Commitments and Contingencies

12 Months Ended

Nov. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies include typical obligations of homebuilders for the completion of contracts and those

incurred in the ordinary course of business.

Warranty. We provide a limited warranty on all of our homes. The specific terms and conditions of our limited warranty

program vary depending upon the markets in which we do business. We generally provide a structural warranty of 10 years, a

warranty on electrical, heating, cooling, plumbing and certain other building systems each varying from two to five years based

on geographic market and state law, and a warranty of one year for other components of the home. Our limited warranty

program is ordinarily how we respond to and account for homeowners’ requests to local division offices seeking repairs of

certain conditions or defects, including claims where we could have liability under applicable state statutes or tort law for a

defective condition in or damages to a home. Our warranty liability covers our costs of repairs associated with homeowner

claims made under our limited warranty program. These claims are generally made directly by a homeowner and involve their

individual home.

We periodically assess the adequacy of our accrued warranty liability, which is included in accrued expenses and other

liabilities in our consolidated balance sheets, and adjust the amount as necessary based on our assessment. Our assessment

includes the review of our actual warranty costs incurred to identify trends and changes in our warranty claims experience, and

considers our home construction quality and customer service initiatives and outside events. While we believe the warranty

liability currently reflected in our consolidated balance sheets to be adequate, unanticipated changes or developments in the

legal environment, local weather, land or environmental conditions, quality of materials or methods used in the construction of

homes or customer service practices and/or our warranty claims experience could have a significant impact on our actual

warranty costs in future periods and such amounts could differ significantly from our current estimates.

The changes in our warranty liability were as follows (in thousands):


	Years Ended November 30,
	2024	2023	2022
Balance at beginning of year	$98,000	$101,890	$96,153
Warranties issued	40,630	37,424	39,476
Payments	(42,604)	(45,314)	(33,739)
Adjustments	—	4,000	—
Balance at end of year	$96,026	$98,000	$101,890

Guarantees. In the normal course of our business, we issue certain representations, warranties and guarantees related to

our home sales and land sales. Based on historical experience, we do not believe any potential liability with respect to these

representations, warranties or guarantees would be material to our consolidated financial statements.

Self-Insurance. We maintain, and require the majority of our independent contractors to maintain, general liability

insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance. These insurance

policies protect us against a portion of our risk of loss from claims related to our homebuilding activities, subject to certain self-

insured retentions, deductibles and other coverage limits. We also maintain certain other insurance policies. Costs associated

with our self-insurance programs are included in selling, general and administrative expenses. In Arizona, California, Colorado

and Nevada, our contractors’ general liability insurance primarily takes the form of a wrap-up policy under a program where

eligible independent contractors are enrolled as insureds on each community. Enrolled contractors generally contribute toward

the cost of the insurance and agree to pay a contractual amount in the future if there is a claim related to their work. To the

extent provided under the wrap-up program, we absorb the enrolled contractors’ general liability associated with the work

performed on our homes within the applicable community as part of our overall general liability insurance and our self-

insurance.

We self-insure a portion of our overall risk through the use of a captive insurance subsidiary, which provides coverage for

our exposure to construction defect, bodily injury and property damage claims and related litigation or regulatory actions, up to

certain limits. Our self-insurance liability generally covers the costs of settlements and/or repairs, if any, as well as our costs to

defend and resolve the following types of claims:

•Construction defect: Construction defect claims, which represent the largest component of our self-insurance liability,

typically originate through a legal or regulatory process rather than directly by a homeowner and involve the alleged

occurrence of a condition affecting two or more homes within the same community, or they involve a common area or

homeowners’ association property within a community. These claims typically involve higher costs to resolve than

individual homeowner warranty claims, and the rate of claims is highly variable.

• Bodily injury: Bodily injury claims typically involve individuals (other than our employees) who claim they were

injured while on our property or as a result of our operations.

• Property damage: Property damage claims generally involve claims by third parties for alleged damage to real or

personal property as a result of our operations. Such claims may occasionally include those made against us by

owners of property located near our communities.

