Accrued Expenses

9 Months Ended

Jul. 31, 2019

Accrued expenses at July 31, 2019 and October 31, 2018 consisted of the following (amounts in thousands):



	July 31, 2019		October 31, 2018
Land, land development, and construction	$	167,971	$	213,641
Compensation and employee benefits	159,083		159,374
Escrow liability	34,031		32,543
Self-insurance	184,355		168,012
Warranty	208,919		258,831
Deferred income	42,284		42,179
Interest	45,083		40,325
Commitments to unconsolidated entities	8,478		10,553
Other	45,736		48,123
	$	895,940	$	973,581

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



	Nine months ended July 31,						Three months ended July 31,
	2019			2018			2019			2018
Balance, beginning of period	$	258,831		$	329,278		$	223,655		$	297,343
Additions – homes closed during the period	23,771			24,588			8,817			9,901
Addition – liabilities assumed in a business acquisition	425						425
Increase in accruals for homes closed in prior years	1,834			4,770			1,562			1,615
Charges incurred	(75,942		)	(80,883		)	(25,540		)	(31,106		)
Balance, end of period	$	208,919		$	277,753		$	208,919		$	277,753

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 Mid-Atlantic region). During the first three quarters of fiscal 2019, 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.

As of July 31, 2019, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million, which was unchanged from October 31, 2016, and our recorded aggregate expected recoveries from

insurance carriers and suppliers were approximately $152.6 million, which was also unchanged from October 31, 2016. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately $134.5 million at July 31, 2019 and $177.6 million at October 31, 2018. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $99.6 million at July 31, 2019 and $109.3 million at October 31, 2018. 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 arbitrations, 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 homebuilders 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 recently disputed coverage for the same claims under policies that are substantially the same. As a result, we have entered arbitration proceedings during the third quarter of fiscal 2019 with these carriers. Based on the legal merits that support our pending insurance claims, 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.