Waste Management 2014 Annual Report Download - page 187

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
established for that purpose. These facilities are discussed further in Note 7. Surety bonds and insurance policies
are supported by (i) a diverse group of third-party surety and insurance companies; (ii) an entity in which we
have a noncontrolling financial interest or (iii) wholly-owned insurance companies, the sole business of which is
to issue surety bonds and/or insurance policies on our behalf.
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. “General liability” refers to the self-insured portion of specific third party claims
made against us that may be covered under our commercial General Liability Insurance Policy. 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,
2014, our commercial General Liability Insurance Policy 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, 2014, 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, 2014, 3.0% at December 31, 2013 and 1.75% at December 31, 2012. The changes to our
net insurance liabilities for the three years ended December 31, 2014 are summarized below (in millions):
Gross Claims
Liability
Receivables
Associated with
Insured Claims(a) Net Claims Liability
Balance, December 31, 2011 .................. $511 $(161) $ 350
Self-insurance expense (benefit) ........... 222 (59) 163
Cash (paid) received .................... (164) 18 (146)
Balance, December 31, 2012 .................. 569 (202) 367
Self-insurance expense (benefit) ........... 177 (5) 172
Cash (paid) received .................... (156) 10 (146)
Balance, December 31, 2013 .................. 590 (197) 393
Self-insurance expense (benefit) ........... 168 (9) 159
Cash (paid) received .................... (161) 23 (138)
Balance, December 31, 2014(b) ............... $597 $(183) $ 414
Current portion at December 31, 2014 ....... $129 $ (17) $ 112
Long-term portion at December 31, 2014 ..... $468 $(166) $ 302
(a) Amounts reported as receivables associated with insured claims are related to both paid and unpaid claims
liabilities.
110