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Note 16 - Warranty Costs

12 Months Ended

Oct. 31, 2022

Product Warranty Disclosure [Text Block]

16. Warranty Costs

General liability insurance for homebuilding companies and their suppliers and subcontractors is very difficult to obtain. The availability of general liability insurance is limited due to a decreased number of insurance companies willing to underwrite for the industry. In addition, those few insurers willing to underwrite liability insurance have significantly increased the premium costs. To date, we have been able to obtain general liability insurance but at higher premium costs with higher deductibles. Our subcontractors and suppliers have advised us that they have also had difficulty obtaining insurance that also provides us coverage. As a result, we have an owner-controlled insurance program for certain of our subcontractors whereby the subcontractors pay us an insurance premium (through a reduction of amounts we would otherwise owe such subcontractors for their work on our homes) based on the risk type of the trade. We absorb the liability associated with their work on our homes as part of our overall general liability insurance at no additional cost to us because our existing general liability and construction defect insurance policy and related reserves for amounts under our deductible covers construction defects regardless of whether we or our subcontractors are responsible for the defect. For the years ended October 31, 2022 and 2021, we received $6.0 million and $5.5 million, respectively, from subcontractors related to the owner controlled-insurance program, which we accounted for as reductions to inventory.

Additions and charges in the warranty reserve and general liability reserve for the years ended October 31, 2022 and 2021 were as follows:

	*Year Ended October 31,*
(In thousands)	*2022*			*2021*

Balance, beginning of period	$	94,916		$	86,417
Additions: Selling, general and administrative		8,495			10,419
Additions: Cost of sales		9,054			13,410
Charges incurred during the period		(18,271	)		(14,342	)
Changes to pre-existing reserves		3,525			(988	)
Balance, end of period	$	97,719		$	94,916

Warranty accruals are based upon historical experience. In fiscal 2022, we recorded an increase of $4.3 million to our construction defect reserves related to specific claims. These changes are reflected in the changes to pre-existing reserves in the table above.

Insurance claims paid by our insurance carriers, excluding insurance deductibles paid, were $0.2 million and $0.1 million for the years ended October 31, 2022 and 2021, respectively, for prior year deliveries.