Accrued Expenses

6 Months Ended

Apr. 30, 2021

Accrued expenses at April 30, 2021 and October 31, 2020 consisted of the following (amounts in thousands):


	April 30, 2021		October 31, 2020
Land, land development, and construction	$	246,200	$	233,783
Compensation and employee benefits	203,088		219,965
Escrow liability	26,975		23,067
Self-insurance	228,748		215,884
Warranty	153,640		157,351
Lease liabilities	121,415		124,756
Deferred income	36,010		34,096
Interest	35,310		38,446
Commitments to unconsolidated entities	16,381		8,928
Other	47,670		53,920
	$	1,115,437	$	1,110,196

The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):


	Three months ended April 30,				Six months ended April 30,
	2021		2020		2021		2020
Balance, beginning of period	$	150,878	$	188,916	$	157,351	$	201,886
Additions – homes closed during the period	11,309		7,254		18,711		14,278
Addition – liabilities assumed in a business acquisition	—		60		—		60
Increase in accruals for homes closed in prior years, net	3,696		2,361		4,891		3,579

Decrease to water intrusion accrual	—		(24,400)		—		(24,400)
Charges incurred	(12,243)		(17,037)		(27,313)		(38,249)
Balance, end of period	$	153,640	$	157,154	$	153,640	$	157,154

Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our North region). During fiscal 2021, we continued to receive water intrusion claims from homeowners in this region, mostly related to older homes, and we continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.

Our review process, conducted quarterly, includes an analysis of many factors applicable to these communities 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, relative merits and adjudication of claims in litigation or arbitration.

From October 31, 2016 through the second quarter of fiscal 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 million. Based on trends in claims experience over several years and lower than anticipated repair costs, in the second fiscal quarter of 2020, we reduced the estimate of the aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by $24.4 million. Because this reduction was associated with periods in which we expect our insurance deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected recoveries from insurance carriers and suppliers by a corresponding $24.4 million. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately $71.7 million at April 30, 2021 and $79.5 million at October 31, 2020. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $66.6 million at April 30, 2021 and $68.4 million at October 31, 2020.

As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes, including, but not limited to, the number of homes to be repaired, the extent of repairs needed, the repair procedures employed, the cost of those repairs, outcomes of litigation or arbitration, and expected recoveries from insurance carriers and suppliers. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences. With respect to our insurance receivables, disputes between home builders and carriers over coverage positions relating to construction defect claims are common, and resolution of claims with carriers involves the exchange of significant amounts of information and frequently involves legal action. While our primary insurance carrier has funded substantially all of the water intrusion claims that we have submitted to it to date, other insurance carriers have disputed coverage for the same claims under policies that are substantially the same. As a result, we entered arbitration proceedings during the third quarter of fiscal 2019 with these carriers. Based on the legal merits that support our pending insurance claims, developments in the arbitration proceedings, review by legal counsel, our history of collecting significant amounts funded by our primary carrier under policies that are substantially the same, and the high credit ratings of our insurance carriers, we believe collection of our remaining recorded insurance receivables is probable. However, due to the complexity of the underlying claims and the variability of the other factors described above, it is reasonably possible that our actual insurance recoveries could materially differ from those recorded. Resolution of these known and unknown claims is expected to take several years.