Ashland and Hercules have liabilities from claims alleging personal injury caused by exposure to asbestos. To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions, Ashland retained third party actuarial experts. Prior to 2018, Ashland retained Hamilton, Rabinovitz & Associates, Inc. (HR&A). During 2018, Ashland transitioned these responsibilities to Nathan Associates, Inc. (Nathan). The processes and methodologies used by Nathan are consistent with the ones historically employed by HR&A. The methodology used by Nathan to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Nathan estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss).

The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley, a former subsidiary. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.

(In thousands)	2018			2017			2016
Open claims - beginning of year		54			57			60
New claims filed		2			2			2
Claims settled		(1	)		(1	)		—
Claims dismissed		(2	)		(4	)		(5	)
Open claims - end of year		53			54			57

During the most recent update completed during 2018, it was determined that the liability for Ashland asbestos-related claims should be decreased by $8 million. Total reserves for asbestos claims were $380 million at September 30, 2018 compared to $419 million at September 30, 2017.

A progression of activity in the asbestos reserve is presented in the following table.

(In millions)	2018			2017			2016
Asbestos reserve - beginning of year	$	419		$	415		$	409
Reserve adjustment		(8	)		36			37
Amounts paid		(31	)		(32	)		(31	)
Asbestos reserve - end of year (a)	$	380		$	419		$	415

(a)	Included $30 million and $34 million classified in accrued expenses and other liabilities on the Consolidated Balance Sheets as of September 30, 2018 and 2017, respectively.

Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.

For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. Substantially all of the estimated receivables from insurance companies are expected to be due from domestic insurers, all of which are solvent.

At September 30, 2018, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $140 million (excluding the Hercules receivable for asbestos claims). Receivables from insurers amounted to $155 million at September 30, 2017. During 2018, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers, was completed. This model update resulted in a $5 million decrease in the receivable for probable insurance recoveries.

A progression of activity in the Ashland insurance receivable is presented in the following table.

(In millions)	2018			2017			2016
Insurance receivable - beginning of year	$	155		$	151		$	150
Receivable adjustment		(5	)		15			16
Insurance settlement		—			(5	)		(4	)
Amounts collected		(10	)		(6	)		(11	)
Insurance receivable - end of year (a)	$	140		$	155		$	151

(a)	Included $15 million and $14 million classified in accounts receivable on the Consolidated Balance Sheets as of September 30, 2018 and 2017, respectively.

Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Hercules’ asbestos claims activity follows.

(In thousands)	2018			2017			2016
Open claims - beginning of year		12			15			20
New claims filed		2			1			1
Claims dismissed		(1	)		(4	)		(6	)
Open claims - end of year		13			12			15

From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs, which generally approximates the mid-point of the estimated range of exposure from model results. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of Nathan. As a result of the most recent annual update of this estimate, completed during 2018, it was determined that the liability for Hercules asbestos-related claims should be decreased by $19 million. Total reserves for asbestos claims were $282 million at September 30, 2018 compared to $323 million at September 30, 2017.

A progression of activity in the asbestos reserve is presented in the following table.

(In millions)	2018			2017			2016
Asbestos reserve - beginning of year	$	323		$	321		$	311
Reserve adjustments		(19	)		16			25
Amounts paid		(22	)		(14	)		(15	)
Asbestos reserve - end of year (a)	$	282		$	323		$	321

(a)	Included $20 million and $14 million classified in accrued expenses and other liabilities on the Consolidated Balance Sheets as of September 30, 2018 and 2017, respectively.

For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. As a result, any increases in the asbestos reserve have been partially offset by probable insurance recoveries. Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.

As of September 30, 2018 and 2017, the receivables from insurers amounted to $54 million and $68 million, respectively. During 2018, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $14 million decrease in the receivable for probable insurance recoveries.

A progression of activity in the Hercules insurance receivable is presented in the following table.

(In millions)	2018			2017		2016
Insurance receivable - beginning of year	$	68		$	63	$	56
Receivable adjustment		(14	)		5		7
Insurance receivable - end of year	$	54		$	68	$	63

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, mortality rates, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 to 50 year periods that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $600 million for the Ashland asbestos-related litigation (current reserve of $380 million) and approximately $450 million for the Hercules asbestos-related litigation (current reserve of $282 million), depending on the combination of assumptions selected in the various models. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.

Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. At September 30, 2018, such locations included 81 waste treatment or disposal sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 116 current and former operating facilities and about 1,225 service station properties, of which 35 are being actively remediated.

Ashland’s reserves for environmental remediation and related environmental litigation amounted to $187 million at September 30, 2018 compared to $163 million at September 30, 2017, of which $147 million at September 30, 2018 and $121 million at September 30, 2017 were classified in other noncurrent liabilities on the Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Consolidated Balance Sheets.

The following table provides a reconciliation of the changes in the environmental remediation reserves during 2018 and 2017.

(In millions)	2018			2017
Environmental remediation reserve - beginning of year	$	163		$	177
Disbursements		(37	)		(32	)
Revised obligation estimates and accretion		61			18
Environmental remediation reserve - end of year	$	187		$	163

The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, probability techniques, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland continues to discount certain environmental sites and regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At September 30, 2018 and 2017, Ashland’s recorded receivable for these probable insurance recoveries was $12 million and $15 million, respectively, of which $11 million and $14 million, respectively, were classified in other noncurrent assets in the Consolidated Balance Sheets.

During 2018, Ashland recognized $60 million of expense for certain environmental liabilities. Of that amount, $18 million related to one site where, after significant research and analysis as part of Ashland’s normal process and protocol for these matters, the estimated cost for the ongoing remediation was finalized. As such, Ashland recorded the expense for this remediation project during 2018 since a reasonable estimate that is in accordance with U.S. GAAP provisions could be determined. The remaining charges in 2018 related to normal ongoing remediation cost estimate updates for sites, which is consistent with Ashland’s historical environmental accounting policy.

Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table for the years ended September 30, 2018, 2017 and 2016.

(In millions)	2018			2017			2016
Environmental expense	$	60		$	17		$	33
Accretion		1			1			2
Legal expense		6			8			8
Total expense		67			26			43

Insurance receivable		(2	)		(2	)		(3	)
Total expense, net of receivable activity (a)	$	65		$	24		$	40

(a)

Net expense of $5 million, $3 million and $2 million for the fiscal years ended September 30, 2018, 2017 and 2016, respectively, related to divested businesses which qualified for treatment as discontinued operations and for which certain environmental liabilities were retained by Ashland. These amounts are classified within the income from discontinued operations caption of the Statements of Consolidated Comprehensive Income (Loss).

Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $430 million. The largest reserve for any site is 14% of the remediation reserve.

In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, and other environmental matters, which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to such actions were immaterial as of September 30, 2018 and 2017. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses were immaterial as of September 30, 2018 and 2017.