims. An analysis is performed by the actuary quarterly and is reviewed by management. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on CSXT's historical claims and settlement experience.

NOTE 5. Casualty, Environmental and Other Reserves, continued

Occupational & Asbestos

Occupational claims arise from allegations of exposures to certain materials in the workplace, such as solvents, soaps, chemicals (collectively referred to as “irritants”) and diesel fuels (like exhaust fumes) or allegations of chronic physical injuries resulting from work conditions, such as repetitive stress injuries, carpal tunnel syndrome and hearing loss.

The Company is also party to a number of asbestos claims by employees alleging exposure to asbestos in the workplace. The heaviest possible exposure for employees resulted from work conducted in and around steam locomotive engines that were largely phased out beginning around the 1950s. Other types of exposures, however, including exposure from locomotive component parts and building materials, continued until these exposures were substantially eliminated by 1985. Additionally, the Company has retained liability for asbestos claims filed against its previously owned international container shipping business. Diseases associated with asbestos typically have long latency periods (amount of time between exposure to asbestos and the onset of the disease) which can range from ten to 40 years after exposure.

Occupational claims, excluding asbestos, are analyzed on a quarterly basis by an independent actuary in order to determine the number of unasserted, or incurred but not reported (“IBNR”), claims. The actuary’s analyses are reviewed by management. With the exception of carpal tunnel, management has determined that seven years is the most probable time period in which these unasserted occupational claim filings and claim values can be estimated. Carpal tunnel claims use a three-year period to estimate the reserve due to the shorter latency period for these types of injuries.

Asbestos claims are analyzed by an independent specialist in order to determine the number of unasserted, or IBNR, claims. Since exposure to asbestos has been substantially eliminated, management reviews asserted asbestos claims quarterly and the review by the specialist is completed annually. In 2014, management reviewed this assumption and determined that it was appropriate to extend the forecast period from seven years to ten years. Based on a review of historical settlement trends, management concluded that ten years is the most probable time period in which unasserted asbestos claim filings and claim values can be estimated. The Company does not believe there is sufficient data to justify a projection period longer than ten years at this time. The change in the forecast period resulted in an immaterial increase in the asbestos reserves during 2014.

The actuary and specialist analyze CSXT’s historical claim filings, settlement amounts, and dismissal rates to determine future anticipated claim filing rates and average settlement values for occupational and asbestos claims reserves. The potentially exposed population is estimated by using CSXT’s employment records and industry data. From this analysis, the actuary and specialist provide estimates of the IBNR claims liabilities.

NOTE 5. Casualty, Environmental and Other Reserves, continued

Undiscounted liabilities recorded related to occupational and asbestos claims were as follows:



	December		December
(Dollars in Millions)	2014		2013
Occupational:
Incurred but not reported claims	$	12	$	15
Asserted claims	6		8
Total liability	$	18	$	23

Asbestos:
Incurred but not reported claims	$	45	$	35
Asserted claims	11		15
Total liability	$	56	$	50

A summary of occupational and asbestos claims activity is as follows:



	Fiscal Years
	2014		2013
Asserted Claims
Open Claims - Beginning of Year	392		523
New Claims Filed	136		165
Claims Settled	(128	)	(146	)
Claims Dismissed	(130	)	(150	)
Open Claims - End of Year	270		392

Environmental

Environmental reserves were $94 million for 2014. The Company is a party to various proceedings related to environmental issues, including administrative and judicial proceedings involving private parties and regulatory agencies. The Company has been identified as a potentially responsible party at approximately 250 environmentally impaired sites. Many of these are, or may be, subject to remedial action under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as the Superfund Law, or similar state statutes. Most of these proceedings arose from environmental conditions on properties used for ongoing or discontinued railroad operations. A number of these proceedings, however, are based on allegations that the Company, or its predecessors, sent hazardous substances to facilities owned or operated by others for treatment, recycling or disposal. In addition, some of the Company’s land holdings were leased to others for commercial or industrial uses that may have resulted in releases of hazardous substances or other regulated materials onto the property and could give rise to proceedings against the Company.

In any such proceedings, the Company is subject to environmental clean-up and enforcement actions under the Superfund Law, as well as similar state laws that may impose joint and several liability for clean-up and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. These costs could be substantial.

NOTE 5. Casualty, Environmental and Other Reserves, continued

In accordance with the Asset Retirement and Environmental Obligations Topic in the ASC, the Company reviews its role with respect to each site identified at least quarterly, giving consideration to a number of factors such as:


•	type of clean-up required;


•	nature of the Company’s alleged connection to the location (e.g., generator of waste sent to the site or owner or operator of the site);


•	extent of the Company’s alleged connection (e.g., volume of waste sent to the location and other relevant factors); and


•	number, connection and financial viability of other named and unnamed potentially responsible parties at the location.

Based on the review process, the Company has recorded amounts to cover contingent anticipated future environmental remediation costs with respect to each site to the extent such costs are estimable and probable. The recorded liabilities for estimated future environmental costs are undiscounted. The liability includes future costs for remediation and restoration of sites as well as any significant ongoing monitoring costs, but excludes any anticipated insurance recoveries. Payments related to these liabilities are expected to be made over the next several years. Environmental remediation costs are included in materials, supplies and other on the consolidated income statement.

Currently, the Company does not possess sufficient information to reasonably estimate the amounts of additional liabilities, if any, on some sites until completion of future environmental studies. In addition, conditions that are currently unknown could, at any given location, result in additional exposure, the amount and materiality of which cannot presently be reasonably estimated. Based upon information currently available, however, the Company believes its environmental reserves accurately reflect the cost of remedial actions currently required.

Other

Other reserves of $59 million for 2014 include liabilities for various claims, such as property, automobile and general liability. Also included in other reserves are longshoremen disability claims related to a previously owned international shipping business (these claims are in runoff) as well as claims for current port employees.