Opinion ID: 1494647
Heading Depth: 1
Heading Rank: 3

Heading: expenses for injuries, damage claims and insurance

Text: The Company attacks the administrator's deduction of $10,000 from the amount projected by it as a reserve fund for its claims department. It appears that the Company each month sets aside 4 per cent of its operating revenues as a reserve fund to cover the anticipated costs of the administration of its claims department and for the payment of damage and workmen's compensation claims. Based upon experience and estimates as to potential liabilities on unsettled claims, the reserve fund is adjusted on an annual basis and excesses are credited and deficiencies debited to earned surplus. In addition, dividends received on account of group insurance are credited to earned surplus. The administrator had before him an exhibit detailing the results of the application of the foregoing procedures for a period of nine years. It discloses that during that period credits from the reserve fund to surplus exceeded the debits to that account by an average of approximately $10,000 a year, and premised upon that experience the administrator concluded that the Company had over-estimated its expenses in this area for the base period by that amount. In these circumstances we cannot say that the administrator acted either illegally or unreasonably when he made this deduction from the Company's projected operating expenses.