9. INSURANCE

The Company uses a combination of insurance and self-insurance programs to cover workers’ compensation, general liability, property damage and other insurable risks. For the majority of these insurance programs, the Company retains the initial $1.0 million of exposure on a per-claim basis either through deductibles or self-insurance retentions. Beyond the retained exposures, the Company has varying primary policy limits between $1.0 million and $5.0 million per occurrence. As of October 31, 2012, to cover general liability losses above these limits, the Company maintained commercial insurance umbrella policies that provide $150.0 million of coverage. Workers’ compensation liability losses have unlimited coverage due to statutory regulations. Additionally, to cover property damage risks above its retention limits, the Company maintained policies that provide $75.0 million of coverage.

Effective January 1, 2012, the Company is also self-insured for certain employee medical and dental plans. The Company retains up to $0.4 million of exposure on a per claim basis under medical plans.

The Company had insurance claims reserves totaling $343.8 million and $341.4 million at October 31, 2012 and 2011, respectively. The balance at October 31, 2012 includes $13.0 million in reserves related to the Company’s medical and dental self-insured plans. The Company also had insurance recoverables totaling $64.5 million and $70.6 million at October 31, 2012 and 2011, respectively.

During the year ended October 31, 2012, there were unfavorable developments in certain general liability and worker’s compensation claims for certain policy years prior to fiscal 2012. Certain general liability claims related to earlier policy years experienced losses significantly higher than were previously estimated. Workers’ compensation expense was unfavorable in California and other states where the Company maintains a significant presence. Specifically in California, workers’ compensation claims were favorable for older years, but adverse for more current years due primarily to California’s post-reform workers’ compensation environment. In addition, some of the unfavorable workers’ compensation development may be the result of the Company’s continuing attempt to achieve earlier settlement of claims.

Offsetting the unfavorable workers’ compensation developments in California and other states was the impact of a favorable reform in Illinois, and more specifically relating to reduced medical costs associated with the reform. The Company has also implemented a series of initiatives to improve the management of general liability claims. Further, the recognition within the Company’s annual actuarial assessment of the loss experience for policy years in which Linc was a member of a group captive, also resulted in a favorable insurance adjustment.

After analyzing the historical loss development patterns, comparing the loss development against benchmarks, adjusting for known operational claims handling changes, and applying actuarial projection methods to determine the estimate of ultimate losses, the Company increased its expected reserves for prior-year claims, which resulted in an increase in the related insurance expense of $7.3 million during fiscal year ended October 31, 2012 and was recorded as part of Corporate expenses, consistent with prior periods. Insurance reserve adjustments resulting from periodic actuarial evaluations of ultimate losses relating to prior years during the years ended October 31, 2011 and 2010 were $2.1 million and $1.2 million respectively.

The Company had the following standby letters of credit, surety bonds and restricted insurance deposits outstanding at October 31, 2012 and 2011, to collateralize its self-insurance obligations.


(in thousands)	October 31,
	2012		2011
Standby Letters of Credit	$	104,968	$	96,776
Surety Bonds		34,933		30,929
Restricted Insurance Deposits		31,720		35,974

Total	$	171,621	$	163,679