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 2018, we performed both an annual actuarial review and an actuarial update. As a result of these studies, we increased our reserves for claims related to prior periods by approximately $10.0 million during 2018, as described below.

Actuarial Studies Performed During 2018

During the three months ended January 31, 2018, we performed an actuarial review of the majority of our casualty insurance programs that considered changes in claim developments and claim payment activity for the period commencing May 1, 2017 and ending October 31, 2017 for all policy years. During the three months ended July 31, 2018, we performed an annual actuarial update of the majority of our casualty insurance programs, evaluating all changes made to claims reserves and claim payment activity for the period commencing November 1, 2017 and ending April 30, 2018 for all policy years. The studies excluded claims relating to certain previously acquired businesses, which we expect to evaluate during the fourth quarter of 2018.

Both the actuarial review and actuarial update indicate the changes we have made to our risk management program have reduced the frequency of claims and have had a positive impact on claim costs. Changes include the implementation of programs to identify claims that have the potential to develop adversely earlier in the claims cycle and to facilitate the establishment of reserves consistent with known fact patterns. However, with respect to claims related to certain prior fiscal years, actuarial studies completed to date show unfavorable developments in our estimate of ultimate losses related to general liability, property damage, workers’ compensation, and automobile liability claims, as described below.

The actuarial studies related to our general liability program indicated the total number of claims continues to show a pattern of decreasing losses, particularly with bodily injury claims. However, we experienced adverse developments with respect to claims related to certain prior fiscal years that are largely attributable to adjustments for certain alleged bodily injury claims and to losses for property damage.

Due to increases in projected costs and severity of claims in certain prior fiscal years, in 2018 we increased our estimate of ultimate losses for workers’ compensation claims. Statutory, regulatory, and legal developments have also contributed to the increase in our estimated losses. Our workers’ compensation estimate of ultimate losses was primarily impacted by increases in projected costs for a significant number of prior year claims in California.

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, consistent with insurance trends exhibited in the broader insurance book of claims.

Based on the results of the actuarial studies performed during 2018, which included analyzing recent loss development patterns, comparing the loss development against benchmarks, and applying actuarial projection methods to estimate 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 for prior periods by $4.0 million during the first half of 2018 and by an additional $6.0 million during the third quarter of 2018, for a total adjustment related to prior year claims of approximately $10.0 million during the nine months ended July 31, 2018. This adjustment was $12.3 million lower than the total adjustment related to prior year claims of $22.3 million in the nine months ended July 31, 2017.

Insurance Related Balances and Activity



(in millions)	July 31, 2018		October 31, 2017
Insurance claim reserves excluding medical and dental	$	500.4	$	485.6
Medical and dental claim reserves	8.9		9.8
Insurance recoverables	73.8		73.1

At July 31, 2018 and October 31, 2017, 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, 2018		October 31, 2017
Standby letters of credit	$	146.7	$	137.6
Surety bonds	89.0		77.5
Restricted insurance deposits	0.6		11.2
Total	$	236.3	$	226.3