The Corporation and its subsidiaries are involved in various claims and lawsuits incidental to their businesses from time to time and are also subject to asbestos litigation as described below.

Claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). Air & Liquid and, in some cases, the Corporation, are defendants (among a number of defendants, often in excess of 50 defendants) in cases filed in various state and federal courts.

The following table reflects approximate information about the claims for the Asbestos Liability against Air & Liquid and the Corporation for the years ended December 31, 2024 and 2023 (number of claims not in thousands). The majority of the settlement and defense costs were reported and paid by insurance carriers. Because claims are often filed and can be settled or dismissed in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.


	2024			2023
Total claims pending at the beginning of the period		6,310			6,259
New claims served		1,282			1,283
Claims dismissed		(637	)		(771	)
Claims settled		(592	)		(461	)
Total claims pending at the end of the period(1)		6,363			6,310
Administrative closures(2)		(3,082	)		(2,949	)
Total active claims pending at the end of the period(2)		3,281			3,361
Gross settlement and defense costs paid (in 000’s)	$	24,573		$	23,374
Average gross settlement and defense costs per claim resolved (in 000’s) (3)	$	19.99		$	18.97

(1)

Included as “open claims” are approximately 1,638 and 1,641 claims in 2024 and 2023, respectively, classified in various jurisdictions as “inactive” or transferred to a state or federal judicial panel on multi-district litigation.

(2)

Administrative closures include (i) mesothelioma claims filed five or more years ago; (ii) non-mesothelioma claims filed six or more years ago; (iii) claims previously classified in various jurisdictions as “inactive;” and (iv) claims transferred to a state or federal judicial panel on multi-district litigation.

(3)

Claims resolved do not include claims that were administratively closed.

The Corporation and Air & Liquid are parties to a series of settlement agreements (“Settlement Agreements”) with insurance carriers that have coverage obligations for the Asbestos Liability (the “Settling Insurers”). In addition, during 2024, the Corporation and Air & Liquid entered into a settlement agreement with a previously unsettled insurance carrier resulting in reimbursement of prior years’ costs of approximately $1,756. Under the Settlement Agreements, the Settling Insurers accept financial responsibility, subject to the terms and conditions of the respective agreements, including overall coverage limits, for pending and future claims for the Asbestos Liability. The Settlement Agreements encompass the majority of insurance policies that provide coverage for claims for the Asbestos Liability.

The Settlement Agreements acknowledge Howden North America, Inc. (“Howden”) is entitled to coverage under policies covering the Asbestos Liability for claims arising out of the historical products manufactured or distributed by Buffalo Forge, a former subsidiary of the Corporation (the “Products”), which was acquired by Howden. The Settlement Agreements do not provide for any prioritization on access to the applicable policies or any sub-limits of liability as to Howden or the Corporation and Air & Liquid and, accordingly, Howden may access the coverage afforded by the Settling Insurers for any covered claim arising out of the Products. In general, access by Howden to the coverage afforded by the Settling Insurers for the Products will erode coverage under the Settlement Agreements available to the Corporation and Air & Liquid for the Asbestos Liability.

The Corporation, with the assistance of a nationally recognized expert in the valuation of asbestos liabilities, reviews the Asbestos Liability and the underlying assumptions on a regular basis to determine whether any adjustment to the Asbestos Liability or the underlying assumptions are necessary. When warranted, the Asbestos Liability is adjusted to consider current trends and new information that becomes available. In conjunction with the regular updates of the estimated Asbestos Liability, the Corporation also develops an estimate of defense costs expected to be incurred with settling the Asbestos Liability and probable insurance recoveries for the Asbestos Liability and defense costs.

In developing the estimate of probable defense costs, the Corporation considers several factors including, but not limited to, current and historical defense-to-indemnity cost ratios and expected defense-to-indemnity cost ratios. In developing the estimate of probable insurance recoveries, the Corporation considers the expert’s projection of settlement costs for the Asbestos Liability and management’s projection of associated defense costs. In addition, the Corporation consults with its outside legal counsel on insurance matters and a nationally recognized insurance consulting firm it retains to assist with certain policy allocation matters. The Corporation also considers a number of other factors including the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, gaps in the coverage, policy exhaustion, the nature of the underlying claims for the Asbestos Liability, estimated erosion of insurance limits on account of claims against Howden arising out of the Products, prior impairment of policies, insolvencies among certain of the insurance carriers, and creditworthiness of the remaining insurance carriers based on publicly available information. Based on these factors, the Corporation estimates the probable insurance recoveries for the Asbestos Liability and defense costs for the corresponding time frame of the Asbestos Liability.

