10. Commitments and contingencies

Product Litigation

The Company is currently named as a defendant in 16 lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CEW was used (or present) by law enforcement officers in connection with arrests or during training exercises. In addition, two other product litigation matters in which the Company is involved are currently on appeal. While the facts vary from case to case, the product liability claims are typically based on an alleged product defect resulting in injury or death, usually involving a failure to warn, and the plaintiffs are seeking monetary damages. The information throughout this note is current through the filing date of this Quarterly Report on Form 10-Q.

As a general rule, it is the Company’s policy not to settle suspect injury or death cases. Exceptions are sometimes made where the settlement is strategically beneficial to the Company. Also, on occasion, the Company’s insurance company has settled such lawsuits over the Company’s objection where the exposure exceeds the Company’s liability insurance deductibles. Due to the confidentiality of the Company’s litigation strategy and the confidentiality agreements that are executed in the event of a settlement, the Company does not generally identify or comment on which specific lawsuits have been settled or the amount of any settlement.

In 2009, the Company implemented new risk management strategies, including revisions to product warnings and training to better protect both the Company and its customers from litigation based on ‘failure to warn’ theories – which comprise the vast majority of the cases against the Company. These risk management strategies have been highly effective in reducing the rate and exposure from litigation post-2009. From the third quarter of 2011 to the third quarter of 2014, we have reduced our outstanding product liability cases from 55 active to 16 active cases.

Management believes that pre-2009 cases have a different risk profile than cases which have occurred since the risk management procedures were introduced in 2009. Therefore, the Company necessarily treats certain pre-2009 cases as exceptions to the Company’s general no settlement policy in order to reduce caseload, legal costs and liability exposure. The Company intends to continue its successful practice of aggressively defending and generally not settling litigation except in very limited and unusual circumstances as described above.

With respect to each of the pending lawsuits, the following table lists the name of plaintiff, the date the Company was served with process, the jurisdiction in which the case is pending, the type of claim and the status of the matter.


Plaintiff	Served	Jurisdiction	Claim Type	Status
Grable	Aug-08	6th Judicial Circuit Court, Pinellas County, FL	Training Injury	Discovery Phase
Koon	Dec-08	17th Judicial Circuit Court, Broward County, FL	Training Injury	Discovery Phase
Derbyshire	Nov-09	Ontario, Canada Superior Court of Justice	Officer Injury	Discovery Phase
Thompson	Mar-10	11th Judicial Circuit Court, Miami-Dade County, FL	Suspect Injury During Arrest	Discovery Phase
Doan	Apr-10	The Queens Bench Alberta, Red Deer Judicial Dist.	Wrongful Death	Discovery Phase
Shymko	Dec-10	The Queens Bench, Winnipeg Centre, Manitoba	Wrongful Death	Pleading Phase
Juran	Dec-10	Hennepin County District Court, 4th Judicial District	Officer Injury	Pleading Phase
Wilson	May-11	US District Court, ED MO	Wrongful Death	Trial scheduled for Nov. 2014
Ramsey	Jan-12	17th Judicial Circuit Court, Broward County, FL	Wrongful Death	Discovery Phase
Firman	Apr-12	Ontario, Canada Superior Court of Justice	Wrongful Death	Pleading Phase
Ricks	May-12	US District Court, WD LA	Wrongful Death	Motion Phase
Miller	Jan-13	New Castle County Superior Court, DE	Wrongful Death	Discovery Phase
Rascom	Apr-14	US District Court, AZ	Wrongful Death	Pleading Phase
Schrock	Sep-14	San Bernardino County Superior Court, CA	Wrongful Death	Pleading Phase
Ward	Oct-14	Richmond County Superior Court, GA	Officer Fired	Pleading Phase
Moore	Oct-14	St. Louis County Circuit Court, MO	Wrongful Death	Pleading Phase

In addition, other product litigation matters in which the Company is involved that are currently on appeal are listed below:

Plaintiff

Month
Served

Jurisdiction

Claim Type

Status

Glowczenski

Oct-04

US District Court, ED NY

Wrongful Death

Notice of Appeal filed Sep. 2013; Opening Brief was filed Jan. 2014; Answering Brief filed Apr. 2014.

