Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley) and the acquisition of Hercules in November 2008. Although Riley, a former subsidiary, was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies. Hercules, an indirect wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products sold by one of Hercules’ former subsidiaries to a limited industrial market.

To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions for Ashland and Hercules asbestos claims, Ashland retained Nathan Associates Inc. (Nathan). The methodology used by Nathan to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Nathan estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss).

The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.

	Six months ended
	March 31						Years ended September 30
(In thousands)	2020			2019			2019			2018			2017
Open claims - beginning of year		53			53			53			54			57
New claims filed		1			1			2			2			2
Claims settled		—			—			(1	)		(1	)		(1	)
Claims dismissed		(4	)		(1	)		(1	)		(2	)		(4	)
Open claims - end of period		50			53			53			53			54

During the most recent annual update of this estimate completed during the June 2019 quarter, it was determined that the liability for Ashland asbestos-related claims should be increased by $1 million. Total reserves for asbestos claims were $337 million at March 31, 2020 compared to $352 million at September 30, 2019.

A progression of activity in the asbestos reserve is presented in the following table.

	Six months ended
	March 31						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Asbestos reserve - beginning of year	$	352		$	380		$	380		$	419		$	415
Reserve adjustment		—			—			1			(8	)		36
Amounts paid		(15	)		(14	)		(29	)		(31	)		(32	)
Asbestos reserve - end of period (a)	$	337		$	366		$	352		$	380		$	419

Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.

For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. A substantial portion of the estimated receivables from insurance companies are expected to be due from domestic insurers.

At March 31, 2020, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $109 million (excluding the Hercules receivable for asbestos claims) compared to $123 million at September 30, 2019. During the June 2019 quarter, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $5 million decrease in the receivable for probable insurance recoveries.

A progression of activity in the Ashland insurance receivable is presented in the following table.

	Six months ended
	March 31						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Insurance receivable - beginning of year	$	123		$	140		$	140		$	155		$	151
Receivable adjustment		—			—			(5	)		(5	)		15
Insurance settlement		(10	)		—			—			—			(5	)
Amounts collected		(4	)		(4	)		(12	)		(10	)		(6	)
Insurance receivable - end of period (a)	$	109		$	136		$	123		$	140		$	155

Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Hercules’ asbestos claims activity follows.

	Six months ended
	March 31					Years ended September 30
(In thousands)	2020		2019			2019			2018			2017
Open claims - beginning of year		13		13			13			12			15
New claims filed		—		—			1			2			1
Claims dismissed		—		(1	)		(1	)		(1	)		(4	)
Open claims - end of period		13		12			13			13			12

From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs, which generally approximates the mid-point of the estimated range of exposure from model results. Ashland reviews this estimate, and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of Nathan. As a result of the most recent annual update of this estimate, completed during the June 2019 quarter, it was determined that the liability for Hercules asbestos-related claims should be decreased by $10 million. Total reserves for asbestos claims were $242 million at March 31, 2020 compared to $252 million at September 30, 2019.

A progression of activity in the asbestos reserve is presented in the following table.

	Six months ended
	March 31						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Asbestos reserve - beginning of year	$	252		$	282		$	282		$	323		$	321
Reserve adjustments		—			—			(10	)		(19	)		16
Amounts paid		(10	)		(10	)		(20	)		(22	)		(14	)
Asbestos reserve - end of period (a)	$	242		$	272		$	252		$	282		$	323

For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.

As of March 31, 2020, Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $49 million. During the June 2019 quarter, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a decrease of $5 million in the receivable for probable insurance recoveries.

A progression of activity in the Hercules insurance receivable is presented in the following table.

	Six months ended
	March 31				Years ended September 30
(In millions)	2020		2019		2019			2018			2017
Insurance receivable - beginning of year	$	49	$	54	$	54		$	68		$	63
Receivable adjustment		—		—		(5	)		(14	)		5
Insurance receivable - end of period	$	49	$	54	$	49		$	54		$	68

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, mortality rates, dismissal rates, costs of medical treatment, 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 the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. Considering these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 to 50 year periods that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $600 million for the Ashland asbestos-related litigation (current reserve of $337 million) and approximately $450 million for the Hercules asbestos-related litigation (current reserve of $242 million), depending on the combination of assumptions selected in the various models. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.

Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively, environmental remediation) at multiple locations. At March 31, 2020, such locations included 79 waste treatment or disposal sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 113 current and former operating facilities (including certain operating facilities conveyed as part of the MAP Transaction) and about 1,225 service station properties, of which 28 are being actively remediated.

Ashland’s reserves for environmental remediation and related environmental litigation amounted to $178 million at March 31, 2020 compared to $186 million at September 30, 2019, of which $135 million at March 31, 2020 and $143 million at September 30, 2019 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

The following table provides a reconciliation of the changes in the environmental remediation reserves during the six months ended March 31, 2020 and 2019.

	Six months ended
	March 31
(In millions)	2020			2019
Reserve - beginning of period	$	186		$	187
Disbursements		(19	)		(15	)
Revised obligation estimates and accretion		11			7
Reserve - end of period	$	178		$	179

The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, probability techniques, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland continues to discount certain environmental sites and regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At March 31, 2020 and September 30, 2019, Ashland’s recorded receivable for these probable insurance recoveries was $14 million and $13 million, of which $12 million at both March 31, 2020 and September 30, 2019 was classified in other noncurrent assets on the Condensed Consolidated Balance Sheets.

Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table for the three months ended March 31, 2020 and 2019.

	Three months ended					Six months ended
	March 31					March 31
(In millions)	2020			2019		2020			2019
Environmental expense	$	8		$	3	$	10		$	6
Accretion		1			1		1			1
Legal expense		1			2		3			3
Total expense		10			6		14			10

Insurance receivable		(3	)		—		(3	)		(1	)
Total expense, net of receivable activity (a)	$	7		$	6	$	11		$	9

Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $425 million. The largest reserve for any site is 15% of the remediation reserve.

In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, and other environmental matters, which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to such actions were immaterial as of March 31, 2020 and September 30, 2019. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses were immaterial as of March 31, 2020.