Thrifty Car Rental 2010 Annual Report Download - page 87

Vehicle Insurance Reserves
The Company is self insured for a portion of vehicle insurance claims. In 2008, 2009 and 2010,
the Company retained risk of loss up to $5.0 million, $7.5 million and $7.5 million, respectively,
per occurrence for public liability and property damage claims, including third-party bodily injury
and property damage. The Company maintains insurance for losses above these levels. The
Company retains the risk of loss on SLI policies sold to vehicle rental customers.
The Company records reserves for its vehicle liability exposure using actuarially-based loss
estimates, which are updated semi-annually in June and December of each year, for public
liability and property damage, and annually in December for SLI. As a result of favorable
overall claims loss development determined in 2010 and 2009, the Company recorded
favorable insurance reserve adjustments, which effectively represents revision to previous
estimates of vehicle insurance charges, of $13.4 million and $9.4 million during 2010 and 2009,
respectively.
The accrual for Vehicle Insurance Reserves includes amounts for incurred and incurred but not
reported losses. Such liabilities are necessarily based on actuarially determined estimates and
management believes that the amounts accrued are adequate. At December 31, 2010 and
2009, the public liability and property damage amounts have been discounted at 1.0% and
1.7% (assumed risk free rate), respectively, based upon the actuarially determined estimated
timing of payments to be made in future years. Discounting resulted in reducing the accrual for
public liability and property damage by $1.3 million and $2.0 million at December 31, 2010 and
2009, respectively. SLI amounts are not discounted. Estimated future payments of Vehicle
Insurance Reserves as of December 31, 2010 are as follows (in thousands):
2011 25,151$
2012 15,332
2013 12,186
2014 6,380
2015 3,722
Thereafter 4,721
Aggregate undiscounted public liability and property damage 67,492
Effect of discounting (1,274)
Public liability and property damage, net of discount 66,218
Supplemental liability insurance 41,502
Total vehicle insurance reserves 107,720$
Contingencies
Various class action complaints relating to the now terminated proposed merger transaction
with Hertz Global Holdings, Inc. (“Hertz”) have been filed in Oklahoma state court, Oklahoma
federal court, and Delaware Chancery Court against the Company, its directors, and Hertz by
various plaintiffs, for themselves and on behalf of the Company's stockholders, excluding
defendants and their affiliates. These complaints allege that the consideration the Company's
stockholders would have received in connection with the proposed transaction with Hertz is
inadequate and that the Company's directors breached their fiduciary duties to stockholders in
negotiating and approving the Merger Agreement (hereinafter defined) (Note 18). These
complaints also allege that the proxy materials that were sent to the Company's stockholders to
approve the Merger Agreement are materially false and misleading. The cases and their
current status are as follows: 1) Henzel v. Dollar Thrifty Automotive Group, Inc., et al.
(Consolidated Case No. CJ-2010-02761, Dist. Ct. Tulsa County, Oklahoma) - the hearing on
the Company’s motion for reconsideration of the Company’s motion to dismiss was set for
September 28, 2010, but the parties agreed that it would not go forward on that day. This case
has not been dismissed but is currently inactive; 2) In Re: Dollar Thrifty Shareholder Litigation
(Consolidated Case No. 5458-VCS, Delaware Court of Chancery) - the Court denied the motion
for preliminary injunction on September 8, 2010. The plaintiffs served a subpoena on Avis
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