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 ranging between $1.0 million and $5.0 million per occurrence. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance 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 per occurrence limits of $75.0 million. We are also self-insured for certain employee medical and dental plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $0.4 million of exposure on a per-participant per-year basis with respect to claims.

The adequacy of our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims is based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports. We use all available information to develop our best estimate of insurance claims reserves as information is obtained. The results of actuarial studies are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. During 2016, we performed both an annual actuarial evaluation and an actuarial review. As a result of these studies, we increased our reserves for claims related to prior periods by $32.9 million during 2016. Pursuant to the actuarial evaluation completed during 2015, we increased our reserves for claims related to prior periods by $35.9 million during 2015.

Insurance Reserve Adjustments

Annual Actuarial Evaluations Performed During 2016

Annual actuarial evaluations were performed for our casualty insurance programs during 2016. These evaluations considered all changes made to claims reserves and claim payment activity for the period commencing May 1, 2015 and ending April 30, 2016 (the “Evaluation Period”). We performed these evaluations for all policy years in which open claims existed.

The annual actuarial evaluations showed unfavorable developments in our estimate of ultimate losses related to general liability, workers’ compensation, and automobile liability claims, as explained below. While we have made significant improvements in our risk management programs, the actuarial evaluation demonstrates these improvements have had a modest impact on prior years and that the impact is not occurring at the pace originally forecasted by the actuaries. The average claim cost was also unfavorably impacted by increases in legal fees, medical costs, and other claim management expenses necessary to adjudicate the claims with dates of loss prior to 2016.

The actuarial evaluations related to our general liability program showed that the total number of claims has remained relatively stable for prior years. However, we experienced adverse developments in prior year claims, which are largely attributable to adjustments on certain property damage claims, in addition to losses for alleged bodily injuries. Also contributing to the increase in projected cost estimates was a higher than expected average incurred cost for our less severe claims observed during the Evaluation Period.

Our workers’ compensation estimate of ultimate losses was negatively impacted by increases in projected costs for a significant number of prior year claims in California and New York. These claims have been impacted by statutory, regulatory, and legal implications. In California, we also experienced increases in frequency of claims.

Our automobile liability program covers our fleet of passenger vehicles, service vans, and shuttle buses, which are associated with our various transportation service contracts. Claim frequency and severity associated with our fleet operations developed unfavorably versus actuarial expectations. The adverse development was primarily attributable to claims in 2013 through 2015.

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 reserves for known claims as well as our estimate of the loss amounts associated with IBNR claims for years prior to 2016 by $32.9 million during 2016.

Annual Actuarial Evaluations Performed During 2015

During the third quarter of 2015, our annual actuarial evaluations showed unfavorable developments in our estimate of ultimate losses related to certain general liability, workers’ compensation, and automobile liability claims. These evaluations indicated that previously estimated decreases in our average claim cost and the anticipated reduction in the total number of claims had not occurred at the pace contemplated in the 2014 actuarial evaluations. As a result, in the third quarter of 2015, we increased our insurance reserves for years prior to 2015 by $35.9 million.

Insurance Related Balances and Activity

At October 31, 2016 and 2015, we had insurance claim reserves totaling $423.8 million and $387.4 million, respectively, which included $5.9 million and $8.1 million in reserves, respectively, related to our medical and dental self-insured plans. At October 31, 2016 and 2015, we also had insurance recoverables, which we include in “Other current assets” and “Other noncurrent assets” on the accompanying consolidated balance sheets, totaling $69.7 million and $65.9 million, respectively.

Casualty Program Insurance Reserves Rollforward



	Years Ended October 31,
(in millions)	2016			2015			2014
Net balance at beginning of year	$	312.7		$	277.8		$	282.2
Change in case reserves plus IBNR - current year	104.5			88.7			78.6
Change in case reserves plus IBNR - prior year	35.8			40.1			12.7
Claims paid	(104.8		)	(93.9		)	(95.7		)
Net balance at October 31	348.2			312.7			277.8
Recoverables	69.7			65.9			66.4
Gross balance at October 31⁽¹⁾	$	417.9		$	378.6		$	344.2

⁽¹⁾ Includes reserves related to discontinued operations of approximately $12 million for both 2016 and 2015 and $11 million for 2014.

Instruments Used to Collateralize Our Insurance Obligations



	As of October 31,
(in millions)	2016		2015
Standby letters of credit	$	118.3	$	105.4
Surety bonds	57.2		55.9
Restricted insurance deposits	11.2		11.4
Total	$	186.7	$	172.7