8. SELF-INSURANCE

The Company self-insures certain insurable risks, such as workers’ compensation, general liability, automobile and property damage. The Company maintains commercial insurance policies that provide $150.0 million (or $75.0 million with respect to claims acquired from OneSource in the year ended October 31, 2008) of coverage for certain risk exposures above the Company’s deductibles (i.e., self-insurance retention limits). For claims incurred after November 1, 2002, substantially all of the self-insured retentions increased from $0.5 million per occurrence (inclusive of allocated loss adjustment expenses) to $1.0 million per occurrence (exclusive of allocated loss adjustment expenses), except for California workers’ compensation insurance which increased to $2.0 million, in the aggregate, from April 14, 2003 to April 14, 2005 ($1.0 million per occurrence, plus an additional $1.0 million annually in the aggregate). The Company allocates current-year insurance expense to its operating segments based upon their underlying exposures.

The Company periodically performs a thorough review, with the assistance of external professionals, of its estimate of the ultimate cost for self-insurance reserves. The independent external third-party’s actuarial estimate of the reserves is reviewed by management and forms the basis for management’s best estimate of the reserves, as recorded in the Company’s financial statements. Although the Company engages third-party experts to assist in estimating appropriate self-insurance reserves, the determination of those reserves is dependent upon significant actuarial judgments and interpretations of trends that have a material impact on the Company’s reserves. If analyses of losses suggest that the frequency or severity of claims incurred has changed, the Company would be required to record increases or decreases in expenses for self-insurance liabilities. All increases or decreases to the Company’s prior year self-insurance liabilities are recorded in the Corporate segment.

The table below summarizes the self-insurance reserve adjustments resulting from periodic actuarial evaluations of ultimate losses relating to prior years during the years ended October 31, 2011, 2010 and 2009. Such amounts are not allocated to the Company’s operating segments and are recorded in the Corporate segment.

		September 30,		September 30,		September 30,
	Years ended October 31,
(in thousands)	2011		2010		2009
Major programs (1)	$	1,399	$	799	$	9,435
Minor programs (2)		682		417		—

Total	$	2,081	$	1,216	$	9,435

(1)

As described above, the Company is self-insured for workers’ compensation, general liability, automobile, and property damage. During 2009, the Company was negatively impacted by the effects of unfavorable developments in workers’ compensation claims in California and other states, certain case law decisions which resulted in a more favorable atmosphere for injured workers, and existing claims in California being updated by injured workers to add additional medical conditions to the original claims. During 2010 and 2011, higher than expected losses in workers’ compensation and general liability claims resulted in increased losses, attributed to claims incurred in prior years.

(2)	Separate evaluations of insurance reserves related to certain Janitorial and Parking locations showed unfavorable claims developments in 2010 and 2011, resulting in increased losses, attributable to claims incurred in prior years.

With respect to certain reserves related to the operation of Linc, the Company was a member, in good standing, of a group captive insurance company to which it paid premiums for Linc’s exposures related to workers’ compensation, general liability, and auto programs. The Company elected not to renew its relationship with the captive effective August 31, 2011, and effective September 1, 2011 all Linc exposures previously included in the group captive have been migrated into the Company’s main insurance program. Based primarily on the Company’s loss experience as a member of the captive, the Company is subject to assessments of additional premiums, subject to a defined annual cap. The Company has accrued for such additional exposure through the date of termination from the group captive as deemed probable and estimable. The Company will continue to perform periodic actuarial assessments of its loss experience for policy years in which it was a member of the group captive and will adjust its reserves as appropriate.

At October 31, 2011, the Company had $96.8 million in standby letters of credit (primarily related to its workers’ compensation, general liability, automobile, and property damage programs), $36.0 million in restricted insurance deposits, and $231.5 million in surety bonds (of which $30.9 million supported insurance claim liabilities). At October 31, 2010, the Company had $100.8 million in standby letters of credit, $36.2 million in restricted insurance deposits and $112.5 million in surety bonds (of which $29.3 million supported insurance claim liabilities).