Commuter Rail
Many Factors Influence Liability and Indemnity Provisions, and Options Exist to Facilitate Negotiations Gao ID: GAO-09-282 February 24, 2009The National Railroad Passenger Corporation (Amtrak) and commuter rail agencies often share rights-of-way with each other and with freight railroads. Negotiating agreements that govern the shared use of infrastructure can be challenging, especially on issues such as liability and indemnity. As requested, this report discusses (1) the liability and indemnity provisions in agreements among passenger and freight railroads, and the resulting implications of these provisions; (2) federal and state court opinions and Surface Transportation Board (STB) decisions related to contractual liability and indemnity provisions of passenger and freight railroad agreements; (3) factors that influence the negotiations of liability and indemnity provisions among passenger and freight railroads; and (4) potential options for facilitating negotiations of liability and indemnity provisions. GAO obtained information from all existing and proposed commuter rail agencies, Amtrak, and major freight railroads through site visits or telephone interviews. GAO analyzed the liability and indemnity provisions in agreements between commuter rail agencies, Amtrak, and freight railroads. GAO also reviewed federal and state laws, STB decisions, and court cases related to liability and indemnity provisions. The Department of Transportation and STB had no comments on the report. Amtrak provided technical comments, which we incorporated where appropriate. GAO is not making recommendations in this report.
The liability and indemnity provisions in agreements between commuter rail agencies and freight railroads differ, but commuter rail agencies generally assume most of the financial risk for commuter operations. For example, most provisions assign liability to a particular entity regardless of fault--that is, commuter rail agencies could be responsible for paying for certain claims associated with accidents caused by a freight railroad. The provisions also vary on whether they exclude certain types of conduct, such as gross negligence, from the agreements. The provisions also require that commuter rail agencies carry varying levels of insurance. Because commuter rail agencies are publicly subsidized, some liability and indemnity provisions can expose taxpayers as well as commuter rail agencies to significant costs. Federal statutes, STB decisions, and federal court decisions are instructive in interpreting liability and indemnity provisions, but questions remain. In response to industry concerns, Congress enacted the Amtrak Reform and Accountability Act of 1997 (ARAA), which limited overall damages from passenger claims to $200 million and explicitly authorized passenger rail providers to enter into indemnification agreements. However, questions remain about the enforceability and appropriateness of indemnifying an entity for its own gross negligence and willful misconduct. A federal court of appeals, in a recent decision regarding Amtrak, overturned an earlier court opinion, holding that it was against public policy to indemnify for gross negligence and willful misconduct because this could undermine rail safety. STB, however, has held, when setting the terms of agreements between Amtrak and freight railroads, that it is against public policy to indemnify an agency against its own gross negligence or willful misconduct. Several factors influence the negotiations of liability and indemnity provisions, including the freight railroads' business perspective, the financial conditions at the time of negotiations, the level of awareness or concern about liability, and federal and state laws. For example, some freight railroad officials told us they are requesting more insurance coverage for new commuter rail projects than what they had required in some past agreements, in part, because ARAA's liability cap has not been tested in court and does not cover third-party claims. Statutes governing Amtrak also influence the negotiations between Amtrak and other railroads. Options for facilitating negotiations on liability and indemnity provisions include amending ARAA; exploring alternatives to traditional commercial insurance; providing commuter rail agencies with more leverage in negotiations; and separating passenger and freight traffic, either physically or by time of day. For example, officials from commuter rail agencies and freight railroads suggested amending ARAA to expand the scope of the liability cap to include third-party claims. Although each of these options could facilitate negotiations on liability and indemnity provisions, each option has advantages and disadvantages to consider.
GAO-09-282, Commuter Rail: Many Factors Influence Liability and Indemnity Provisions, and Options Exist to Facilitate Negotiations
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
February 2009:
Commuter Rail:
Many Factors Influence Liability and Indemnity Provisions, and Options
Exist to Facilitate Negotiations:
GAO-09-282:
GAO Highlights:
Highlights of GAO-09-282, a report to congressional requesters.
Why GAO Did This Study:
The National Railroad Passenger Corporation (Amtrak) and commuter rail
agencies often share rights-of-way with each other and with freight
railroads. Negotiating agreements that govern the shared use of
infrastructure can be challenging, especially on issues such as
liability and indemnity. As requested, this report discusses (1) the
liability and indemnity provisions in agreements among passenger and
freight railroads, and the resulting implications of these provisions;
(2) federal and state court opinions and Surface Transportation Board
(STB) decisions related to contractual liability and indemnity
provisions of passenger and freight railroad agreements; (3) factors
that influence the negotiations of liability and indemnity provisions
among passenger and freight railroads; and (4) potential options for
facilitating negotiations of liability and indemnity provisions.
GAO obtained information from all existing and proposed commuter rail
agencies, Amtrak, and major freight railroads through site visits or
telephone interviews. GAO analyzed the liability and indemnity
provisions in agreements between commuter rail agencies, Amtrak, and
freight railroads. GAO also reviewed federal and state laws, STB
decisions, and court cases related to liability and indemnity
provisions. The Department of Transportation and STB had no comments on
the report. Amtrak provided technical comments, which we incorporated
where appropriate. GAO is not making recommendations in this report.
What GAO Found:
The liability and indemnity provisions in agreements between commuter
rail agencies and freight railroads differ, but commuter rail agencies
generally assume most of the financial risk for commuter operations.
