Phatboy Motorcycles, Inc., a motorcycle manufacturer, included the following note in its annual report: Notes to Consolidated Financial Statements 9: Commitments and Contingencies The Company self-insures its product liability losses in the United States up to $1.5 million. Catastrophic coverage is maintained for individual claims in excess of $1.5 million up to $30 million. 1. Why are product liability losses considered contingent liabilities? 2. How can a contingent liability become a real liability for Phatboy Motorcycles? Question content area bottom Part 1 1. Why are product liability losses considered contingent liabilities? Product losses are contingent liabilities because they represent actual, rather than potential potential, rather than actual obligations