12. Commitments and Contingencies

Leases

We lease certain facilities and equipment under noncancelable operating leases. Rent expense for the years ended December 31, 2016, 2015 and 2014 was $20.6 million, $20.6 million, and $17.8 million, respectively. We recognize escalating rental payments that are quantifiable at the inception of the lease on a straight‑line basis over the lease term. Concurrent with the acquisitions of certain companies, we entered into various agreements with previous owners to lease buildings used in our operations. The terms of these leases generally range from three to ten years and certain leases provide for escalations in the rental expenses each year, the majority of which are based on inflation. Included in the 2016, 2015 and 2014 rent expense above are approximately $5.1 million, $5.4 million and $3.8 million of rent paid to these related parties, respectively. In addition to the noncancelable operating leases, we have capital lease obligations of $0.3 million as of December 31, 2016, which were attained through our acquisition in Northern Texas.

The following represents future minimum rental payments under noncancelable operating leases (in thousands):


Year ended December 31—
2017	$	13,098
2018		11,904
2019		9,666
2020		7,204
2021		5,051
Thereafter		9,107
	$	56,030

Claims and Lawsuits

We are subject to certain legal and regulatory claims, including lawsuits arising in the normal course of business. We maintain various insurance coverages to minimize financial risk associated with these claims. We have estimated and provided accruals for probable losses and related legal fees associated with certain litigation in the accompanying consolidated financial statements. While we cannot predict the outcome of these proceedings, in management’s opinion and based on reports of counsel, any liability arising from these matters individually and in the aggregate will not have a material effect on our operating results, cash flows or financial condition, after giving effect to provisions already recorded.

In the fourth quarter of 2016, we entered into a settlement agreement with British Petroleum (“BP”) related to a claim from one of our subsidiaries regarding the April 2010 BP Deepwater Horizon oil spill. We recorded a $0.6 million gain in the fourth quarter of 2016 in Other Income as a result of this settlement. While we still have other subsidiaries with outstanding claims against BP related to this matter, we cannot predict when or if we will receive any further settlement compensation as a result of these outstanding claims.

Surety

Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. If we fail to perform under the terms of a contract or to pay subcontractors and vendors who provided goods or services under a contract, the customer may demand that the surety make payments or provide services under the bond. We must reimburse the surety for any expenses or outlays it incurs. To date, we are not aware of any losses to our sureties in connection with bonds the sureties have posted on our behalf, and do not expect such losses to be incurred in the foreseeable future.

Surety market conditions are favorable and bonding capacity is adequate in the current market conditions along with acceptable terms and conditions. Historically, approximately 20% to 30% of our business has required bonds. While we currently have strong surety relationships to support our bonding needs, future market conditions or changes in the sureties’ assessment of our operating and financial risk could cause the sureties to decline to issue bonds for our work. If that were to occur, the alternatives include doing more business that does not require bonds, posting other forms of collateral for project performance such as letters of credit or cash, and seeking bonding capacity from other sureties. We would likely also encounter concerns from customers, suppliers and other market participants as to our creditworthiness. While we believe our general operating and financial characteristics would enable us to ultimately respond effectively to an interruption in the availability of bonding capacity, such an interruption would likely cause our revenue and profits to decline in the near term.

Self‑Insurance

We are substantially self‑insured for workers’ compensation, employer’s liability, auto liability, general liability and employee group health claims, in view of the relatively high per‑incident deductibles we absorb under our insurance arrangements for these risks. Losses are estimated and accrued based upon known facts, historical trends and industry averages. Estimated losses in excess of our deductible, which have not already been paid, are included in our accrual with a corresponding receivable from our insurance carrier. Loss estimates associated with the larger and longer‑developing risks, such as workers’ compensation, auto liability and general liability, are reviewed by a third‑party actuary quarterly.

Our self‑insurance arrangements as of December 31, 2016 were as follows:

Workers’ Compensation—The per‑incident deductible for workers’ compensation is $1.0 million. Losses above $1.0 million are determined by statutory rules on a state‑by‑state basis, and are fully covered by excess workers’ compensation insurance.

Employer’s Liability—For employer’s liability, the per incident deductible is $1.0 million and then we have several layers of excess loss insurance policies that cover losses up to $100.0 million in aggregate across this risk area (as well as general liability and auto liability noted below).

General Liability—For general liability, the per incident deductible is $1.0 million. We are fully insured for the next $1.0 million of each loss, and then have several layers of excess loss insurance policies that cover losses up to $100.0 million in aggregate across this risk area (as well as employer’s liability noted above and auto liability noted below).

Auto Liability—For auto liability, the per incident deductible is $0.5 million. We are fully insured for the next $1.5 million of each loss, and then have several layers of excess loss insurance policies that cover losses up to $100.0 million in aggregate across this risk area (as well as employer’s liability and general liability noted above).

Employee Medical—We have two medical plans. The deductible for employee group health claims is $350,000 per person, per policy (calendar) year for each plan. Insurance then covers any responsibility for medical claims in excess of the deductible amount.

Our $100.0 million of aggregate excess loss coverage above applicable per‑incident deductibles represents one policy limit that applies to all lines of risk; we do not have a separate $100.0 million of excess loss coverage for each of general liability, employer’s liability and auto liability.