In 2024, the Corporation engaged Gnarus Advisors LLC (“Gnarus”) to update the estimated Asbestos Liability. The methodology used by Gnarus in its updated projection was substantially the same methodology employed previously, which has been accepted by numerous courts, and included the following factors:

Based on these analyses, the Corporation recorded an undiscounted decrease to its estimated Asbestos Liability of $544 for claims pending or projected to be asserted through the estimated final date by which the Corporation expects to have settled all asbestos-related claims and estimated defense costs associated with such claims. The decrease is primarily attributable to the net benefit of a tolling agreement reached with a plaintiff’s counsel offset by recent claim experience. The Corporation also recorded an undiscounted decrease to its insurance receivable of $178 for the estimated insurance recoveries attributable to the claims for which the Asbestos Liability reserve has been established and for the portion of defense costs covered by the Settlement Agreements.

In connection with the Corporation’s review of the Asbestos Liability and the underlying assumptions in 2024, the Corporation revised its estimated defense-to-indemnity cost ratio from 60% to 55%. This change reduced the Asbestos Liability by $6,470 and insurance receivable by $2,735. Similarly, in connection with its review of the Asbestos Liability and the underlying assumptions in 2023, the Corporation revised its estimated defense-to-indemnity cost ratio from 65% to 60%. This change reduced the Asbestos Liability by $4,162 and the insurance receivable by $2,705.

The following table summarizes activity relating to the Asbestos Liability for the years ended December 31, 2024 and 2023.


	2024			2023
Asbestos Liability, beginning of the year	$	238,679		$	153,575
Settlement and defense costs paid		(24,573	)		(23,374	)
Effect from a lower defense-to-indemnity cost ratio		(6,470	)		(4,162	)
Change in estimated liability		(544	)		112,640
Asbestos Liability, end of the year	$	207,092		$	238,679

The following table summarizes activity relating to insurance recoveries for the years ended December 31, 2024 and 2023.


	2024			2023
Insurance receivable – asbestos, beginning of the year	$	160,245		$	105,434
Settlement and defense costs paid by insurance carriers		(18,037	)		(12,780	)
Effect from a lower defense-to-indemnity cost ratio		(2,735	)		(2,705	)
Change in estimated coverage		(178	)		70,296
Insurance receivable – asbestos, end of the year	$	139,295		$	160,245

The Corporation establishes an allowance for expected credit losses based on historical insolvency experience, expected time frame until collection of insurance claim and assessments of current creditworthiness of insurers. The insurance receivable does not assume any recovery from insolvent carriers. A substantial majority of the insurance recoveries deemed probable is from insurance companies rated A – (excellent) or better by A.M. Best Corporation. There can be no assurance, however, there will not be insolvencies among the relevant insurance carriers, or the assumed percentage recoveries for certain carriers will prove correct. At December 31, 2024 and 2023, the allowance for expected credit losses approximated $656 and $708, respectively.

The Corporation recognized asbestos-related costs of $(4,184) and $40,696 for 2024 and 2023, respectively, comprised of the following:


	2024			2023
Impact from changes in estimated Asbestos Liability, net of estimated insurance recoveries	$	(366	)	$	42,344
Benefit from a lower defense-to-indemnity cost ratio		(3,735	)		(1,457	)
Proceeds from insolvent asbestos-related insurance carrier		(83	)		(191	)
(Credit) charge for asbestos-related costs	$	(4,184	)	$	40,696

The amounts recorded for the Asbestos Liability and insurance receivable rely on assumptions based on currently known facts and strategy. The Corporation’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Corporation’s or the experts’ calculations vary significantly from actual results. Key variables in these assumptions include the forecast of the population likely to have been exposed to asbestos; the number of people likely to develop an asbestos-related disease; the estimated number of people likely to file an asbestos-related injury claim against the Corporation or its subsidiaries; an analysis of pending cases, by type of injury claimed and jurisdiction where the claim is filed; average settlement value of claims, by type of injury claimed and jurisdiction of filing; the number and nature of new claims to be filed each year; the average cost of disposing of each new claim; the average annual defense costs; compliance by relevant parties with the terms of the Settlement Agreements; ability to reach acceptable agreements with insurance carriers currently not a party to a Settlement Agreement or at a coverage amount less than anticipated; and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and ability to recover under the Corporation’s insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation.

The Corporation intends to continue to evaluate the Asbestos Liability, related insurance receivable, the sufficiency of its allowance for expected credit losses and the underlying assumptions on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance recovery, these regular reviews may result in the Corporation adjusting its current reserve; however, the Corporation is currently unable to estimate such future adjustments. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability, insurance receivable and/or allowance for expected credit losses could be material to the operating results for the period in which the adjustments to the liability, receivable or allowance are recorded and to the Corporation’s consolidated financial position, results of operations and liquidity.