CRANE NXT Item 2.02 Results of Operations and Financial Condition.
On
The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 8.01 Other Events
Asbestos Liability
Information Regarding Claims and Costs in the Tort System
As of
29,056 29,089 32,234
New claims 2,620 2,848 2,434
Settlements (885) (983) (1,011)
Dismissals (1,653) (1,898) (4,568)
Ending claims 29,138 29,056 29,089
Of the 29,138 pending claims as of December 31, 2020 , approximately 18,000
claims were pending in New York of which approximately 16,000 are non-malignancy
claims that were filed over 15 years ago and have been inactive under New York
court orders.
We have tried several cases resulting in defense verdicts by the jury or
directed verdicts for the defense by the court. We further have pursued appeals
of certain adverse jury verdicts that have resulted in reversals in favor of the
defense. We have also tried several other cases resulting in plaintiff verdicts
which we paid or settled after unsuccessful appeals, the most recent of which
are described below.
On March 23, 2010 , a Philadelphia, Pennsylvania , state court jury found us
responsible for a 1/11th share of a $14.5 million verdict in the James Nelson
claim. On February 23, 2011 , the court entered judgment on the verdict in the
amount of $4.0 million , jointly, against us and two other defendants, with
additional interest in the amount of $0.01 million being assessed against us,
only. All defendants, including us, and the plaintiffs took timely appeals of
certain aspects of those judgments. On September 5, 2013 , a panel of the
Pennsylvania Superior Court , in a 2-1 decision, vacated the Nelson verdict
against all defendants, reversing and remanding for a new trial. Plaintiffs
requested a rehearing in the Superior Court and by order dated November 18,
2013 , the Superior Court vacated the panel opinion, and granted en banc
reargument. On December 23, 2014 , the Superior Court issued a second opinion
reversing the jury verdict. Plaintiffs sought leave to appeal to the
Pennsylvania Supreme Court , which defendants opposed. By order dated June 21,
2017 , the Supreme Court of Pennsylvania denied plaintiffs' petition for leave to
appeal. The case was set for a new trial in April 2018 . We settled the matter in
2018.
On September 17, 2013 , a Fort Lauderdale, Florida state court jury in the
Richard DeLisle claim found us responsible for 16% of an $8 million verdict. The
trial court denied all parties' post-trial motions, and entered judgment against
us in the amount of $1.3 million . We appealed and oral argument on the appeal
took place on February 16, 2016 . On September 14, 2016 , a panel of the Florida
Court of Appeals reversed and entered judgment in favor of us. Plaintiff filed
with the Court of Appeals a motion for rehearing and/or certification of an
appeal to the Florida Supreme Court , which the Court denied on November 9, 2016 .
Plaintiffs subsequently requested review by the Supreme Court of Florida .
Plaintiffs' motion was granted on July 11, 2017 . Oral argument took place on
March 6, 2018 . On October 15, 2018 , the Supreme Court of Florida reversed and
remanded with instructions to reinstate the trial court's judgment. We paid the
judgment on December 28, 2018 .
On July 2, 2015 , a St. Louis, Missouri state court jury in the James Poage claim
entered a $1.5 million verdict for compensatory damages against us. The jury
also awarded exemplary damages against us in the amount of $10 million . We filed
a motion seeking to reduce the verdict to account for the verdict set-offs. That
motion was denied, and judgment was entered against
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us in the amount of$10.8 million . We initiated an appeal. Oral argument was held onDecember 13, 2016 . In an opinion datedMay 2, 2017 , aMissouri Court of Appeals panel affirmed the judgment in all respects. The Court of Appeals denied our motion to transfer the case to theSupreme Court of Missouri . We sought leave to appeal before theSupreme Court of Missouri , which denied that request.The Supreme Court of the United States denied further review onMarch 26, 2018 . We settled the matter in 2018. OnApril 22, 2016 , aPhoenix, Arizona federal court jury found us responsible for a 20% share of a$9 million verdict in the George Coulbourn claim, and further awarded exemplary damages against us in the amount of$5 million . The jury also awarded compensatory and exemplary damages against the other defendant present at trial. The court entered judgment against us in the amount of$6.8 million . We filed post-trial motions, which were denied onSeptember 20, 2016 . We pursued an appeal to theNinth Circuit Court of Appeals which affirmed the judgment onMarch 29, 2018 . We settled the matter in 2018. Such judgment amounts were not included in our incurred costs until all available appeals were exhausted and the final payment amount was determined. The gross settlement and defense costs incurred (before insurance recoveries and tax effects) by us for the years endedDecember 31, 2020 , 2019 and 2018 totaled$50.9 million ,$66.2 million and$88.8 million , respectively. Results for 2020 were impacted by court closures and significantly reduced trial related activity in jurisdictions throughoutthe United States due to the COVID-19 pandemic. Assuming a successful and comprehensive implementation of a COVID-19 vaccine program, we expect activity in the tort system to begin returning to a more normal pace in the second half of 2021. In contrast to the recognition of settlement and defense costs, which reflect the current level of activity in the tort system, cash payments and receipts generally lag the tort system activity by several months or more, and may show some fluctuation from period to period. Cash payments of settlement amounts are not made until all releases and other required documentation are received by us, and reimbursements of both settlement amounts and defense costs by insurers may be uneven due to insurer payment practices, transitions from one insurance layer to the next excess layer and the payment terms of certain reimbursement agreements. Our total pre-tax payments for settlement and defense costs, net of funds received from insurers, for the years endedDecember 31, 2020 , 2019 and 2018 totaled$31.1 million ,$41.5 million and$63.9 million , respectively. Detailed below are the comparable amounts for the periods indicated. (in millions) For the year ended December 31, 2020 2019 2018
Settlement / indemnity costs incurred *
15.6 20.7 25.8
Total costs incurred $ 50.9 $ 66.2 $ 88.8
Settlement / indemnity payments $ 24.7 $ 38.9 $ 61.5
Defense payments 16.7 21.4 26.5
Insurance receipts (10.3) (18.8) (24.1)
Pre-tax cash payments, net $ 31.1 $ 41.5 $ 63.9
* Before insurance recoveries and tax effects.
