Accrued Expenses

9 Months Ended

Jul. 31, 2021

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


	July 31, 2021		October 31, 2020
Land, land development, and construction	$	274,930	$	233,783
Compensation and employee benefits	209,917		219,965
Escrow liability	66,700		23,067
Self-insurance	232,535		215,884
Warranty	150,414		157,351
Lease liabilities	116,613		124,756
Deferred income	35,719		34,096
Interest	46,347		38,446
Commitments to unconsolidated entities	17,745		8,928
Other	48,284		53,920
	$	1,199,204	$	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 July 31,				Nine months ended July 31,
	2021		2020		2021		2020
Balance, beginning of period	$	153,640	$	157,154	$	157,351	$	201,886
Additions – homes closed during the period	10,430		8,975		29,141		23,252
Addition – liabilities assumed in a business acquisition	—		—		—		60
Increase in accruals for homes closed in prior years, net	1,111		2,150		6,002		5,730
Decrease to water intrusion accrual	—		—		—		(24,400)
Charges incurred	(14,767)		(9,880)		(42,080)		(48,129)
Balance, end of period	$	150,414	$	158,399	$	150,414	$	158,399

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 $68.6 million at July 31, 2021 and $79.5 million at October 31, 2020. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $41.8 million at July 31, 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. As a result of coverage disputes related to water intrusion claims, we entered arbitration proceedings during the third quarter of fiscal 2019 with certain of our insurance carriers. During the third quarter of fiscal 2021, we settled all such outstanding disputes and have since entered into coverage agreements with the relevant insurance carriers. Based on the resolution of such disputes and the terms of these coverage agreements, we concluded that no adjustments to our insurance receivables were necessary and we continue to believe that the collection of our remaining recorded insurance receivables is probable.