COMMITMENTS AND CONTINGENCIES

Fuel Tech is subject to various claims and contingencies related to, among other things, workers compensation, general liability (including product liability), and lawsuits. The Company records liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.

From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows. We do not believe we have any pending loss contingencies that are probable or reasonably possible of having a material impact on our consolidated financial position, results of operations or cash flows.

During the fourth quarter of 2018, we were notified of certain design non-conformances in a project with a U.S. customer that required remedial warranty work under the contract. For the year ended December 31, 2019, we recognized remediation costs of $2,241 included within costs of sales in the Consolidated Statements of Operations. The Company believes there are no ongoing remedial obligations to the customer. In connection with this matter, in early 2019 we notified our errors and omission insurer of the claim and were issued a letter confirming coverage of the claim under the applicable policy. Although we have periodically submitted expenses for reimbursement to our insurer, as of the filing date the insurer has not yet fully completed its review of submitted reimbursement requests. In light of the pending status of the settlement, the Company determined, in the exercise of its judgment as prescribed by ASC 450 Contingencies, to not reflect any benefits that might be realized from our insurer and will reflect such benefit at such time as settlement with our insurer becomes certain.

As of December 31, 2019, we have recorded no receivables from the insurance carrier and a total accrued liability associated with the completion of the non-conformance issues of $146 in the other accrued liabilities line of the Consolidated Balance Sheets.

Performance Guarantees

The majority of Fuel Tech’s long-term equipment construction contracts contain language guaranteeing that the performance of the system that is being sold to the customer will meet specific criteria. On occasion, performance surety bonds and bank performance guarantees/letters of credit are issued to the customer in support of the construction contracts as follows:


•	in support of the warranty period defined in the contract; or


•	in support of the system performance criteria that are defined in the contract.

As of December 31, 2019, we had outstanding bank performance guarantees and letters of credit in the amount of $2,461 in support of equipment construction contracts that have not completed their final acceptance test or that are still operating under a warranty period. The performance guarantees and letters of credit expire in dates ranging from May 2020 through February 2023. The expiration dates may be extended if the project completion dates are extended. Our management believes it is probable that these projects will be successfully completed and that there will not be a material adverse impact on our operations from these bank performance guarantees and letters of credit. As a result, no liability has been recorded for these performance guarantees.

Product Warranties

We issue a standard product warranty with the sale of our products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experience in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced. There was 0 changes in the warranty liability from continuing operations in 2019, 2018 and 2017. The warranty balance was $159 at December 31, 2019, 2018 and 2017.