For example, most provisions assign liability to a particular entity
regardless of fault”that is, commuter rail agencies could be
responsible for paying for certain claims associated with accidents
caused by a freight railroad. The provisions also vary on whether they
exclude certain types of conduct, such as gross negligence, from the
agreements. The provisions also require that commuter rail agencies
carry varying levels of insurance. Because commuter rail agencies are
publicly subsidized, some liability and indemnity provisions can expose
taxpayers as well as commuter rail agencies to significant costs.
Federal statutes, STB decisions, and federal court decisions are
instructive in interpreting liability and indemnity provisions, but
questions remain. In response to industry concerns, Congress enacted
the Amtrak Reform and Accountability Act of 1997 (ARAA), which limited
overall damages from passenger claims to $200 million and explicitly
authorized passenger rail providers to enter into indemnification
agreements. However, questions remain about the enforceability and
appropriateness of indemnifying an entity for its own gross negligence
and willful misconduct. A federal court of appeals, in a recent
decision regarding Amtrak, overturned an earlier court opinion, holding
that it was against public policy to indemnify for gross negligence and
willful misconduct because this could undermine rail safety. STB,
however, has held, when setting the terms of agreements between Amtrak
and freight railroads, that it is against public policy to indemnify an
agency against its own gross negligence or willful misconduct.
Several factors influence the negotiations of liability and indemnity
provisions, including the freight railroads‘ business perspective, the
financial conditions at the time of negotiations, the level of
awareness or concern about liability, and federal and state laws. For
example, some freight railroad officials told us they are requesting
more insurance coverage for new commuter rail projects than what they
had required in some past agreements, in part, because ARAA‘s liability
cap has not been tested in court and does not cover third-party claims.
Statutes governing Amtrak also influence the negotiations between
Amtrak and other railroads.
Options for facilitating negotiations on liability and indemnity
provisions include amending ARAA; exploring alternatives to traditional
commercial insurance; providing commuter rail agencies with more
leverage in negotiations; and separating passenger and freight traffic,
either physically or by time of day. For example, officials from
commuter rail agencies and freight railroads suggested amending ARAA to
expand the scope of the liability cap to include third-party claims.
Although each of these options could facilitate negotiations on
liability and indemnity provisions, each option has advantages and
disadvantages to consider.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-282]. For more
information, contact Susan A. Fleming at (202) 512-4431 or
flemings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Liability and Indemnity Provisions in Agreements Differ, but Commuter
Rail Agencies Generally Assume Most of the Financial Risk for Their
Operations:
Federal Statutes, STB Decisions, and Federal Court Decisions Are
Instructive in Interpreting Liability and Indemnity Provisions, but
Questions Remain:
Various Factors, Such as Financial Conditions and Federal and State
Laws, Influence Negotiations of Liability and Indemnity Provisions:
Commuter Rail Agency, Amtrak, and Freight Railroad Officials Identified
Several Options for Facilitating Negotiations:
Concluding Observations:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Summary of Liability and Indemnity Provisions in Commuter
Rail Agency and Freight Railroad Agreements:
Appendix III: Summary of Liability and Indemnity Provisions in Commuter
Rail Agency and Amtrak Agreements:
Appendix IV: Summary of Key Case Law Addressing Liability and Indemnity
Provisions:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Types and Examples of State Laws That May Affect Liability and
Indemnity Negotiations:
Table 2: Names and Locations of Existing Commuter Rail Agencies,
Proposed Commuter Rail Agencies, Intercity Passenger Railroads, Class I
Freight Railroads, and State Departments of Transportation That We
Interviewed:
Figures:
Figure 1: Overview of Commuter Rail Agency Reliance on Amtrak for
Rights-of-Way and Services:
Figure 2: Overview of Commuter Rail Agency Reliance on Freight
Railroads for Rights-of-Way and Services:
Figure 3: Amtrak Network, by Track Ownership:
Abbreviations:
AAR: Association of American Railroads:
Amtrak: National Railroad Passenger Corporation:
APTA: American Public Transportation Association:
ARAA: Amtrak Reform and Accountability Act of 1997:
DOT: Department of Transportation:
FRA: Federal Railroad Administration:
FTA: Federal Transit Administration:
NEC: Northeast Corridor:
STB: Surface Transportation Board:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 24, 2009:
The Honorable James L. Oberstar:
Chairman:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable John W. Olver:
Chairman:
Subcommittee on Transportation, Housing and Urban Development, and
Related Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable Kathy Castor:
House of Representatives:
The Honorable James P. McGovern:
House of Representatives:
Freight rail and passenger rail services are important to the nation's
mobility and economy. Freight railroads play a critical role in the
movement of freight throughout the United States, carrying over 40
percent of domestic intercity freight (as measured by ton-miles),
including bulk commodities; intermodal freight (e.g., containers and
trailers); and hazardous materials. Demand for freight rail service has
increased over the last 25 years and is expected to continue growing in
the coming decades. For example, according to Department of
Transportation (DOT) estimates, freight rail tonnage will increase to
3.5 billion tons, or by about 88 percent, from 2002 to 2035.[Footnote
1] As the demand for freight rail services increases across the
country, demand for passenger rail services, including intercity
passenger rail and commuter rail, is also growing.[Footnote 2] For
example, the National Railroad Passenger Corporation (Amtrak), the
nation's intercity passenger rail provider, has reported 6 consecutive
years of growth in ridership, with almost 29 million passengers in
fiscal year 2008. Similarly, commuter rail is an increasingly popular
choice for communities as they look to different forms of public
transportation for relief from highway congestion. Twenty-one commuter
rail agencies now operate in communities across the country, and 5 more
commuter rail systems are expected to initiate service within the next
5 years.
