| CONTINGENT LIABILITIES | NOTE 13 - CONTINGENT LIABILITIES
As of April 1, 2023, the Company
was a defendant in eight (8) lawsuits and is aware of certain other such claims. The lawsuits fall into three categories: municipal litigation,
negligence, and unfair trade practices. Each is discussed in turn below. Municipal Litigation Municipal litigation generally
includes those cases brought by cities or other governmental entities against firearms manufacturers, distributors and retailers seeking
to recover damages allegedly arising out of the misuse of firearms by third parties. There are four lawsuits of this type: the City
of Gary Estados Unidos Mexicanos v. Smith & Wesson, et al. The City of Buffalo The City
of Rochester The City of Gary After a long
procedural history , Estados Unidos Mexicanos v.
Smith & Wesson Brands, Inc., et al. On December 20, 2022, the City
of Buffalo, New York filed a lawsuit captioned The City of Buffalo v. Smith & Wesson Brands, Inc., et al. The City of Rochester v. Smith & Wesson Brands, Inc., et al., On December 21, 2022, the City
of Rochester, New York filed a lawsuit captioned The City of Rochester v. Smith & Wesson Brands, Inc., et al. The City of Buffalo The City of Buffalo Defendants moved to stay the consolidated
Buffalo/Rochester National Shooting Sports Foundation, Inc.
et al. v. James N.Y. Gen. Bus.
Law Negligence Rossiter v. Sturm, Ruger, et
al. The Company was named in two purported
class action lawsuits arising out of a data breach at Freestyle Solutions, Inc., the vendor who hosted the Company’s ShopRuger.com
website at the time of the breach. Jones v. Sturm, Ruger & Co., Copeland v. Sturm, Ruger & Company, et al. Copeland Copeland Jones Unfair Trade Practices Estate of Suzanne Fountain
v. Sturm, Ruger & Co., Inc., Ahmad
Al Aliwi Al-Issa. The Complaint alleges that the Company’s advertising and marketing of the Ruger AR-556 pistol involved in the
criminal shootings violate the Connecticut Unfair Trade Practices Act and were a substantial factor in bringing about the wrongful death
of Suzanne Fountain. On April 24, 2023, the Connecticut Superior Court in Stamford sua sponte Estate of Neven Stanisic et
al. v. Sturm, Ruger & Co., Inc., Estate of Suzanne Fountain Ahmad Al Aliwi Al-Issa and plaintiffs allege that the Company’s
advertising and marketing of the Ruger AR-556 pistol involved in the criminal shootings violate the Connecticut Unfair Trade Practices
Act and were a substantial factor in causing the wrongful death of plaintiffs’ decedents. Summary of Claimed Damages and Explanation of Product Liability Accruals Punitive damages, as well as compensatory
damages, are demanded in certain of the lawsuits and claims. In many instances, the plaintiff does not seek a specified amount of money,
though aggregate amounts ultimately sought may exceed product liability accruals and applicable insurance coverage. For product liability
claims made after July 10, 2000, coverage is provided on an annual basis for losses exceeding $5 million per claim, or an aggregate maximum
loss of $10 million annually, except for certain new claims which might be brought by governments or municipalities after July 10, 2000,
which are excluded from coverage. The Company management monitors
the status of known claims and the product liability accrual, which includes amounts for asserted and unasserted claims. While it is not
possible to forecast the outcome of litigation or the timing of costs, in the opinion of management, after consultation with special and
corporate counsel, it is not probable and is unlikely that litigation, including punitive damage claims, will have a material adverse
effect on the financial position of the Company, but may have a material impact on the Company's financial results for a particular period. Product liability claim payments
are made when appropriate if, as, and when claimants and the Company reach agreement upon an amount to finally resolve all claims. Legal
costs are paid as lawsuits and claims develop, the timing of which may vary greatly from case to case. A time schedule cannot be determined
in advance with any reliability concerning when payments will be made in any given case. Provision is made for product
liability claims based upon many factors related to the severity of the alleged injury and potential liability exposure, based upon prior
claim experience. Because the Company's experience in defending these lawsuits and claims is that unfavorable outcomes are typically not
probable or estimable, only in rare cases is an accrual established for such costs. In most cases, an accrual is established
only for estimated legal defense costs. Product liability accruals are periodically reviewed to reflect then-current estimates of possible
liabilities and expenses incurred to date and reasonably anticipated in the future. Threatened product liability claims are reflected
in the Company's product liability accrual on the same basis as actual claims; i.e., an accrual is made for reasonably anticipated possible
liability and claims handling expenses on an ongoing basis. A range of reasonably possible
losses relating to unfavorable outcomes cannot be made. However, in product liability cases in which a dollar amount of damages is claimed,
the amount of damages claimed, which totaled $1.1 million at December 31, 2021, is set forth as an indication of possible maximum liability
the Company might be required to incur in these cases (regardless of the likelihood or reasonable probability of any or all of this amount
being awarded to claimants) as a result of adverse judgments that are sustained on appeal. At December 31, 2022, the
total amount claimed specifically in these cases was de minimis. |
