INSURANCE

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $1.0 million of exposure on a per-claim basis either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits between $1.0 million and $5.0 million per occurrence. To cover general liability losses above these primary limits, we maintain commercial insurance umbrella policies that provide aggregate limits of $200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide limits of $75.0 million. We are also self-insured for certain employee medical and dental plans. We retain up to $0.4 million of exposure on a per-claim basis with respect to claims under our medical plan.

During the three months ended July 31, 2014, annual actuarial evaluations were performed for the majority of our casualty insurance programs. The evaluations completed to date showed a reduction in our 2014 total Occupational Safety and Health Act reportable incidents, which was evidenced by favorable trends during the year. These evaluations excluded claims relating to certain previously acquired businesses. We expect to complete the evaluation of these claims in the fourth quarter of 2014.

For certain years prior to 2014, the evaluations showed unfavorable developments in certain general liability, automobile liability, and workers’ compensation claims. Certain general liability claims related to earlier years reflected a loss development that was measurably higher than previously estimated. The majority of the adverse impact seen in the general liability program was the result of claims developments in California and New York. A similar trend was also experienced in our automobile liability program, which was largely attributable to considerable unfavorable changes in a few cases within our automobile liability claim pool.

In California, a jurisdiction in which we maintain a significant presence, the workers’ compensation claims development patterns warranted an unfavorable adjustment to our insurance reserves for various years prior to 2014. Conversely, the workers’ compensation loss patterns in states other than California warranted a favorable adjustment for various years prior to 2014, which largely offset the adverse development experienced in California. In response to California’s challenging workers’ compensation environment, we have engaged third-party resources to assist us in resolving claims at an accelerated pace, where feasible.

After analyzing the recent loss development patterns, comparing the loss development against benchmarks, and applying actuarial projection methods to determine the estimate of ultimate losses, we increased our insurance reserves by $4.3 million at July 31, 2014.

We had insurance claim reserves totaling $352.4 million and $358.0 million at July 31, 2014 and October 31, 2013, respectively. The balance at July 31, 2014 and October 31, 2013 includes $4.8 million and $7.0 million in reserves, respectively, related to our medical and dental self-insured plans. We also had insurance recoverables totaling $67.6 million and $68.7 million at July 31, 2014 and October 31, 2013, respectively. The adequacy of insurance claims reserves is based upon actuarial estimates of required reserves considering the most recently completed actuarial reports and known events.

During the fourth quarter of 2014, we expect to complete actuarial assessments using recent claims development experience for several of our remaining insurance programs, which are primarily related to certain previously acquired businesses. This may result in a change in the amount of expense recognized during the period.

We had the following standby letters of credit, surety bonds, and restricted insurance deposits outstanding at July 31, 2014 and October 31, 2013, to collateralize our insurance obligations:



(in millions)	July 31, 2014		October 31, 2013
Standby letters of credit	$	111.2	$	97.7
Surety bonds	46.5		40.5
Restricted insurance deposits	16.0		28.5
Total	$	173.7	$	166.7