Both Amtrak and commuter rail agencies often share rights-of-way with
each other and with freight railroads.[Footnote 3] Because Class I
freight railroads own the majority of existing railroad rights-of-way
in the United States, Amtrak and commuter rail agencies must often
negotiate with freight railroads to purchase, lease, or pay to access
their rights-of-way.[Footnote 4] Commuter rail agencies generally must
also negotiate with Amtrak to use Amtrak-owned rights-of-way. As we
have previously reported, negotiating agreements that govern the shared
use of rights-of-way can be challenging, especially on issues such as
liability and indemnity.[Footnote 5] Although the passenger rail and
the freight rail industries maintain good safety records, mixing
passenger and freight trains on the same rights-of-way entails certain
risks, as the deadly September 2008 crash involving a Metrolink
commuter rail train and a freight train in Chatsworth, California,
illustrates. Consequently, as a condition for using their rights-of-
way, freight railroads seek certain liability protections from the
costs and risks associated with potential passenger rail accidents. For
example, a freight railroad might require that the commuter rail agency
contractually indemnify the railroad from any liability in the event of
a passenger accident and procure a certain level of insurance coverage
to guarantee its ability to pay the entire allocation of damages.
Amtrak also sometimes requires certain liability protections when
hosting commuter rail operations. Accepting such liability and
indemnity terms can raise a number of issues for the commuter rail
agencies. As a result, contract negotiations between commuter rail
agencies and freight railroads can stall or fail.
Three federal agencies--the Federal Railroad Administration (FRA), the
Surface Transportation Board (STB), and the Federal Transit
Administration (FTA)--are responsible for different aspects of
passenger rail and freight rail services in the United States. In
particular, FRA administers and enforces the federal laws and related
regulations that are designed to promote safety on railroads, such as
track maintenance, inspection standards, equipment standards, and
operating practices.[Footnote 6] Freight railroads, Amtrak, and
commuter rail agencies are subject to FRA regulations. STB is
responsible for the economic regulation of interstate surface
transportation, primarily freight railroads, within the United States.
STB has jurisdiction to resolve compensation and access issues between
freight railroads and Amtrak in the event of an impasse in
negotiations. In addition, the Passenger Rail Investment and
Improvement Act of 2008 authorizes STB to provide nonbinding mediation
between public transportation authorities, including commuter rail
agencies, and host carriers in the event of an impasse in negotiations
regarding trackage use.[Footnote 7] Unlike FRA and STB, FTA is not
principally a regulatory agency. Rather, FTA is the primary source of
federal financing for locally planned, implemented, and operated
transit capital investments. As a form of public transit, commuter rail
projects are eligible for FTA funding.
You asked us to undertake a comprehensive study of the liability and
indemnity provisions governing passenger and freight rail services.
This report addresses the following questions:
* What are the characteristics of liability and indemnity provisions in
agreements among passenger and freight railroads, and what are the
resulting implications of those provisions?
* How have federal and state courts and STB interpreted the contractual
liability and indemnity provisions of passenger and freight railroad
agreements?
* What factors influence the negotiations of liability and indemnity
provisions among passenger and freight railroads?
* What are potential options for facilitating negotiations of liability
and indemnity provisions among passenger and freight railroads?
To address these questions, we obtained information from all existing
and proposed commuter rail agencies and Class I freight railroads
through site visits or telephone interviews.[Footnote 8] Specifically,
we conducted semistructured interviews with officials from the 21
existing commuter rail agencies, 5 proposed commuter rail agencies, and
the 7 Class I freight railroads. We also visited 3 existing commuter
rail agencies, 2 proposed commuter rail agencies, and 2 Class I freight
railroads. We used a variety of criteria to select these entities for
site visits, including the number of contracts each freight railroad
maintains, data on the ridership levels of existing commuter rail
agencies, and whether proposed commuter rail agencies plan to purchase
or lease freight-owned rights-of-way. We also obtained and analyzed the
liability and indemnity provisions in agreements between commuter rail
agencies, Amtrak, and freight railroads.[Footnote 9] In some cases, a
commuter rail agency could have more than one agreement with Amtrak or
a freight railroad or could have agreements with multiple railroads if
its service extends onto tracks owned by more than one railroad. We
also interviewed Amtrak, FTA, and FRA officials; STB staff; as well as
selected state departments of transportation officials, representatives
from a variety of industry associations, and a law firm representative
who has served as a consultant to commuter rail agencies. Additionally,
we reviewed federal and state laws, STB decisions, and court cases
related to liability and indemnity provisions.[Footnote 10] We
conducted our work between July 2008 and February 2009. See appendix I
for detailed information about our scope and methodology.
Results in Brief:
The liability and indemnity provisions in agreements between commuter
rail agencies and freight railroads differ, but commuter rail agencies
generally assume most of the financial risk for commuter operations.
