Tuesday, August 12, 2014

Insurance and Oil-Train Catastrophe Liability

Good summary of current conditions for major railroads and liability insurance (of course Short Line railroads are usually wholly owned LLCs which can just go "bankrupt" letting their owners off the hook):

Insurers Weigh Risks of an Oil-Train Catastrophe

Reuters January 27, 2014

....Part of the problem is there is just not enough insurance to cover a really serious incident. There are only 30 or 40 companies willing to offer railway liability insurance, typically in discrete amounts of $5, $10, $20 or $50 million, which are then bundled together in liability stacks to provide the desired amount of cover for a railroad, according to the CTA.

The maximum coverage available to a major railroad is between $1 billion and $1.5 billion. In its 2012 annual filing with the Securities and Exchange Commission (SEC), Norfolk Southern disclosed that it self-insures for losses up to $50 million from a single incident, has insurance coverage up to $1 billion, but self-insures again for amounts over that limit....

3 Sectors Expected To Benefit From The Oil-By-Rail Surge

Benzinga    August 11, 2014   By Bruce Kennedy


....Insurance Providers

...The Wall Street Journal reports that most, big North American railroads usually carry about $1.5 billion in liability insurance – but notes that accidents like last year's deadly derailment and explosion in Lac-Mégantic, Quebec, can end up costing billions of dollars more in cost, especially if that accident happens in a populated area.

"Even if it happens outside of town, the massive damage to property and the environment — you're stymied when you have these kind of crude oil fires burning hot and big for days," Karen Darch, president of Barrington, Illinois, told the newspaper.

This could lead to an increase in the need for insurance.

“With experts predicting that oil spill derailments may increase in frequency over the next decade, the insurance industry must be prepared to address this new coverage threat,” says the law industry tracker web site Law360 earlier this year, “including the coverage issues and potential exposure which may arise from these disasters."....

see also:  Review of Third-Party Insurance Liability Coverage: Comments of the Association of  American Railroads

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