The amounts shown for settlement and defense costs incurred, and cash payments,
are not necessarily indicative of future period amounts, which may be higher or
lower than those reported.
Cumulatively through December 31, 2020 , we have resolved (by settlement or
dismissal) approximately 141,000 claims. The related settlement cost incurred by
us and our insurance carriers is approximately $680 million , for an average
settlement cost per resolved claim of approximately $4,800 . The average
settlement cost per claim resolved during the years ended December 31, 2020 ,
2019 and 2018 was $13,900 , $15,800 , and $11,300 , respectively. Because claims
are sometimes dismissed in large groups, the average cost per resolved claim, as
well as the number of open claims, can fluctuate significantly from period to
period. In addition to large group dismissals, the nature of the disease and
corresponding settlement amounts for each claim resolved will also drive changes
from period to period in the average settlement cost per claim. Accordingly, the
average cost per resolved claim is not considered in our periodic review of our
estimated asbestos liability. For a discussion regarding the four most
significant factors affecting the liability estimate, see "Effects on the
Condensed Consolidated Financial Statements."
Effects on the Condensed Consolidated Financial Statements
We have retained an independent actuarial firm to assist management in
estimating our asbestos liability in the tort system. The actuarial consultants
review information provided by us concerning claims filed, settled and
dismissed, amounts paid in
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settlements and relevant claim information such as the nature of the asbestos-related disease asserted by the claimant, the jurisdiction where filed and the time lag from filing to disposition of the claim. The methodology used by the actuarial consultants to project future asbestos costs is based on our recent historical experience for claims filed, settled and dismissed during a base reference period. Our experience is then compared to estimates of the number of individuals likely to develop asbestos-related diseases determined based on widely used previously conducted epidemiological studies augmented with current data inputs. Those studies were undertaken in connection with national analyses of the population of workers believed to have been exposed to asbestos. Using that information, the actuarial consultants estimate the number of future claims that would be filed against us and estimates the aggregate settlement or indemnity costs that would be incurred to resolve both pending and future claims based upon the average settlement costs by disease during the reference period. This methodology has been accepted by numerous courts. After discussions with us, the actuarial consultants augment our liability estimate for the costs of defending asbestos claims in the tort system using a forecast from us which is based upon discussions with our defense counsel. Based on this information, the actuarial consultants compile an estimate of our asbestos liability for pending and future claims using a range of reference periods based on claim experience and claims expected to be filed through the indicated forecast period. The most significant factors affecting the liability estimate are (1) the number of new mesothelioma claims filed against us, (2) the average settlement costs for mesothelioma claims, (3) the percentage of mesothelioma claims dismissed against us and (4) the aggregate defense costs incurred by us. These factors are interdependent, and no one factor predominates in determining the liability estimate. In our view, the forecast period used to provide the best estimate for asbestos claims and related liabilities and costs is a judgment based upon a number of trend factors, including the number and type of claims being filed each year; the jurisdictions where such claims are filed, and the effect of any legislation or judicial orders in such jurisdictions restricting the types of claims that can proceed to trial on the merits; and the likelihood of any comprehensive asbestos legislation at the federal level. In addition, the dynamics of asbestos litigation in the tort system have been significantly affected by the substantial number of companies that have filed for bankruptcy protection, thereby staying any asbestos claims against them until the conclusion of such proceedings, and the establishment of a number of post-bankruptcy trusts for asbestos claimants, which have been estimated to provide$36 billion for payments to current and future claimants. These trend factors have both positive and negative effects on the dynamics of asbestos litigation in the tort system and the related best estimate of our asbestos liability, and these effects do not move in a linear fashion but rather change over multi-year periods. Accordingly, management continues to monitor these trend factors over time and periodically assesses whether an alternative forecast period is appropriate. Each quarter, the actuarial consultants compile an update based upon our experience in claims filed, settled and dismissed as well as average settlement costs by disease category (mesothelioma, lung cancer, other cancer, and non-malignant conditions including asbestosis). In addition to this claims experience, we also consider additional quantitative and qualitative factors such as the nature of the aging of pending claims, significant appellate rulings and legislative developments, and their respective effects on expected future settlement values. As part of this process, we also consider trends in the tort system such as those enumerated above. Management considers all these factors in conjunction with the liability estimate of the actuarial consultants and determines whether a change in the estimate is warranted. Liability Estimate. InJune 2016 , theNew York State Court of Appeals issued its opinion in Dummitt v.Crane Co. , affirming a 2012 verdict for$4.9 million against us. In that opinion, the court ruled that in certain circumstances we are legally responsible for asbestos-containing materials made and sold by third parties that others attached post-sale to our equipment. This decision provided clarity regarding the nature of claims that may proceed to trial inNew York and greater predictability regarding future claim activity. We also reflected the impact of the Dummitt decision on our expected settlement values. Accordingly, onDecember 31, 2016 , we updated and extended our asbestos liability estimate through 2059, the generally accepted end point. Following our experience in the tort system post the Dummitt decision, we entered into several, increasingly similar, group settlements with various . . . Item 9.01 Financial Statements and Exhibits. (a) None (b) None (c) None (d) Exhibits 99.1 Earnings Press Release datedJanuary 25, 2021 andCrane Co. Quarterly Financial Data Supplement for the quarter endedDecember 31, 2020 7
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