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Contingencies | 12 Months Ended
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Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract] |
Contingencies | Contingencies Product Liability The Company categorizes the product liability losses of its subsidiary MSA LLC into two main categories: single incident and cumulative trauma. Single incident product liability claims involve discrete incidents that are typically known to us when they occur and involve observable injuries which provide an objective basis for quantifying damages. MSA LLC estimates its liability for single incident product liability claims based on expected settlement costs for reported claims and an estimate of costs for unreported claims (claims incurred but not reported or IBNR). The estimate for IBNR claims is based on experience, sales volumes, and other relevant information. The reserve for single incident product liability claims, which includes reported and IBNR claims, at December 31, 2015 and 2014 was $3.5 million in each year. Single incident product liability expense during the year ended December 31, 2015 was $0.9 million and was not significant for the year ended December 31, 2014. Single incident product liability exposures are evaluated on an ongoing basis and adjustments are made to the reserve as appropriate. Cumulative trauma product liability claims involve exposures to harmful substances (e.g., silica, asbestos and coal dust) that occurred many years ago and may have developed over long periods of time into diseases such as silicosis, asbestosis, or coal worker’s pneumoconiosis. MSA LLC is presently named as a defendant in 1,988 lawsuits, some of which involve multiple plaintiffs, in which plaintiffs allege to have contracted certain cumulative trauma diseases. These lawsuits mainly involve respiratory protection products allegedly manufactured and sold by MSA LLC or its predecessors. A summary of cumulative trauma product liability lawsuit activity follows:
| 2015 |  | 2014 |  | 2013
Open lawsuits, January 1 | 2,326 |  |  | 2,840 |  |  | 2,609 |
New lawsuits | 340 |  |  | 542 |  |  | 489 |
Settled and dismissed lawsuits | (678 | ) |  | (1,056 | ) |  | (258 | )
Open lawsuits, December 31 | 1,988 |  |  | 2,326 |  |  | 2,840 |
As reflected in the roll-forward above, during the 2014 fourth quarter and extending into January 2015, MSA LLC resolved a number of cumulative trauma cases, the vast majority of which were insured. The settlements were recorded in both the insurance and product liability line under current liabilities, and in the insurance receivable in the other non-current asset section of the consolidated balance sheet. More than half of the open lawsuits at December 31, 2015 have had a de minimis level of activity over the last 5 years. It is possible that these cases could become active again at any point due to changes in circumstances. Cumulative trauma product liability litigation has been difficult to predict. In our past experience, it has typically not been until very late in the legal process that we can reasonably determine whether it is probable that any particular case will ultimately result in a liability. This uncertainty is caused by many factors; Cumulative trauma litigation is inherently unpredictable. Complaints generally do not provide information sufficient to determine if a lawsuit will develop into an actively litigated case. Even when a case is actively litigated, it is often difficult to determine if the lawsuit will be dismissed or otherwise resolved until late in the lawsuit. Moreover, even if it is probable that such a lawsuit will result in a loss; it is often difficult to estimate the amount of actual loss that will be incurred. These actual loss amounts are highly variable and turn on a case-by-case analysis of the relevant facts, which are often not learned until late in the lawsuit. In addition, there are uncertainties concerning the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and uncertainties regarding the impact of potential changes in legislative or judicial standards. Consequently, MSA LLC historically has been unable to estimate its cumulative trauma product liability exposure. In 2014, MSA LLC engaged an outside valuation consultant to assist in assessing its ability to estimate MSA LLC's cumulative trauma product liability exposure. This assessment was based on MSA LLC’s cumulative claims experience, including recent claims trends, and the development of enhanced claims data analytics. The analysis focused on claims made or resolved over the last several years as these claims are likely to best represent future claim characteristics. After review by the valuation consultant, outside legal counsel, and Management, it was determined that MSA LLC could not estimate its liability for reported or IBNR cumulative trauma product liability claims. The cumulative product liability reserve totaled $74.9 million at December 31, 2014, comprising of $35.1 million in other non-current liabilities and the remainder recorded in the insurance and product liability line in the other current liabilities section of the consolidated balance sheet. These amounts relate to settlements that were reached in 2014 and 2015 that will be paid out in 2015 and 2016. In 2015, Management continued to work with the outside valuation consultant and outside legal counsel to