For example, most liability and indemnity provisions assign liability
to a particular entity regardless of fault--that is, a commuter rail
agency could be responsible for paying for certain claims associated
with an accident caused by a freight railroad. The reverse is also
true--a freight railroad could be responsible for certain claims
associated with an accident caused by a commuter rail agency. For
example, a freight railroad could indemnify a commuter rail agency by
assuming liability for freight rail equipment and track maintenance,
even if the commuter rail agency is solely responsible for causing an
accident. In contrast, a fault-based agreement assigns responsibility
for an incident to the party that caused the incident. Provisions in
about one-third of the no-fault agreements exclude certain types of
conduct--such as gross negligence, recklessness, or willful misconduct-
-from the agreement, while in some of the remaining agreements,
provisions specifically allow for such conduct in the no-fault
arrangement. In these instances, the commuter rail agency is
responsible for certain claims from an accident that is caused, for
example, by gross negligence or recklessness on the part of the freight
railroad. In addition, the liability and indemnity provisions require
that commuter rail agencies carry certain levels of insurance to
guarantee their ability to pay for the entire allocation of damages.
These levels of insurance range from $75 million to $500 million.
Because commuter rail agencies are publicly subsidized, some liability
and indemnity provisions can expose taxpayers as well as commuter rail
agencies to significant costs. For example, officials from some
proposed commuter rail agencies told us they anticipate spending a
substantial portion of their operating budgets on insurance, with
officials from one proposed commuter rail agency anticipating spending
20 percent of the agency's operating budget on insurance premiums.
Federal statutes, STB decisions, and federal court decisions are
instructive in interpreting liability and indemnity provisions, but
questions remain. In response to industry concerns, Congress enacted
the Amtrak Reform and Accountability Act of 1997 (ARAA), which limited
overall damages from passenger claims to $200 million and explicitly
authorized passenger rail providers to enter into indemnification
agreements.[Footnote 11] However, the enforceability and
appropriateness of indemnifying an entity for its own gross negligence
and willful misconduct remain an issue. In addressing an accident
involving Amtrak, a federal court of appeals ruled in 2008 that a
provision in ARAA that authorizes a provider of passenger rail service
to enter into contracts that allocate financial responsibility for
claims preempted (superseded) a state law that prohibited
indemnification in cases of negligence.[Footnote 12] STB, however,
based on its statutory authority to prescribe contract terms if Amtrak
and freight railroads cannot agree on a contract, has held, when
setting the terms of agreements between Amtrak and freight railroads,
that it would be contrary to public policy (e.g., good government) to
indemnify an agency against its own gross negligence or willful
misconduct. Specifically, STB has held that it would be contrary to
provisions in the federal government's rail transportation policy,
which require STB, among other things, to promote a safe and efficient
transportation system and operate facilities and equipment without
detriment to public health and safety. In addition, some officials have
questioned whether ARAA preempts state sovereign immunity provisions,
which generally prevent a state from being sued, except to the extent
the state allows.[Footnote 13] The 2008 federal court of appeals
opinion is very recent, and it will take time to see how it is
interpreted and applied to indemnity provisions in agreements between
commuter rail agencies and freight railroads.
Several factors influence negotiations of liability and indemnity
provisions among passenger and freight railroads, according to
officials from commuter rail agencies, Amtrak, and freight railroads.
First, the freight railroads' business perspective influences the
negotiation's starting position between commuter rail agencies and
freight railroads. Freight railroads are not required to share their
infrastructure with commuter rail agencies, and freight railroad
officials said they are unwilling to assume any additional risk from
passenger rail service, noting that the additional risk would not exist
without (but for) the commuter rail service. In addition, other
factors--including freight railroads' financial health, the level of
awareness or concern about liability, and views on sufficient amounts
of insurance--have influenced negotiations. For example, some freight
railroad officials told us that they are requesting more insurance
coverage for new commuter rail projects than what they had required in
some past agreements. However, officials from two proposed commuter
rail agencies told us that it could be challenging and costly to obtain
insurance coverage for the amount of insurance the freight railroads
are requiring them to obtain. Additionally, a variety of state laws can
influence the liability and indemnity provisions to which commuter rail
agencies can agree. For example, some state laws prohibit a public
agency, such as a commuter rail agency, from agreeing to indemnify a
private party. Statutes governing Amtrak also influence the
negotiations of liability and indemnity provisions between Amtrak and
freight railroads as well as between Amtrak and commuter rail agencies.
Specifically, Amtrak officials noted that because Amtrak is prohibited
from cross-subsidizing commuter rail agencies and freight railroads on
the Northeast Corridor (NEC), Amtrak cannot assume additional liability
for these parties in its agreements for shared use of infrastructure.
Commuter rail agency, Amtrak, and freight railroad officials identified
several options for facilitating negotiations of liability and
indemnity provisions, including changing existing legislation,
exploring alternatives to traditional commercial insurance, providing
commuter rail agencies with more leverage in negotiations, and
separating passenger and freight traffic. For example, although ARAA
addressed many liability concerns, some commuter rail agency and
freight railroad officials have questioned whether ARAA's liability cap
applies to commuter rail agencies and have expressed concern that ARAA
does not cover third-party claims. As a result, commuter rail agency
and freight railroad officials suggested (1) amending ARAA to clarify
that the $200 million liability cap applies to commuter rail agencies
and (2) expanding the scope of the liability cap to include third-party
claims as a way to reduce the cost of insurance. In addition, commuter
rail agency, Amtrak, and freight railroad officials identified
alternatives to commercial insurance options, such as pooled insurance
programs, that could increase the availability and affordability of
insurance coverage as well as provide a mechanism to ensure that claims
are paid to those involved in a high-cost incident. Some commuter rail
agency officials also identified options that could improve their
leverage in negotiations with freight railroads, such as providing
commuter rail agencies with statutory access to freight-owned
infrastructure. Finally, a few commuter rail agency and freight
railroad officials identified separating passenger and freight
infrastructure as an ideal, but costly, option for eliminating exposure
to liability risk.
