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Contingent Liabilities | 12 Months Ended
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Dec. 31, 2012
Contingent Liabilities [Abstract] |
Contingent Liabilities |
| 16. | Contingent Liabilities
As of December 31, 2012, the Company was a defendant in approximately two (2) lawsuits and was aware of certain other such claims. Lawsuits in which the Company is involved generally fall into one of three categories: traditional product litigation, municipal litigation, and commercial litigation, discussed in turn below. Traditional Product Liability Litigation One of the two lawsuits mentioned above involves claims for damages related to allegedly defective product design and/or manufacture and/or inadequate warnings. The lawsuit stems from a specific incident of personal injury and is based on traditional product liability theories such as strict liability, negligence and/or breach of warranty. The Company management believes that the allegations in this case are unfounded, and that the incident was caused by the negligence and/or misuse of the firearm by third parties or the claimant, and that there should be no recovery against the Company. Municipal Litigation Municipal litigation generally includes those cases brought by cities or other governmental entities and individuals against firearms manufacturers, distributors and retailers seeking to recover damages allegedly arising out of the misuse of firearms by third-parties in the commission of homicides, suicides and other shootings involving juveniles and adults. The only remaining lawsuit of this type was filed by the City of Gary in Indiana State Court over ten years ago. The complaint seeks damages, among other things, for the costs of medical care, police and emergency services, public health services, and other services as well as punitive damages. In addition, nuisance abatement and/or injunctive relief is sought to change the design, manufacture, marketing, and distribution practices of the various defendants. The suit alleges, among other claims, negligence in the design of products, public nuisance, negligent distribution and marketing, negligence per se and deceptive advertising. The case does not allege a specific injury to a specific individual as a result of the misuse or use of any of the Company's products. After a long procedural history, the case was scheduled for trial on June 15, 2009. The case was not tried on that date and no subsequent scheduling order was entered. There has been no activity since that time. Commercial Litigation From time to time, the Company may be involved in commercial disputes that result in litigation. These disputes run the gamut and may involve intellectual property, real property, supply or distribution agreements, contract disputes, or other, general commercial matters. As of December 31, 2012, the Company was not involved in any such lawsuits. Summary of Claimed Damages and Explanation of Product Liability Accruals Punitive damages, as well as compensatory damages, are demanded in certain of the lawsuits and claims. Aggregate claimed amounts presently exceed product liability accruals and applicable insurance coverage. For claims made after July 10, 2000, coverage is provided on an annual basis for losses exceeding $5 million per claim, or an aggregate maximum loss of $10 million annually, except for certain new claims which might be brought by governments or municipalities after July 10, 2000, which are excluded from coverage. The Company management monitors the status of known claims and the product liability accrual, which includes amounts for asserted and unasserted claims. While it is not possible to forecast the outcome of litigation or the timing of costs, in the opinion of management, after consultation with special and corporate counsel, there is a remote likelihood that litigation, including punitive damage claims, will have a material adverse effect on the financial position of the Company, but may have a material impact on the Company's financial results for a particular period. Product liability claim payments are made when appropriate if, as, and when claimants and the Company reach agreement upon an amount to finally resolve all claims. Legal costs are paid as the lawsuits and claims develop, the timing of which may vary greatly from case to case. A time schedule cannot be determined in advance with any reliability concerning when payments will be made in any given case. Provision is made for product liability claims based upon many factors related to the severity of the alleged injury and potential liability exposure, based upon prior claim experience. Because our experience in defending these lawsuits and claims is that unfavorable outcomes are typically not probable or estimable, only in rare cases is an accrual established for such costs. In most cases, an accrual is established only for estimated legal defense costs. Product liability accruals are periodically reviewed to reflect then-current estimates of possible liabilities and expenses incurred to date and reasonably anticipated in the future. Threatened product liability claims are reflected in our product liability accrual on the same basis as actual claims; i.e., an accrual is made for reasonably anticipated possible liability and claims-handling expenses on an ongoing basis. A range of reasonably possible loss relating to unfavorable outcomes cannot be made. However, in product liability cases in which a dollar amount of damages is claimed, the amount of damages claimed, which totaled $0.0 million and $5.4 million at December 31, 2012 and 2011, respectively, are set forth as an indication of possible maximum liability that the Company might be required to incur in these cases (regardless of the likelihood or reasonable probability of any or all of this amount being awarded to claimants) as a result of adverse judgments that are sustained on appeal. As of December 31, 2012 and 2011, the Company was a defendant in 2 and 3 lawsuits, respectively, involving its products and is aware of other such claims. During 2012 and 2011, respectively, 2 and 1 claims were filed against the Company, 3 and 0 claims were dismissed, and no claims were settled in either year. The Company's product liability expense was $0.2 million in 2012 and $1.6 million in 2011. This expense includes the cost of outside legal fees, insurance, and other expenses incurred in the management and defense of product liability matters. A roll-forward of the product liability reserve and detail of product liability expense for the three years ended December 31, 2012 follows: Balance Sheet Roll-forward for Product Liability Reserve
|  |  |  |  |  |  |  | Cash Payments |  |  |  |
|  | Balance Beginning of Year (a) |  |  | Accrued Legal Expense (Income) (b) |  |  | Legal Fees (c) |  |  | Settlements (d) |  |  | Balance End of Year (a) |
2010 |  |  | 2,082 |  |  |  | (834 | ) |  |  | (64 | ) |  |  | (162 | ) |  |  | 1,022 |
2011 |  |  | 1,022 |  |  |  | 755 |  |  |  | (31 | ) |  |  | - |  |  |  | 1,746 |
2012 |  |  | 1,746 |  |  |  | (633 | ) |  |  | (52 | ) |  |  | (4 | ) |  |  | 1,057 |
Income Statement Detail for Product Liability Expense
|  | Accrued Legal Expense (b) |  |  | Insurance Premium Expense (e) |  |  | Total Product Liability Expense |
2010 |  |  | (834 | ) |  |  | 843 |  |  |  | 9 |
2011 |  |  | 755 |  |  |  | 862 |  |  |  | 1,617 |
2012 |  |  | (633 | ) |  |  | 810 |  |  |  | 177 |
Notes
| (a) | The beginning and ending liability balances represent accrued legal fees only. Settlements and administrative costs are expensed as incurred. Only in rare instances is an accrual established for settlements.
| (b) | The expense accrued in the liability is for legal fees only. In 2010 and 2012, the costs incurred related to cases that were settled or dismissed were less than the amounts accrued for these cases in prior years.
| (c) | Legal fees represent payments to outside counsel related to product liability matters.
| (d) | Settlements represent payments made to plaintiffs or allegedly injured parties in exchange for a full and complete release of liability.
| (e) | Insurance expense represents the cost of insurance premiums.
There were no insurance recoveries during any of the above years.

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