develop a method to provide a reasonable estimate for certain reported claims by using appropriate assumptions based on our unique circumstances. As a result, we've established a reserve for these reported claims that we believe represents our best estimate of potential loss at December 31, 2015. The change in ability to estimate was driven by the maturation of MSA LLC’s defense efforts and an additional year of claims experience. Management’s claims experience has now advanced to a level that enables us to develop a reserve of potential loss. As a result, for certain reported claims, we estimated a liability of $7.1 million as of December 31, 2015. This amount has been added to the product liability reserve and the insurance receivable (see below). The product liability reserve for cumulative trauma totals $50.1 million, and is recorded in the insurance and product liability line within current liabilities in the consolidated balance sheet. To arrive at the estimate for certain reported claims, it was necessary to employ significant assumptions. In light of these significant assumptions, and all of the uncertainties inherent in cumulative trauma product liability litigation noted above, there can be no assurance that future experience with reported claims will follow MSA LLC’s past experience. Thus, the reserve of $7.1 million as of December 31, 2015 should be viewed as simply an estimate of a possible outcome for those reported claims where our experience allows us to reasonably make an estimate. Actual liabilities could vary greatly and we will need to adjust the estimate from time to time based on relevant facts and circumstances. If actual experience is worse than projected, it is likely that the estimate would increase, and these increases could potentially be material over time. The uncertainties noted above relating to our cumulative trauma product liability litigation are particularly acute in the case of IBNR claims, which by definition are potential claims that have not yet been filed. Management continues to be unable to reasonably estimate, and therefore has not recorded any liability for, MSA LLC’s cumulative trauma IBNR claims. This determination was made by Management after review with its valuation consultant and outside legal counsel. Our aggregate cumulative trauma product liability losses and administrative and defense costs for the three years ended December 31, 2015, totaled approximately $156.1 million, substantially all of which was insured. Because litigation is subject to inherent uncertainties, and unfavorable rulings or developments could occur, there can be no certainty that MSA LLC may not ultimately incur charges in excess of presently recorded liabilities. The estimate does not purport to reflect MSA LLC’s overall claims exposure for either reported claims or future claims as noted above. Although it is impossible to predict the ultimate outcome of current open claims, based on current information, our experience in handling these matters, and our substantial insurance program, we do not believe that the resolution of these claims will have a material adverse effect on our future financial condition or liquidity. On February 26, 2016, a Kentucky state court jury in the James Couch claim rendered a verdict against subsidiary MSA LLC of $7.2 million dollars. Judgment has not yet been entered on the verdict. The Company is currently evaluating all available legal options. Outside legal counsel advises that the Company has strong grounds to appeal this decision. Insurance Receivable With some common contract exclusions, we maintain insurance for cumulative trauma product liability claims. We have purchased insurance policies for the policy years from 1952-1986 from over 20 different insurance carriers that provide coverage for cumulative trauma product liability losses and, in many instances, related defense costs (the "Occurrence-Based Policies"). The available limits of these policies exceed the recorded insurance receivable balance. After 1986, the Company’s insurance policies have significant per claim deductibles. Based on this, the Company does not expect to be materially reimbursed for any claims alleging exposures that occurred entirely after this date. In the normal course of business, we make payments to settle product liability claims and for related defense costs. We record receivables for the amounts that are covered by insurance. Since December 31, 2014, the insurance receivable has increased by $9.0 million as a result of the above noted settlements and related defense costs. Various factors could affect the timing and amount of recovery of the insurance receivable, including the outcome of negotiations with insurers, legal proceedings with respect to product liability insurance coverage and the extent to which insurers may become insolvent in the future. Insurance receivables at December 31, 2015 totaled $229.5 million, of which $2.0 million is reported in other current assets and $227.5 million in other non-current assets. Insurance receivables at December 31, 2014 totaled $220.5 million, of which $2.0 million is reported in other current assets and $218.5 million in other non-current assets. A summary of insurance receivable balances and activity related to cumulative trauma product liability losses follows:
(In millions) | 2015 |  | 2014 |  | 2013
Balance January 1 | $ | 220.5 |  |  | $ | 124.8 |  |  | $ | 130.0 |