Our self-insurance liability at each reporting date represents the estimated costs of reported claims, claims incurred but not

yet reported, and claim adjustment expenses. The amount of our self-insurance liability is based on an analysis performed by a

third-party actuary that uses our historical claim and expense data, as well as industry data to estimate these overall costs. Key

assumptions used in developing these estimates include claim frequencies, severities and resolution patterns, which can occur

over an extended period of time. These estimates are subject to variability due to the length of time between the delivery of a

home to a homebuyer and when a construction defect claim is made, and the ultimate resolution of such claim; uncertainties

regarding such claims relative to our markets and the types of product we build; and legal or regulatory actions and/or

interpretations, among other factors. Due to the degree of judgment involved and the potential for variability in these

underlying assumptions, our actual future costs could differ from those estimated. In addition, changes in the frequency and

severity of reported claims and the estimates to resolve claims can impact the trends and assumptions used in the actuarial

analysis, which could be material to our consolidated financial statements. Though state regulations vary, construction defect

claims are reported and resolved over a long period of time, which can extend for 10 years or more. As a result, the majority of

the estimated self-insurance liability based on the actuarial analysis relates to claims incurred but not yet reported. Therefore,

adjustments related to individual existing claims generally do not significantly impact the overall estimated liability.

Adjustments to our liabilities related to homes delivered in prior years are recorded in the period in which a change in our

estimate occurs.

Our self-insurance liability is presented on a gross basis for all years without consideration of insurance recoveries and

amounts we have paid on behalf of and expect to recover from other parties, if any. Estimated probable insurance and other

recoveries of $22.6 million and $31.1 million are included in receivables in our consolidated balance sheets at November 30,

2024 and 2023, respectively. These self-insurance recoveries are principally based on actuarially determined amounts and

depend on various factors, including, among other things, the above-described claim cost estimates, our insurance policy

coverage limits for the applicable policy year(s), historical third-party recovery rates, insurance industry practices, the

regulatory environment and legal precedent, and are subject to a high degree of variability from year to year. Because of the

inherent uncertainty and variability in these assumptions, our actual insurance recoveries could differ significantly from

amounts currently estimated.

The changes in our self-insurance liability were as follows (in thousands):


	Years Ended November 30,
	2024	2023	2022
Balance at beginning of year	$179,832	$175,977	$189,131
Self-insurance provided	21,663	18,351	21,926
Payments	(16,008)	(20,896)	(21,984)
Adjustments (a)	(59)	6,400	(13,096)
Balance at end of year	$185,428	$179,832	$175,977

(a)Represents net changes in estimated probable recoveries related to self-insurance, which are recorded in receivables, to

present our self-insurance liability on a gross basis, and an adjustment to increase our previously recorded liability by

$5.5 million in 2024, $6.5 million in 2023 and $7.0 million in 2022. The 2022 amount was largely impacted by a change

in the actuarially determined estimate of probable recoveries associated with higher self-insured retention levels in our

more recent coverage years, and an insurance carrier’s payment of a portion of a townhome claim settlement reached in the

2022 first quarter.

For most of our claims, there is no interaction between our warranty liability and self-insurance liability. Typically, if a

matter is identified at its outset as either a warranty or self-insurance claim, it remains as such through its resolution. However,

there can be instances of interaction between the liabilities, such as where individual homeowners in a community separately

request warranty repairs to their homes to address a similar condition or issue and subsequently join together to initiate, or

potentially initiate, a legal process with respect to that condition or issue and/or the repair work we have undertaken. In these

instances, the claims and related repair work generally are initially covered by our warranty liability, and the costs associated

with resolving the legal matter (including any additional repair work) are covered by our self-insurance liability.

The payments we make in connection with claims and related repair work, whether covered within our warranty liability

and/or our self-insurance liability, may be recovered from our insurers to the extent such payments exceed the self-insured

retentions or deductibles under our general liability insurance policies. Also, in certain instances, in the course of resolving a

claim, we pay amounts in advance of and/or on behalf of an independent contractor(s) or their insurer(s) and believe we will be

reimbursed for such payments. Estimates of all such amounts, if any, are recorded as receivables in our consolidated balance

sheets when any such recovery is considered probable.

