Accrued Expenses

Accrued expenses at October 31, 2017 and 2016, consisted of the following (amounts in thousands):



	2017		2016
Land, land development and construction	$	146,168	$	153,264
Compensation and employee benefits	149,145		138,282
Escrow liability	45,209		137,396
Self-insurance	149,303		126,431
Warranty	329,278		370,992
Deferred income	42,798		43,488
Interest	36,035		34,903
Commitments to unconsolidated entities	8,870		5,637
Other	52,547		61,907
	$	959,353	$	1,072,300

In response to a significant number of water intrusion claims received in fiscal 2014, 2015, and 2016 from owners of stucco and non-stucco homes in communities located in Pennsylvania and Delaware (which are in our Mid-Atlantic region), we reviewed homes built in these communities from 2002 through 2013 in Pennsylvania and homes built from 2002 through 2009 in Delaware to determine whether repairs related to these homes would likely be needed. In fiscal 2017, we continued to receive claims, and we identified a small number of claims from homes delivered in Delaware after the date parameters noted above and expanded our review to homes built in Delaware through 2013. We also saw an increase in the number of claims in active litigation and arbitration in the fourth quarter of fiscal 2017 relating to time-barred claims.

Our quarterly review process includes an analysis of many factors to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume and relative merits of claims in litigation or arbitration.

As of October 31, 2016, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million, as compared to $80.3 million as of October 31, 2015. The increase in fiscal 2016 reflected an increase in the estimated aggregate number of homes we expect to repair for water intrusion issues largely due to an increase in the rate of claims received; increases in the projected cost per claim attributable to our experience in resolving claims and modified repair protocols, as well as construction cost increases affecting the industry generally; and our determination that an accrual was needed for projected claims related to water intrusion in non-stucco homes in those communities. As of October 31, 2016, we recorded an aggregate of $152.6 million of estimated recoveries from our insurance carriers and suppliers for these claims. In fiscal 2016 and 2015, we recognized $125.6 million and $14.7 million, respectively, of net charges after reduction for expected insurance and supplier recoveries, for estimated repair costs.

Based on our reviews performed in fiscal 2017, we determined that no adjustments to our previously recorded estimates were necessary. Our estimates are predicated on several assumptions for which there is uncertainty including assumptions about, but not limited to, the number of homes to be repaired, the extent of repairs needed, the cost of those repairs, outcomes of pending litigations or arbitrations, and expected recoveries from insurance carriers and suppliers. Due to the degree of judgment required and the potential for variability in the underlying assumptions, it is reasonably possible that our actual costs and recoveries could differ from those recorded, such differences could be material, and therefore, we are unable to estimate the range of any such differences.

Our recorded remaining estimated repair costs related to water intrusion were approximately $251.8 million at October 31, 2017 and $298.0 million at October 31, 2016. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $119.7 million at October 31, 2017 and $141.7 million at October 31, 2016.

The charges discussed above are included in “Cost of revenues” in our Consolidated Statements of Operations and Comprehensive Income. Resolution of these known and unknown claims is expected to take several years.

We accrue for expected warranty costs at the time each home is closed and title and possession are transferred to the home buyer. Warranty costs are accrued based upon historical experience. The table below provides a reconciliation of the changes in our warranty accrual during fiscal 2017, 2016, and 2015 as follows (amounts in thousands):



	2017			2016			2015
Balance, beginning of year	$	370,992		$	93,083		$	86,282
Additions - homes closed during the year	31,798			28,927			20,934
Addition - liabilities acquired	1,495
Increase in accruals for homes closed in prior years *	6,226			26,689			2,661
Reclassification from other accruals	1,082
Increase to water intrusion reserves (see above) **				267,258			14,685
Charges incurred	(82,315		)	(44,965		)	(31,479		)
Balance, end of year	$	329,278		$	370,992		$	93,083