INSURANCE

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $1.0 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits between $1.0 million and $5.0 million per occurrence. To cover general liability losses above these primary limits, we maintain commercial insurance umbrella policies that provide aggregate limits of $200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide $75.0 million limits.

During the three months ended July 31, 2015, our annual actuarial evaluations were performed for the majority of our casualty insurance programs. These evaluations excluded claims relating to certain previously acquired businesses. We expect to complete the evaluation of those claims in the fourth quarter of 2015.

The actuarial evaluations completed to date showed unfavorable developments in our estimate of ultimate losses related to certain general liability, workers’ compensation, and automobile liability claims, as explained below. These evaluations indicated that previously estimated decreases in our average claim cost and the anticipated reduction in the total number of claims have yet to occur at the pace contemplated in the 2014 evaluations.

General Liability. The actuarial evaluations showed that while the total number of general liability claims has remained relatively stable, the ratio of alleged bodily injury claims as compared to the total number of general liability claims has increased. The shift in the claim-type mix, coupled with an increase in the number of premises liability claims from earlier years reported to us subsequent to the 2014 actuarial evaluations, resulted in increases to our estimate of ultimate losses.

Workers’ Compensation. Our workers’ compensation claim development patterns in the majority of states in which we provide services, coupled with an increase in claims frequency in California, also warranted increases to our estimate of ultimate losses. This adverse development can be attributed to an increase in the statutory benefits paid to the claimants as well as to increases in administrative and legal expenses associated with claims in which settlements cannot be quickly attained.

Automobile Liability. We operate a fleet of passenger vehicles, service vans, and shuttle buses associated with our various transportation service contracts. Subsequent to last year’s actuarial review, the adverse development trend of the claims related to operating these vehicles was primarily attributable to three large multi-party claims that occurred in the 2013 policy year. Additionally, claims frequency associated with our continuing fleet operations trended unfavorably versus the actuarial expectations during the last 12 months.

After analyzing the recent loss development patterns, comparing the loss development against benchmarks, and applying actuarial projection methods to determine the estimate of ultimate losses, we increased our total reserves by $46.5 million at July 31, 2015.

We are also self-insured for certain employee medical and dental plans. We retain up to $0.4 million of exposure on a per-participant per-year basis with respect to claims under our medical plan. During the three months ended April 30, 2015, actuarial evaluations were completed for our medical and dental plans for the calendar year ended December 31, 2014. The results of the actuarial evaluations indicated a higher than expected incurred but not reported liability for medical and dental claims. As a result, we increased our reserves by $3.0 million in the three months ended April 30, 2015, which was recorded as part of Corporate expenses.

At July 31, 2015 and October 31, 2014, we had insurance claim reserves totaling $391.2 million and $349.7 million, respectively, which include $8.5 million and $4.8 million in reserves, respectively, related to our medical and dental self-insured plans. At July 31, 2015 and October 31, 2014, we also had insurance recoverables, which we include in “Other current assets” and “Other assets” on the accompanying unaudited consolidated balance sheets, totaling $67.9 million and $66.4 million, respectively.

Instruments Used to Collateralize Our Insurance Obligations



(in millions)	July 31, 2015		October 31, 2014
Standby letters of credit	$	108.6	$	111.1
Surety bonds	52.9		52.5
Restricted insurance deposits	11.4		11.5
Total	$	172.9	$	175.1