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 refine our best estimate of insurance claims reserves as information becomes available. 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 2017, we performed both an actuarial review and an annual actuarial evaluation. As a result of these studies, we increased our reserves for claims related to prior periods by $22.3 million during 2017, as described below.

Actuarial Studies Performed During 2017

During the three months ended January 31, 2017, we performed an actuarial review of the majority of our casualty insurance programs, considering changes in claim developments and claim payment activity for the period commencing May 1, 2016 and ending October 31, 2016. During the three months ended July 31, 2017, we performed an annual actuarial evaluation of the majority of our casualty insurance programs, evaluating all changes made to claims reserves and claim payment activity for the period commencing May 1, 2016 and ending April 30, 2017 for all policy years having open claims. The studies excluded claims relating to certain previously acquired businesses, which we expect to evaluate during the fourth quarter of 2017.

Both the actuarial review and annual actuarial evaluation indicated safety initiatives we have implemented have had a modest impact on our claim costs in the most recent years, however there have been unfavorable developments in ultimate losses that we estimated for general liability and workers’ compensation claims related to prior years, as described below.

The actuarial studies indicated a decrease over the most recent years in the total number of reported claims related to our general liability program, particularly with respect to bodily injury claims, in addition to property damage claims. However, we experienced adverse developments in prior year claims, which are largely attributable to adjustments related to certain bodily injury claims and to losses for property damage.

We are experiencing a reduced frequency of claims in our workers’ compensation program. However, due to increases in projected costs and severity of claims for a number of prior year claims in California and New York, we increased our estimate of ultimate losses for workers’ compensation. Statutory, regulatory, and legal developments have contributed to the increase in our estimated losses.

Based on the results of the actuarial studies performed during 2017, which included analyzing 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 for known claims as well as our estimate of the loss amounts associated with incurred but not reported claims by $10.0 million during the first half of 2017 and by an additional $12.3 million during the third quarter of 2017, for a total adjustment related to prior year claims of $22.3 million during 2017. This adjustment was $9.5 million lower than the total adjustment related to prior year claims of $31.8 million in 2016.

Insurance Related Balances and Activity



(in millions)	July 31, 2017		October 31, 2016
Insurance claim reserves excluding medical and dental	$	449.3	$	417.9
Medical and dental claim reserves	8.3		5.9
Insurance recoverables	74.6		69.7

At July 31, 2017 and October 31, 2016, insurance recoverables are included in “Other current assets” and “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets.

Instruments Used to Collateralize Our Insurance Obligations



(in millions)	July 31, 2017		October 31, 2016
Standby letters of credit	$	118.8	$	118.3
Surety bonds	59.9		57.2
Restricted insurance deposits	11.2		11.2
Total	$	189.9	$	186.7