Although we make no recommendations to DOT, STB, or Amtrak in this
report, we provided these entities with a draft copy for review and
comment. Amtrak provided technical comments, which we incorporated
where appropriate. DOT and STB had no comments on the draft report.
Background:
Most commuter rail agencies use rights-of-way that are owned by Amtrak
or freight railroads for at least some portion of their operations.
Specifically, 9 commuter rail agencies operate over Amtrak-owned rights-
of-way. Twelve commuter rail agencies operate over rights-of-way owned
by freight railroads. In addition, most commuter rail agencies rely on
Amtrak and freight railroads for some level and type of service,
including the operation of commuter trains; maintenance of equipment
(i.e., locomotives and train cars); maintenance of way (i.e., track and
related infrastructure); and train dispatching. Specifically, 13
commuter rail agencies rely on Amtrak for some type of service.
Fourteen commuter rail agencies rely on freight railroads for some type
of service. (See figures 1 and 2 for an overview of these
relationships.)
Figure 1: Overview of Commuter Rail Agency Reliance on Amtrak for
Rights-of-Way and Services:
[Refer to PDF for image: map and illustration]
SLE (Connecticut Department of Transportation Shore Line East):
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Metro-North:
No dependencies.
LIRR (MTA Long Island Rail Road):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
NJT (New Jersey Transit Corporation):
Services:
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
SEPTA (Southeastern Pennsylvania Transportation Authority):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
MARC:
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
VRE (Virginia Railway Express):
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Tri-Rail:
Services:
* Dispatching.
Music City Star:
No dependencies.
TRE (Trinity Railway Express):
No dependencies.
Rail Runner:
No dependencies.
Front Runner:
No dependencies.
Coaster:
No dependencies.
Metrolink:
No dependencies.
Caltrain:
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching.
ACE (Altamont Commuter Express):
Services:
* Maintenance of way;
* Dispatching.
Sounder:
Services:
* Maintenance of equipment.
Metra:
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
NICTA (Northern Indiana Commuter Transportation District):
No dependencies.
PennDOT:
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
MBTA (Massachusetts Bay Transportation Authority):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Sources: GAO; MapArt (map).
Note: This figure does not include Amtrak-owned or -operated stations
and platforms or other services, such as traction power, ticketing, or
security services provided by Amtrak to commuter rail agencies. For
information about those relationships, see GAO, Commuter Rail: Commuter
Rail Issues Should Be Considered in Debate over Amtrak, [hyperlink,
http://www.gao.gov/products/GAO-06-470] (Washington, D.C.: Apr. 21,
2006). Also, the grayed-out icons in this figure indicate that these
services or infrastructure are not provided to the commuter rail agency
by Amtrak.
[End of figure]
Figure 2: Overview of Commuter Rail Agency Reliance on Freight
Railroads for Rights-of-Way and Services:
[Refer to PDF for image: map and illustration]
SLE (Connecticut Department of Transportation Shore Line East):
No dependencies.
Metro-North:
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
LIRR (MTA Long Island Rail Road):
No dependencies.
NJT (New Jersey Transit Corporation):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
SEPTA (Southeastern Pennsylvania Transportation Authority):
Services:
* Maintenance of way;
Infrastructure:
* Amtrak-owned rights-of-way.
MARC:
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
VRE (Virginia Railway Express):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Tri-Rail:
Services:
* Maintenance of way;
* Dispatching.
Music City Star:
No dependencies.
TRE (Trinity Railway Express):
No dependencies.
Rail Runner:
Services:
* Dispatching.
Front Runner:
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Coaster:
No dependencies.
Metrolink:
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Caltrain:
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
ACE (Altamont Commuter Express):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Sounder:
Services:
* Train operations;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Metra:
Services:
* Train operations;
* Maintenance of equipment;
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
NICTA (Northern Indiana Commuter Transportation District):
No dependencies.
PennDOT:
No dependencies.
MBTA (Massachusetts Bay Transportation Authority):
Services:
* Maintenance of way;
* Dispatching;
Infrastructure:
* Amtrak-owned rights-of-way.
Sources: GAO; MapArt (map).
Note: The grayed-out icons in this figure indicate that these services
or infrastructure are not provided to the commuter rail agency by a
freight railroad.
[End of figure]
Historically, America's rail corridors have been used for both freight
and passenger purposes. At one time, private railroads operated both
passenger and freight services. In general, freight services were more
profitable, but federal law required the private railroads to maintain
their passenger service. However, by the 1970s, U.S. freight railroads
were in serious financial decline. Congress responded by passing the
Rail Passenger Service Act of 1970, which created Amtrak to provide
intercity passenger rail service and relieve the existing railroads of
the requirement to provide unprofitable passenger service.[Footnote 14]
In return, Amtrak gained the statutory right to operate over tracks
owned by freight railroads.[Footnote 15] (See fig. 3.) Specifically,
federal law requires freight railroads to give Amtrak trains priority
access and to charge Amtrak an incremental cost--rather than the fully
allocated cost--associated with the use of their tracks.[Footnote 16]
Freight railroads also provide dispatching and maintenance-of-way
services for Amtrak trains operating on their tracks.
