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.

Actuarial Review Performed During the First Quarter of 2019

During the three months ended January 31, 2019, 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, 2018 and ending October 31, 2018 for all policy years in which open claims existed.

The actuarial review indicated the changes we have made to our risk management program have reduced the frequency of claims; however, we are experiencing adverse developments that impact claim costs relating to prior periods. Claim management initiatives include programs to identify those claims earlier in the claims cycle that may potentially develop adversely and ensure the establishment of reserves consistent with known fact patterns. However, with respect to claims related to prior fiscal years, the actuarial review showed unfavorable developments in our estimates of ultimate losses related to general liability, property damage, workers’ compensation, and automobile liability claims, as described below.

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

Due to increases in projected costs and severity of claims in prior fiscal years, 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 review and subsequent developments, 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 $5.0 million during the three months ended January 31, 2019. This adjustment was $3.0 million higher than the total adjustment related to prior year claims of $2.0 million during the three months ended January 31, 2018. We will continue to assess ongoing developments, which may result in further adjustments to reserves.

Insurance Related Balances and Activity



(in millions)	January 31, 2019		October 31, 2018
Insurance claim reserves, excluding medical and dental	$	512.0	$	501.4
Medical and dental claim reserves	9.7		8.9
Insurance recoverables	73.7		73.7

At January 31, 2019 and October 31, 2018, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying unaudited consolidated balance sheets.

Instruments Used to Collateralize Our Insurance Obligations



(in millions)	January 31, 2019		October 31, 2018
Standby letters of credit	$	143.5	$	144.1
Surety bonds	89.2		89.2
Restricted insurance deposits	0.8		0.6
Total	$	233.5	$	233.9