Canada Senate urges minimum insurance levels for railways

Thu Aug 22, 2013 1:56pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada should force railways to take out enough insurance to ensure they can cover damage caused by major incidents, the Canadian Senate said on Thursday in a report issued after last month's train disaster in Quebec, which killed 47 people.

The recommendation was one of 13 in a report by the Senate's energy, environment and natural resources committee on transporting oil and gas by pipeline, rail and tanker. The Senate is Canada's unelected upper house of Parliament.

A train operated by Montreal, Maine and Atlantic Railway (MMA) derailed and blew up in the Quebec town of Lac-Megantic on July 6, killing 47 and destroying the town's downtown.

Canada moved to shut down MMA last week, saying it did not have enough insurance to pay for the cleanup costs. But it has since said it will let the railway operate through early October.

The report said the federal transport ministry should "apply appropriate minimum liability coverage thresholds" to ensure rail companies can cover damage caused by a major incident.

MMA, which has filed for bankruptcy, said it has third party liability insurance of C$25 million ($23.8 million). It says the Lac-Megantic cleanup operation could cost more than C$200 million.

Under federal regulations in Canada, there is no set minimum or maximum amount of insurance coverage required for rail operators. Coverage is based on a risk assessment carried out by the insurance company and the railway.

"If they can't afford to actually have the correct amount of liability then they shouldn't probably be in the business," committee Chairman Richard Neufeld told a news conference.   Continued...

Firefighters spray wagons at the site of the train wreck in Lac-Megantic July 14, 2013. REUTERS/Mathieu Belanger