In addition to the risk that is effectively self-insured through our captive insurance subsidiary, we often obtain project-

specific insurance coverage for construction defect risk on attached projects (e.g., condominiums or townhomes) with policy

deductibles generally ranging from $50,000 to $250,000. We record estimated liabilities and recoveries for projected losses

related to these projects on a gross basis, including for known claims as well as estimates for claims incurred but not yet

reported, to the extent such amounts are considered probable and estimable.

Florida Chapter 558 Actions. We and certain of our trade partners continue to receive claims from attorneys on behalf of

individual owners of our homes and/or homeowners’ associations that allege, pursuant to Chapter 558 of the Florida Statutes,

various construction defects, with most relating to stucco and water-intrusion issues. The claims primarily involve homes in

our Jacksonville, Orlando, and Tampa operations. Under Chapter 558, homeowners must serve written notice of a construction

defect(s) and provide the served construction and/or design contractor(s) with an opportunity to respond to the noticed issue(s)

before they can file a lawsuit. Although we have resolved many of these claims without litigation, and a number of others have

been resolved with applicable trade partners or their insurers covering the related costs, as of November 30, 2024, we had

approximately 414 outstanding noticed claims, and some are scheduled for trial over the next few quarters and beyond. In

addition, some of our trade partners’ insurers in some of these cases have informed us of their inability to continue to pay

claims-related costs. At November 30, 2024, we had an accrual for our estimated probable loss for these matters and a

receivable for estimated probable insurance recoveries, including an estimate for claims incurred but not yet reported. While it

is reasonably possible that our losses could exceed the amounts accrued and our recoveries could be less than the amounts

recorded, at this time, we are unable to estimate the total amount of the loss in excess of the accrued amount and/or associated

with a shortfall in the recoveries that is reasonably possible as each of these is dependent on several factors, including the extent

of additional claims to be reported in future periods; the nature of any specific claims; our evaluation of the particular facts

surrounding each such claim; and the actions of third parties over which we have no control.

Performance Bonds and Letters of Credit. We are often required to provide to various municipalities and other

government agencies performance bonds and/or letters of credit to secure the completion of our projects and/or in support of

obligations to build community improvements such as roads, sewers, water systems and other utilities, and to support similar

development activities by certain of our unconsolidated joint ventures. At November 30, 2024, we had $1.33 billion of

performance bonds and $81.6 million of letters of credit outstanding. At November 30, 2023, we had $1.32 billion of

performance bonds and $19.1 million of letters of credit outstanding. If any such performance bonds or letters of credit are

called, we would be obligated to reimburse the issuer of the performance bond or letter of credit. We do not believe that a

material amount of any currently outstanding performance bonds or letters of credit will be called. Performance bonds do not

have stated expiration dates. Rather, we are released from the performance bonds as the underlying performance is completed.

The expiration dates of some letters of credit issued in connection with community improvements coincide with the expected

completion dates of the related projects or obligations. Most letters of credit, however, are issued with an initial term of one

year and are typically extended on a year-to-year basis until the related performance obligations are completed.

Land Option Contracts and Other Similar Contracts. In the ordinary course of business, we enter into land option

contracts and other similar contracts to acquire rights to land for the construction of homes. At November 30, 2024, we had

total cash deposits of $81.9 million to purchase land having an aggregate purchase price of $2.59 billion. Our land option

contracts and other similar contracts generally do not contain provisions requiring our specific performance.

Civil Subpoena. On October 2, 2023, we received a subpoena from the U.S. Department of Justice Civil Division, dated

September 27, 2023, to produce certain documents and testimony with respect to the inspection, rating, marketing and

advertising of our ENERGY STAR homes, including our contracts and/or communications with U.S. EPA and third-party

ENERGY STAR rating companies, real estate brokers, real estate appraisers, financial institutions and other parties, as well as

inspection-related guidelines, instructions, methods, policies, processes and procedures. We are cooperating with the

government, producing documents and information. As of the date of this report, we are unable to predict what actions the

government will take, if any; the timing or nature of the ultimate outcome in this matter; or the impact, if any, such outcome

may have on our business or consolidated financial statements. As a result, while a loss or penalty, if any, is reasonably

possible in this matter, it is not considered to be probable or estimable.