We lease certain property and equipment under various operating lease arrangements. Most of the property leases provide that we pay taxes, insurance and maintenance applicable to the leased premises. As leases for existing locations expire, we expect to renew the leases or substitute another location and lease.

Rental expense for the years ended December 31, 2019, 2018 and 2017 was $36 million, $33 million and $29 million, respectively.

In the normal course of business, we periodically enter into agreements that incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be estimated, we do not expect these guarantees and indemnifications to have a material effect on our business, financial condition, results of operations or cash flows.

We carry insurance policies on insurable risks at levels that we believe to be appropriate, including workers’ compensation, automobile and general liability risks. We purchase insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. We are responsible for all claims that fall below the retention limits, exceed our coverage limits or are otherwise not covered by our insurance policies. In determining our accrual for self-insured claims, we use historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include known claims, as well as incurred but not reported claims. We adjust our estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

A reconciliation of beginning and ending accrued self-insured claims, which are included in Accrued liabilities—Self-insured claims and related expenses and Other long-term obligations, primarily self-insured claims on the Consolidated Statements of Financial Position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the Consolidated Statements of Financial Position, is presented as follows:



	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2017	$	115
Provision for self-insured claims		29
Cash payments		(33)
Balance as of December 31, 2018		111
Provision for self-insured claims		36
Cash payments		(35)
Balance as of December 31, 2019	$	111

Termite damage claim accruals for Non-Litigated Claims in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. We have certain liabilities with respect to existing or potential claims, lawsuits and other proceedings, including Litigated Claims. We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

Since the beginning of 2017, we have been served with an increasing number of termite damage claims related lawsuits. Some plaintiffs have sought to demonstrate a pattern and practice of fraud in connection with these claims and have sought awards, in addition to repair costs, which included punitive damages and damages for mental anguish.

In accordance with ASC 450, “Contingencies,” we have historically determined that we had adequate information to assess probability of loss and a reasonable estimate of the range of loss for Litigated Claims only after the completion of discovery for each individual case, which is often more than a year after the case is filed. In 2019, we experienced an increase in the number of Litigated Claims and in early 2020 we completed a detailed statistical analysis of our recent termite damage claims history and case results. As a result, we have concluded that given a statistically meaningful population of outstanding Litigated Claims and sufficient history of resolving claims with similar attributes we are able to calculate an initial “best” estimate of the outcome of most of our cases based on variables known at the time each case is filed. For the pending Litigated Claims for which we were previously not able to estimate a range of loss under our prior estimation technique, we have recorded a change in estimate of our reserve in the amount of $45 million in the year ended December 31, 2019. The Litigated Claims are included in Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims on the Consolidated Statements of Financial Position.

We have also utilized the aforementioned statistical analysis to evaluate our warranty reserves for Non-Litigated Claims. The resulting estimation technique projects the cost to settle Non-Litigated Claims considering both the expected geographic distribution of current and future claims and their relative cost to settle. Based on this review we have recorded a change in estimate related to our reserve for Non-Litigated Claims in the amount of $8 million in the year ended December 31, 2019. The Non-Litigated Claims are included in Accrued liabilities—Self-insured claims and related expenses on the Consolidated Statements of Financial Position.

A reconciliation of beginning and ending accrued Litigated Claims and Non-Litigated Claims is presented as follows:

	Accrued
	Termite Damage
(In millions)	Claims
Balance as of December 31, 2017	$	22
Provision for termite damage claims		39
Cash payments		(33)
Balance as of December 31, 2018		28
Provision for termite damage claims⁽¹⁾		95
Cash payments		(44)
Balance as of December 31, 2019	$	80

In addition to the matters discussed above and the fumigation related matters discussed below, in the ordinary course of conducting business activities, we and our subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. We have entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of our settlements are not finally approved, we could have additional or different exposure, which could be material. Subject to the paragraphs below, we do not expect any of these proceedings to have a material effect on our reputation, business, financial position, results of operations or cash flows; however, we can give no assurance that the results of any such proceedings will not materially affect our reputation, business, financial position, results of operations and cash flows.

On January 20, 2017, TMX USVI and TMX LP, each an indirect, wholly-owned subsidiary of the Company, entered into a revised Plea Agreement in connection with the investigation initiated by the DOJ into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. Under the terms of sentencing handed down on November 20, 2017, (i) TMX USVI and TMX LP each paid a fine of $4.6 million (total of $9.2 million); (ii) TMX USVI and TMX LP paid a total of $1.2 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; and (iii) both TMX USVI and TMX LP will serve a five year probation period. In lieu of the $1 million community service payment that was proposed in the Plea Agreement, the court required TMX USVI and TMX LP to provide for training certification courses with respect to pesticide application and safety in the U.S. Virgin Islands until November 2022.