Lawsuit for $2,000,000 for an injury caused to a customer allegedly as a result of product use. The suit was filed in March of 2012. The Marshall corporate lawyer feels that it is probable Marshall will not win the suit and currently estimates a judgment against Marshall Corporation between $300,000 and $800,000 with a most likely judgment of $500,000 based on historical similar cases

What about insurance?

You should create a liability account and put notes in the financial statements.