NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 (In Part): Commitments and Contingencies The Company self-insures its product liability losses in the United States up to $3.8 million (catastrophic coverage is maintained for individual claims in excess of $3.8 million up to $26.3 million). Outside the United States, the Company is insured for product liability up to $26.3 million per individual claim and in the aggregate. Read the 1. Why are these contingent (versus real) liabilities? These are contingent liabilities because at the time of the note Martinson Cycles, Inc. liable for any of these product losses. 2. In the United States, how can the contingent liability become a real liability for Martinson? What are the limits to the company's product liabilities in the United States? In the United States, the contingent liability can become a real liability if a user of the company's product suffers a loss for which the company is responsible. Martinson Cycles, Inc., must pay for all individual losses up to million and all individual losses above million. 3. How can a contingency outside the United States become a real liability for the company? How does Martinson's potential liability differ for claims outside the United States? Outside the United States the contingent liability can become a real liability if