Waste Management 2011 Annual Report Download - page 186

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
established for that purpose. These facilities are discussed further in Note 7. We obtain surety bonds and
insurance policies from an entity in which we have a noncontrolling financial interest. We also obtain insurance
from a wholly-owned insurance company, the sole business of which is to issue policies for us. In those instances
where our use of financial assurance from entities we own or have financial interests in is not allowed, we have
available alternative financial assurance mechanisms.
Management does not expect that any claims against or draws on these instruments would have a material
adverse effect on our consolidated financial statements. We have not experienced any unmanageable difficulty in
obtaining the required financial assurance instruments for our current operations. In an ongoing effort to mitigate
risks of future cost increases and reductions in available capacity, we continue to evaluate various options to
access cost-effective sources of financial assurance.
Insurance — We carry insurance coverage for protection of our assets and operations from certain risks including
automobile liability, general liability, real and personal property, workers’ compensation, directors’ and officers’
liability, pollution legal liability and other coverages we believe are customary to the industry. Our exposure to loss for
insurance claims is generally limited to the per incident deductible under the related insurance policy. Our exposure,
however, could increase if our insurers are unable to meet their commitments on a timely basis.
We have retained a significant portion of the risks related to our automobile, general liability and workers’
compensation claims programs. For our self-insured retentions, the exposure for unpaid claims and associated
expenses, including incurred but not reported losses, is based on an actuarial valuation and internal estimates.
The accruals for these liabilities could be revised if future occurrences or loss development significantly differ
from our assumptions used. As of December 31, 2011, our general liability insurance program carried self-
insurance exposures of up to $2.5 million per incident and our workers’ compensation insurance program carried
self-insurance exposures of up to $5 million per incident. As of December 31, 2011, our auto liability insurance
program included a per-incident base deductible of $5 million, subject to additional deductibles of $4.8 million in
the $5 million to $10 million layer. Self-insurance claims reserves acquired as part of our acquisition of
WM Holdings in July 1998 were discounted at 2.0% at December 31, 2011, 3.50% at December 31, 2010 and
3.75% at December 31, 2009. The changes to our net insurance liabilities for the three years ended December 31,
2011 are summarized below (in millions):
Gross Claims Liability
Receivables
Associated with
Insured Claims(a) Net Claims Liability
Balance, December 31, 2008 ......... $531 $(191) $ 340
Self-insurance expense (benefit) .... 184 (32) 152
Cash (paid) received ............. (174) 29 (145)
Balance, December 31, 2009 ......... 541 (194) 347
Self-insurance expense (benefit) .... 179 (38) 141
Cash (paid) received ............. (197) 62 (135)
Balance, December 31, 2010 ......... 523 (170) 353
Self-insurance expense (benefit) .... 176 (14) 162
Cash (paid) received ............. (188) 23 (165)
Balance, December 31, 2011(b) ....... $511 $(161) $ 350
Current portion at December 31,
2011 ........................ $135 $ (40) $ 95
Long-term portion at December 31,
2011 ........................ $376 $(121) $ 255
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