Quarterly report pursuant to Section 13 or 15(d)

Workers' Compensation Claims

v3.8.0.1
Workers' Compensation Claims
9 Months Ended
Sep. 30, 2017
Text Block [Abstract]  
Workers' Compensation Claims

Note 3 – Workers’ Compensation Claims

The following table summarizes the aggregate workers’ compensation reserve activity (in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Beginning balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

330,079

 

 

$

277,050

 

 

$

312,537

 

 

$

255,675

 

Add: claims expense accrual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

39,316

 

 

 

38,094

 

 

 

112,469

 

 

 

103,875

 

Prior periods

 

 

(280

)

 

 

(999

)

 

 

4,984

 

 

 

(1,547

)

 

 

 

39,036

 

 

 

37,095

 

 

 

117,453

 

 

 

102,328

 

Less: claim payments related to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

6,082

 

 

 

5,596

 

 

 

11,362

 

 

 

10,565

 

Prior periods

 

 

18,466

 

 

 

16,618

 

 

 

67,928

 

 

 

55,507

 

 

 

 

24,548

 

 

 

22,214

 

 

 

79,290

 

 

 

66,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Change in claims incurred in excess of retention limits

 

 

118

 

 

 

 

 

 

(6,015

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workers' compensation claims liabilities

 

$

344,685

 

 

$

291,931

 

 

$

344,685

 

 

$

291,931

 

Incurred but not reported (IBNR)

 

$

177,166

 

 

$

145,722

 

 

$

177,166

 

 

$

145,722

 

The Company is a self-insured employer with respect to workers' compensation coverage for all of its employees (including employees co-employed through our client service agreements) working in Colorado, Maryland and Oregon, except as described below. In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program.

Effective January 1, 2015, the Company stopped maintaining a certificate to self-insure in the state of California, and it now obtains individual policies from Chubb Limited (“Chubb”) for all California-based clients along with clients in Delaware, Virginia, Pennsylvania, North Carolina, New Jersey, West Virginia, Idaho and the District of Columbia. The arrangement with Chubb, known as a fronted program, provides BBSI a licensed, admitted insurance carrier to issue policies on behalf of BBSI. The risk of loss up to the first $5.0 million per occurrence is retained by BBSI through a reinsurance agreement. Chubb assumes credit risk should BBSI be unable to satisfy its indemnification obligations.

As part of its fronted workers’ compensation insurance program with Chubb, the Company makes monthly payments into a trust account (“the Chubb trust account”) to be used for the payment of future claims. The balance in the Chubb trust account was $358.4 million and $277.1 million at September 30, 2017 and December 31, 2016, respectively. The Chubb trust account balances are included as a component of the current and long-term restricted cash and investments in the Company’s condensed consolidated balance sheets.

The states of California, Maryland, Oregon, Washington, Colorado and Delaware required us to maintain specified investment balances or other financial instruments totaling $97.0 million and $135.0 million at September 30, 2017 and December 31, 2016, respectively, to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer. At September 30, 2017, the Company had provided surety bonds and standby letters of credit totaling $97.0 million, including a California requirement of $84.8 million.

The Company provided a total of $344.7 million and $312.5 million at September 30, 2017 and December 31, 2016, respectively, as an estimated future liability for unsettled workers' compensation claims liabilities. Of this amount, $3.1 million and $9.1 million at September 30, 2017 and December 31, 2016, respectively, represents case reserves incurred in excess of the Company’s retention. The accrual for costs incurred in excess of retention limits is offset by a receivable from excess insurance carriers of $3.1 million and $9.1 million at September 30, 2017 and December 31, 2016, respectively, included in other assets in the condensed consolidated balance sheets.