Mitchell

Apr-12

US District Court, ED MI

Wrongful Death

Notice of Appeal filed Aug. 2014

Cases that were dismissed or judgment entered during the third quarter of 2014, and through the filing date of this Quarterly Report on Form 10-Q, are listed in the table below. Cases that were dismissed or judgment entered in prior fiscal quarters are not included in this table.


Plaintiff	Month Served		Jurisdiction	Claim Type	Status
Faltesek		Apr-14	Harris County District Court, TX	Wrongful Death	Voluntary Dismissal
Mitchell		Apr-12	US District Court, ED MI	Wrongful Death	Motion for Summary Judgment Granted
McCue		Mar-14	US District Court, District of Maine	Wrongful Death	Voluntary Dismissal
Slade		Dec-13	US District Court, ED TX	Wrongful Death	Voluntary Dismissal
Goodard		Jul-14	Pinellas County Circuit Court, FL	Wrongful Death	Voluntary Dismissal
Parker		Jul-14	US District Court, SD TX	Suspect Injury During Arrest	Voluntary Dismissal

The claims, and in some instances the defense, of each of these lawsuits have been submitted to the Company’s insurance carriers that maintained insurance coverage during the applicable periods. The Company continues to maintain product liability insurance coverage with varying limits and deductibles. The following table provides information regarding the Company’s product liability insurance. Remaining insurance coverage is based on information received from the Company’s insurance provider (in millions).


Policy Year	Policy Start Date		Policy End Date		Insurance Coverage		Deductible Amount		Defense Costs Covered		Remaining Insurance Coverage		Active Cases and Cases on Appeal
2004		12/01/03		12/01/04	$	2.0	$	0.1		N	$	2.0	Glowczenski
2005		12/01/04		12/01/05		10.0		0.3		Y		7.0	n/a
2006		12/01/05		12/01/06		10.0		0.3		Y		3.7	n/a
2007		12/01/06		12/01/07		10.0		0.3		Y		8.0	n/a
2008		12/01/07		12/15/08		10.0		0.5		Y		—	Grable, Koon
2009		12/15/08		12/15/09		10.0		1.0		N		10.0	Derbyshire
2010		12/15/09		12/15/10		10.0		1.0		N		10.0	Thompson, Shymko, Doan, Juran
2011		12/15/10		12/15/11		10.0		1.0		N		10.0	Wilson
Jan – Jun 2012		12/15/11		06/25/12		7.0		1.0		N		7.0	Ramsey, Firman, Ricks, Mitchell
Jul – Dec 2012		06/25/12		12/15/12		12.0		1.0		N		12.0	n/a
2013		12/15/12		12/15/13		12.0		1.0		N		12.0	Miller
2014		12/15/13		12/15/14		12.0		4.0		N		12.0	Rascom, Schrock, Moore, Ward

Other Litigation

AA & Saba (AZ) Lawsuit

In February 2012, the Company was served with a complaint in the matter of AA & Saba Consultants, Inc. v. TASER International, Inc. that was filed in the Superior Court for the County of Maricopa, Arizona, which alleges that the Company breached a contract by unilaterally terminating a distributor agreement between the Company and plaintiff without good cause. The complaint seeks an award for damages, costs, expenses and attorneys’ fees. TASER filed a counterclaim for breach of contract and fraud. During 2012, the Company made a settlement offer of $0.8 million to plaintiff, which was recorded as an expense in SG&A in that year. The offer was not accepted and thereafter was withdrawn. On February 28, 2014, the jury returned a verdict of $3.3 million against the Company. Judgment had not been entered at the time. The Company recorded an additional $2.6 million of expense in the fourth quarter of 2013 as Litigation judgments on the statement of operations.

On May 6, 2014 the court issued a Minute Entry Order awarding Plaintiff approximately $1.2 million in attorneys’ fees, costs and expenses which was recorded as a litigation settlement in the second quarter of 2014. On May 6, 2014 the matter was resolved and dismissed.

General

From time to time, the Company is notified that it may be a party to a lawsuit or that a claim is being made against it. It is the Company’s policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on the Company. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against the Company. In certain legal matters, we record a liability when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

Based on our assessment of outstanding litigation and claims as of September 30, 2014, the Company has determined that it is not reasonably possible that these lawsuits will individually, or in the aggregate, materially affect our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.