We are a party to contracts in which we agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related liabilities arising out of the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct of the indemnified parties. We cannot estimate the potential amount of future payments under these agreements until events arise that would trigger the liability.

Additionally, in connection with certain sales of assets and divestures of businesses, we have agreed to indemnify the buyer and related parties for certain losses or liabilities incurred by the buyer or such related parties with respect to (1) the representations and warranties made to the buyer by us in connection with the sales and (2) liabilities related to the pre-closing operations of the assets sold. Indemnities related to pre-closing operations generally include environmental liabilities, tax liabilities and other liabilities not assumed by the buyer.

Indemnities related to the pre-closing operations of sold assets normally do not represent added liabilities for us, but simply serve to protect the buyer from potential liability associated with the obligations that existed (known and unknown) at the time of the sale. We record accruals for those pre-closing obligations that are considered probable and estimable. We have not accrued any additional amounts as a result of the indemnity agreements summarized below as we believes the fair value of the guarantees are not material.


•	In connection with various sales of our timberlands, we have agreed to indemnify various buyers with respect to losses resulting from breaches of limited representations and warranties contained in these agreements. These indemnities generally are capped at a maximum potential liability and have an unspecified duration.


•	In connection with the sale by LP Canada Pulp Ltd (LPCP) of its pulp mill in Chetwynd, BC, Canada to Tembec, Ltd in October 2002, we provided an indemnity of unspecified duration provided by LPCP for liabilities arising out of pre-closing operations. These indemnities, which do not extend to environmental liabilities, are capped at C$15.0 million in the aggregate.


•	In connection with the mill exchange by LP Canada of its non-operating OSB mill in Chambord, Quebec to Norbord in November 2016, we provided an indemnity for liabilities arising out of pre-closing operations. These indemnities are capped at C$5.0 million in aggregate.

We also have various other indemnities that are individually and in the aggregate immaterial.

We will record a liability related to specific indemnification when future payment is probable and the amount is estimable.

Additionally, we offer warranties on the sale of most of our products and record an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The activity in warranty reserves for the last three years is summarized in the following table.



	Year ended December 31,
Dollar amounts in millions	2017			2016			2015
Beginning balance	$	24.1		$	21.0		$	31.4
Accrued to expense during the year	1.0			0.8			0.7
Accrued/ (credited) to other operating credits and charges	5.4			16.9			(1.4		)
Accrued to discontinued operations	1.5			0.5			2.5
Foreign currency translation	2.2			(0.2		)	(0.5		)
Payments made	(9.5		)	(14.9		)	(11.7		)
Total warranty reserves	24.7			24.1			21.0
Current portion of warranty reserves	(9.0		)	(9.0		)	(6.0		)
Long term portion of warranty reserves	$	15.7		$	15.1		$	15.0

The current portion of the warranty reserve is included in “Accounts payable and accrued liabilities” and the long-term portion is included in “Other long-term liabilities” on the Consolidated Balance Sheets.

We increased the warranty reserves related to CanExel products sold in certain geographic areas and for a specific time period by $5.4 million in 2017 and $16.9 million in 2016. The changes to the reserve reflected revised estimates of future claims.

During 2015, we decreased the warranty reserve associated with our SmartSide products by $1.4 million based upon reduced claims activity.

We increased the warranty reserves related to discontinued composite decking products by $1.5 million, $0.5 million, and $2.5 million for the years ended December 31, 2017, 2016 and 2015. The additional reserves reflect revised estimates of future claim payments based upon an increase in decking warranty claims related to a specific operation and specific time period.

We believe that the warranty reserve balances at December 31, 2017 are adequate to cover future warranty payments. However, it is possible that additional charges may be required.