COLUMN-Insurers weigh risks of an oil-train catastrophe: Kemp

Mon Jan 27, 2014 9:58am EST
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By John Kemp

LONDON Jan 27 (Reuters) - In the event of a mass-casualty accident involving the derailment of a crude-carrying train in a densely populated urban area, who would be responsible for the compensation for deaths, injuries, damage to property and environmental clean up?

The short answer is the railroad operator. By law, the operator of any railroad in the United States or Canada cannot refuse to transport any cargo, no matter how hazardous, provided it conforms to applicable regulations.

Marine and air transportation carriers can limit their liability as a condition of carriage. But uniquely in the case of rail, the railroad operator cannot insist on an agreement sharing the risk with the shipper. The railroad operator is liable for all costs in the event of an accident up to an unlimited amount.

"Once the railway has received a car from a shipper, all of the risk and exposure associated with that car are then transferred to the railway even when the liability arising from the carriage of the dangerous goods is not caused by the negligence of the railway," Canadian National wrote in a letter to the Canadian Transportation Agency (CTA) on January 21.

"Should an incident occur within or near a densely populated area ... an incident ... has the potential to be truly catastrophic and result in billions of dollars in personal injury and property damage claims," the Association of American Railroads (AAR), which represents railroad operators, wrote in its own submission to the CTA.

"The damages potentially resulting from an exposure could risk the financial soundness and viability of the rail transportation network in North America," the AAR warned.