The Takeaways:
- For train derailments the first thing coming to many minds is “inland marine” insurance, which however may not be true.
- Commercial general liability insurance usually covers the most ground.
- The cause of the derailment, the ownership of the train and cargo, and the location of the incident, these may all enter the equation.
- If the train was carrying hazardous materials, there may also be environmental liability insurance in place to cover any cleanup and remediation costs, although this may not be relevant for trains carrying cars.
The Bad News
According to the AP news on February 4, 2023, “A freight train derailment in Ohio near the Pennsylvania state line left a mangled and charred mass of boxcars and flames Saturday as authorities launched a federal investigation and monitored air quality from the various hazardous chemicals in the train.”
“About 50 cars derailed in East Palestine at about 9 p.m. EST Friday as a train was carrying a variety of products from Madison, Illinois, to Conway, Pennsylvania, rail operator Norfolk Southern said Saturday. There was no immediate information about what caused the derailment. No injuries or damage to structures were reported.”
“20 of the more than 100 cars were classified as carrying hazardous materials — defined as cargo that could pose any kind of danger ‘including flammables, combustibles, or environmental risks.’”
Now, who is covering the big mess?
A 50-car train derailment can result in significant property damage, environmental harm, and liability for personal injury. The type of insurance that would cover this loss would depend on several factors, including the cause of the derailment, the ownership of the train and cargo, and the location of the incident.
Generally, liability coverage is provided by commercial general liability insurance and railway protective liability insurance. The railway company may also have a self-insured retention or deductible to cover smaller losses. If the train was carrying hazardous materials, there may also be environmental liability insurance in place to cover any cleanup and remediation costs.
In the event of damage to the train and cargo, the railway company and/or the owners of the cargo may have marine cargo insurance or inland marine insurance. If the train was being operated under a lease agreement, the lessee may have rolling stock insurance to cover the dam age to the train.
It’s important to note that insurance coverage for a train derailment can be complex and the actual coverage will depend on the specific policy language and any exclusions that may apply.
As a final note, the news did not tell us details about what caused the accident, who own the train and cargo. Knowing those will allow us to say more about the insurance.
Would inland marine insurance policy cover train derailment?
If you know even a bit of insurance, enough to get you pass the license exam, then you most likely will remember a type of insurance called “inland marine” insurance.
This is a funny name because the term “marine” historically referred to transportation of goods by water or even ocean, but now it also covers transportation of goods by land. The term “inland” distinguishes this type of insurance from “ocean marine” insurance which specifically covers transportation of goods by sea.
Inland marine insurance generally covers goods in transit and other movable property, such as bridges and tunnels, and provides protection against loss or damage from various causes such as theft, fire, and weather events being moved within a country.
In the case of a train derailment, an inland marine insurance policy may provide coverage for the damage to the goods or property being transported by the train. This would depend on the specific policy language, the cause of the derailment, and any exclusions or conditions that may apply.
It’s important to note that while inland marine insurance may provide coverage for goods and property being transported by train, it is not specifically designed to cover train derailments. For that, the railway company and/or the owners of the cargo may have railway protective liability insurance or commercial general liability insurance.
Additionally, if the train was carrying hazardous materials, there may also be environmental liability insurance in place to cover any cleanup and remediation costs.
What is environmental liability insurance?
Environmental liability insurance is a type of insurance coverage that protects individuals and businesses against financial loss and legal liability for damages or injury to the environment, including natural resources and wildlife, as a result of their operations or products. It covers costs associated with cleaning up contaminated sites, compensating affected parties, and defending against legal action related to environmental issues. Environmental liability insurance is often required by law for certain industries and businesses, and is also available to protect against the risks associated with environmental incidents caused by a third party.