Additions | 17.3 |  |  | 98.2 |  |  | 34.0 |
Collections and settlements | (8.3 | ) |  | (2.5 | ) |  | (39.2 | )
Balance December 31 | $ | 229.5 |  |  | $ | 220.5 |  |  | $ | 124.8 |
Additions to insurance receivables in the above table represent insured cumulative trauma product liability losses and related defense costs. Uninsured cumulative trauma product liability losses during the year ended December 31, 2015, 2014, and 2013 were $1.0 million, $3.9 million and $1.7 million, respectively. Collections primarily represent agreements with insurance companies to pay amounts due that are applicable to cumulative trauma claims. When there are contingencies embedded in these agreements, we apply payments to the insurance receivable in the period when the contingency is met. In cases where the payment stream covers multiple years and there are no contingencies, the present value of the payments is recorded as a note receivable (current and long-term) in the balance sheet within prepaid expenses and other current assets and other noncurrent assets. MSA LLC believes that the increase in its insurance receivable balance that it has experienced since 2005 is primarily due to disagreements among its insurance carriers, and consequently with MSA LLC, as to when the individual obligations of insurance carriers to pay are triggered and the amount of each insurer’s obligation, as compared to other insurers. MSA LLC believes that its insurers do not contest that they have issued policies to our subsidiaries or that these policies cover cumulative trauma product liability claims. We believe that successful resolution of insurance litigation with various insurance carriers in recent years demonstrates that we have strong legal positions concerning MSA LLC's rights to coverage. The collectability of MSA LLC's insurance receivables is regularly evaluated and we believe that the amounts recorded are probable of collection. These conclusions are based on analysis of the terms of the underlying insurance policies, experience in successfully recovering cumulative trauma product liability claims from our insurers under other policies, the financial ability of the insurance carriers to pay the claims, understanding and interpretation of the relevant facts and applicable law and the advice of MSA LLC's outside legal counsel. Insurance Litigation MSA LLC is currently involved in insurance coverage litigation with a number of our insurance carriers regarding its Occurrence-Based Policies. In 2009, MSA LLC (as Mine Safety Appliances Company) sued The North River Insurance Company (North River) in the United States District Court for the Western District of Pennsylvania, alleging that North River breached one of its insurance policies by failing to pay amounts owed to MSA LLC and that it engaged in bad-faith claims handling. MSA LLC believes that North River’s refusal to indemnify it under the policy for product liability losses and legal fees paid by MSA LLC is wholly contrary to Pennsylvania law and MSA LLC is vigorously pursuing the legal actions necessary to collect all due amounts. A trial date has not yet been scheduled. In 2010, North River sued MSA LLC (as Mine Safety Appliances Company) in the Court of Common Pleas of Allegheny County, Pennsylvania seeking a declaratory judgment concerning their responsibilities under three additional policies. MSA LLC asserted claims against North River for breaches of contract for failures to pay amounts owed to MSA LLC. MSA LLC also alleges that North River engaged in bad-faith claims handling. MSA LLC believes that North River’s refusal to indemnify us under these policies for product liability losses and legal fees paid by MSA LLC is wholly contrary to Pennsylvania law and MSA LLC is vigorously pursuing the legal actions necessary to collect all due amounts. Trial is currently scheduled for September 2016. In July 2010, MSA LLC (as Mine Safety Appliances Company) filed a lawsuit in the Superior Court of the State of Delaware seeking declaratory and other relief from the majority of its excess insurance carriers concerning the future rights and obligations of MSA LLC and its excess insurance carriers under various insurance policies. The reason for this insurance coverage action is to secure a comprehensive resolution of its rights under the insurance policies issued by the insurers. Trial is currently scheduled for May 2016. MSA LLC has resolved claims against certain of its insurance carriers on some of their policies, including the Occurrence-Based Policies through negotiated settlements. When a settlement is reached, MSA LLC dismisses the settling carrier from relevant above noted lawsuit(s). Assuming satisfactory resolution, once disputes are resolved with each of the remaining carriers responsible for the Occurrence-Based Policies, MSA LLC anticipates having commitments to provide future payment streams which should be sufficient to satisfy its recorded receivables due from insurance carriers. In addition, MSA LLC likely will retain some coverage through coverage-in-place agreements, although that coverage may not be immediately accessible. When these insurance coverage matters are fully resolved, MSA LLC (and its coverage-in-place carriers, where applicable) will be responsible for expenses related to cumulative trauma product liability claims.

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