Figure 3: Amtrak Network, by Track Ownership:
[Refer to PDF for image: map of the United States]
The map illustrates the location of the Amtrak Network throughout the
country, and indicates that the track ownership is either:
Amtrak-owned; or:
Freight- or commuter-owned.
Source: Amtrak.
[End of figure]
Unlike Amtrak, commuter rail agencies do not possess statutory rights
of access to freight railroads' tracks and generally do not possess
statutory rights of access to Amtrak's tracks. Since commuter rail
agencies typically operate on infrastructure owned by another entity,
commuter rail agencies must negotiate with the owner to purchase,
lease, or pay to access the owner's rights-of-way. If the two parties
reach agreement, there are often multiple documents detailing this
agreement, including the purchase, lease, or access agreement and the
shared-use agreement.[Footnote 17] These agreements can also vary by
the parties involved, the location, and the structure of the agreement.
For example, one commuter rail agency may have separate contracts with
Amtrak for services, infrastructure access, and capital investment,
whereas another commuter rail agency might have one contract with
Amtrak that bundles several services and access fees together in a
fixed price. Similarly, one commuter rail agency may have an agreement
with a freight railroad for various bundled services, while another
commuter rail agency may have contracts with more than one freight
railroad because its service extends onto tracks shared with more than
one freight railroad.[Footnote 18] The contents of these agreements
also may vary, but they are likely to address a number of important
issues, including liability and indemnity provisions that allocate
responsibility for risk in the event of an accident. However, these
provisions cannot be considered in isolation because they are
negotiated in the context of broader negotiations for the shared use of
infrastructure that address train dispatching, maintenance of rights-
of-way, capital improvements, and access fees. Hence, the agreements
govern how the two parties operate on the rights-of-way they share. The
period of time covered by the agreements and the amount of time
required to negotiate the agreements also vary. For example, some
commuter rail agencies have reached agreement with Amtrak or freight
railroads within months, while other commuter rail agencies have
negotiated with Amtrak or freight railroads over a period of years.
Although Amtrak has statutory access rights to freight-owned rights-of-
way, Amtrak must still negotiate the terms and conditions of this
access.
In 1997, Congress enacted ARAA in response to concerns from freight
railroads, commuter rail agencies, and Amtrak about the liability issue
and the difficulties the parties were having in negotiating the shared
use of freight railroads' rights-of-way, and a 1987 district court
decision that addressed a catastrophic accident between an Amtrak train
and a Conrail train. Section 161 of ARAA limits the overall damages
from passenger claims from a single rail accident to $200 million and
also authorizes the providers of passenger rail transportation to enter
into contracts allocating financial responsibility for claims.[Footnote
19] In enacting this legislation, Congress intended to facilitate
agreements on the shared use of the freight railroads' rights-of-way.
Liability and Indemnity Provisions in Agreements Differ, but Commuter
Rail Agencies Generally Assume Most of the Financial Risk for Their
Operations:
Liability and indemnity provisions in agreements between commuter rail
agencies and freight railroads differ, but commuter rail agencies
generally assume most of the financial risk for commuter operations.
For example, most liability and indemnity provisions assign liability
to an entity regardless of fault--that is, a commuter rail agency could
be responsible for paying for certain claims associated with an
accident caused by a freight railroad. The reverse is also true--
freight railroads are sometimes responsible for certain claims
associated with accidents caused by commuter rail agencies. These types
of agreements are referred to as no-fault agreements. In addition,
about one-third of these no-fault agreements exclude certain types of
conduct, such as gross negligence, recklessness, or willful misconduct,
from the agreements. Some of the remaining no-fault agreements
specifically allow for such conduct, that is, the commuter rail agency
is still responsible for certain claims caused by, for example, the
gross negligence or recklessness of a freight railroad. The liability
and indemnity provisions also require that commuter rail agencies carry
certain levels of insurance to guarantee their ability to pay for the
entire allocation of damages.
