Alton Company is a defendant in a wrongful death suit filed as a result of the death of an employee who was working on one of the companys production lines. The plaintiff filed suit in June and has asked for damages of $3,000,000. Alton carries insurance for potential claims of this nature, but the insurance coverage amounts to $1,500,000. Legal counsel for Alton believes that the judge will rule in the plaintiffs favor and that the company will have to pay about $2,200,000, but the settlement could reach $3,000,000.

Describe the treatment of this event and related lawsuit as financial statement disclosures and prepare journal entry as required.