Liability and Indemnity Provisions of Passenger Rail Agreements Differ
in their Allocation of Financial Responsibility:
Although liability and indemnity provisions in agreements between
commuter rail agencies and freight railroads differ, commuter rail
agencies generally assume most of the financial risk for commuter
operations.[Footnote 20] With two exceptions, liability and indemnity
agreements between commuter rail agencies and freight railroads are
primarily no-fault arrangements--that is, responsibility for specific
liability in any incident is assigned to a particular entity,
regardless of fault. For example, in a no-fault agreement, a commuter
rail agency might indemnify a freight railroad by assuming liability
for commuter equipment damage and passenger injury in a derailment,
regardless of whether the freight railroad's maintenance of the tracks
could be blamed for a given incident. Similarly, a freight railroad
could indemnify a commuter rail agency by assuming liability for
freight rail equipment and track maintenance, even if the commuter rail
agency was solely responsible for causing an accident. In contrast, a
fault-based agreement assigns responsibility for an incident to the
party that caused the incident. Of the 33 commuter rail agency and
freight railroad agreements we reviewed, 21 were no fault, 10 contained
a combination of no-fault and fault provisions, and 2 were premised on
a fault-based allocation of risk.[Footnote 21]
Although most of the agreements between commuter rail agencies and
freight railroads are no-fault arrangements, the liability and
indemnity provisions vary regarding the type of conduct allowed. For
example, 9 of the 31 agreements with all or some no-fault provisions
explicitly exclude certain types of conduct from the no-fault
arrangement.[Footnote 22] Excluded conduct is any type of conduct
specifically identified in the agreement as conduct beyond simple
negligence and can be defined in a number of ways, including willful
and wanton misconduct, gross negligence, or conduct that might result
in punitive damages.[Footnote 23] For example, 1 agreement specifically
excludes conduct that is taken with conscious disregard for or
indifference to the property or safety or welfare of others. Another 10
of the 31 agreements with all or some no-fault provisions, in contrast,
explicitly include conduct that exceeds simple negligence as covered
under the no-fault provisions.[Footnote 24] For example, 1 agreement
explicitly states that the indemnification agreement includes coverage
for punitive damages, or damages that are caused by the reckless or
willful acts of a party, while another explicitly states that the
parties agree to indemnify each other even if a train engineer in an
incident is using alcohol or drugs. Finally, the remaining 12
agreements are silent on excluded conduct, and discuss indemnification
of negligence without explicit regard to its degree. Often, in these
cases, the degree of negligence will depend on state law, and a
determination concerning the enforceability of the provision may
require litigation.[Footnote 25]
Freight railroads often set a requirement for a certain level of
indemnification in the agreements and corresponding insurance
requirements to ensure that the commuter rail agency will have the
resources to pay for claims. The required level of insurance in
existing commuter rail agency and freight railroad agreements ranges
from $75 million to $500 million. Agreements vary on the exact
requirements for insurance, such as what level of liability can be
absorbed by the commuter rail agency--referred to as a self-insured
retention--before the railroad must use commercial insurance. For
example, some agreements that we analyzed set the level at which the
commuter rail agency must purchase insurance for risk at above $5
million, while other agreements set the level at $1 million. Twelve of
the 33 agreements between commuter rail agencies and freight railroads
are silent on the exact level of insurance required. Appendix II
contains a table summarizing the apportionment of liability in commuter
and freight rail agreements.
Similar to the agreements with freight railroads, commuter rail
agencies' agreements with Amtrak also are generally no fault.
Specifically, 14 of the 17 agreements we reviewed between commuter rail
agencies and Amtrak allocate liability on a no-fault basis, while 2
contain a combination of fault-based and no-fault provisions. The
remaining agreement is fault-based. Regarding excluded conduct, 8 of
the 17 agreements explicitly exclude certain conduct; the remaining
agreements are silent concerning whether any conduct is excluded.
Amtrak also sometimes requires certain levels of indemnification and
corresponding levels of insurance to ensure that the commuter rail
agency will have the resources to pay for claims.[Footnote 26] Appendix
III contains a table summarizing the apportionment of liability in
commuter rail agency and Amtrak agreements.
Amtrak's agreements with Class I freight railroads are also generally
no-fault arrangements.[Footnote 27] In addition, these agreements are
generally silent on excluded conduct. Furthermore, all of Amtrak's
agreements with freight railroads are silent on the amount of insurance
Amtrak must carry to use freight-owned rights-of-way. ARAA requires
Amtrak to maintain a minimum coverage for claims through insurance or
self-insurance of least $200 million per accident.[Footnote 28]
However, Amtrak officials stated that Amtrak carries more insurance
than is required by this statute.
Freight railroad, commuter rail agency, and Amtrak officials told us
that no-fault agreements are the easiest way to settle liability claims
because they avoid the need for additional litigation to try to
ascertain blame. Officials in Florida, for example, said a fault-based
agreement would be much more expensive than a no-fault agreement
because of the costs of investigating accidents. These officials said
that a no-fault agreement was the best way to compensate litigants
quickly. Furthermore, officials at a freight railroad said that an
accident can have multiple causes and an investigation may not settle
which party was at fault; therefore, a fault-based approach can result
in disputes between commuter rail agencies and freight railroads over
which party is responsible for paying for claims. These officials also
said that contrary to some views, passenger and freight railroads have
strong incentives to operate safely, even if they may not be liable for
some accidents that they cause. Finally, Amtrak and freight railroad
officials noted that no-fault agreements are fairly standard across the
industry, and that these agreements are similar to agreements freight
railroads use for access to each other's infrastructure.
Liability and Indemnity Provisions Have Cost Implications for Commuter
Rail Agencies and Taxpayers:
The liability and indemnity provisions in commuter rail agency
agreements with freight railroads have cost implications because
premiums vary with the levels of insurance required. Eleven commuter
rail agencies reported paying from $700,000 to $5 million in insurance
premiums, representing less than 1 percent and up to about 15 percent
of commuter rail agencies' operating budgets.[Footnote 29] Newer and
smaller (as defined by ridership) commuter rail agencies typically
spend more of their operating budgets on insurance premiums, in part
because they do not have an established claims record, which factors
into the premiums that a commuter rail agency must pay to cover its
potential risk. Officials at proposed commuter rail agencies told us
that they anticipated spending a substantial portion of their operating
budgets on insurance. For example, officials at a proposed commuter
rail agency anticipated spending more than 20 percent of their
operating budget on insurance premiums. However, these premiums could
decrease once the commuter rail agency has an established claims
record, particularly if the commuter rail agency has no accidents over
several years of service. Because commuter rail agencies are publicly
subsidized, the premium costs for commuter rail agencies also represent
a cost to taxpayers. Furthermore, the potential for high premium costs
may impede or stop the development of new or expanded commuter rail
services, according to commuter rail agency officials.
According to commuter rail agencies officials, certain liability and
indemnity provisions expose commuter rail agencies to significant risks
and, therefore, to potential costs. Although no-fault liability
agreements are the norm, most assign more liability to commuter rail
agencies than to freight railroads. Specifically, of the 31 agreements
with all or some no-fault provisions we analyzed, 13 assign all
liability for passengers to the commuter rail agencies and 7 assign all
liability for passengers, as well as all liability for freight
equipment, employees, and third parties, to the commuter rail agencies.
In the remaining 11 agreements, freight railroads could be responsible
for assuming some liability for passenger claims resulting from a
collision.
When accidents do occur, commuter rail agencies use both their self-
insured retention and commercial insurance to pay for claims. Similar
to the deductible on individual insurance policies, the self-insured
retention is the amount specified in the liability insurance policy
that the commuter rail agency must pay before the insurance company
pays for claims. For example, a commuter rail agency with a $2 million
self-insured retention must pay for all claims that are $2 million or
less, while claims above $2 million would be covered by the insurance
company. In most cases, the self-insured retention is per incident,
that is, a commuter rail agency would pay each time a claim fell within
the self-insured retention, which can be costly if there are many such
claims in a given period. However, in most cases, these types of claims
are fairly predictable for commuter rail agencies that have an
established loss record, allowing the agencies to better plan and
budget for costs they are likely to incur. Although most commuter rail
agencies have commercial insurance policies to cover claims from a
potentially catastrophic incident, most commuter rail agencies stated
that they had never exceeded their self-insured retention and, thus,
had never filed a claim with an insurer.[Footnote 30]
Federal Statutes, STB Decisions, and Federal Court Decisions Are
Instructive in Interpreting Liability and Indemnity Provisions, but
Questions Remain:
ARAA capped liability for damages and addressed concerns about the
enforceability of contractually negotiated indemnity provisions.
[Footnote 31] Some railroad officials question, however, whether the
act applies to commuter rail agencies and the types of contractually
negotiated conduct that are enforceable. As a result, some freight
railroads are hesitant to rely on the $200 million cap on passenger
claims when negotiating insurance requirements with commuter rail
agencies.
ARAA Addresses Many Liability Concerns, but Railroad Officials Question
the Applicability of the Statute's Liability Cap:
ARAA introduced tort[Footnote 32] reform measures that limit the
overall damages for passenger claims to $200 million, including
punitive damages to the extent permitted by state law, against all
defendants arising from a single accident or incident. ARAA also
authorizes providers of passenger rail transportation to enter into
contracts allocating financial responsibility for claims. Congress
introduced these measures in 1997 in response to concerns from freight
railroads, commuter rail agencies, and Amtrak about the difficulties
the parties were having in negotiating the use of freight railroads'
rights-of-way by Amtrak and the commuter rail agencies. These concerns
were heightened after a 1988 district court decision put in doubt the
enforceability of contractually negotiated indemnity
provisions.[Footnote 33] That decision involved a catastrophic
collision in 1987 of an Amtrak train and a Conrail train in Chase,
Maryland, that resulted in 16 deaths and over 350 injuries. A Conrail
engineer admitted, among other things, that the Conrail crew had
recently used marijuana, was speeding, and was operating a train in
which an audible warning device had been intentionally disabled. The
engineer pleaded guilty to manslaughter and was given the maximum
penalty. The plaintiffs in many of the cases brought against Conrail
and Amtrak alleged that Conrail or Amtrak, or both, had committed
reckless, wanton, willful, or grossly negligent acts and asserted
entitlement to compensatory as well as punitive damages. Amtrak brought
an action before the trial court seeking a declaration of the rights
and obligations of the parties concerning the indemnification
agreement, which required that Amtrak defend and indemnify Conrail for
any claims and damages arising out of the Chase accident. The trial
court held that Amtrak was not required to indemnify Conrail where
there were allegations and a showing of gross negligence, recklessness,
willful and wanton misconduct, intentional misconduct, or conduct so
serious that it warranted the imposition of punitive damages. The court
found that public policy would not allow the enforcement of
indemnification provisions that appear to cover such extreme
misconduct, because serious and significant disincentives to railroad
safety would ensue.
We have previously concluded that the $200 million cap on passenger
claims arising from a single rail accident applies to all commuter rail
operators[Footnote 34] as well as to Amtrak, based on the plain
language of the statute.[Footnote 35] The act creates a $200 million
cap for passenger injuries arising "in connection with any rail
passenger transportation operations over or rail passenger
transportation use of right-of-way or facilities owned, leased, or
maintained by any high-speed railroad authority or operator, any
commuter authority or operator, any rail carrier, or any State."
[Footnote 36] Additionally, the act defines a claim, in part, as "a
claim made against Amtrak, any high-speed railroad authority or
operator, any commuter authority or operator, any rail carrier, or any
State."[Footnote 37] We also concluded that the cap does not apply to
third-party claims--that is, claims by parties other than passengers.
[Footnote 38] Some commuter rail agencies, however, have expressed
uncertainty regarding whether the cap applies to them. In addition,
some freight railroad officials have stated that although they believe
the cap does apply to commuter rail agencies, they will not rely on the
cap in determining the level of insurance that a commuter rail agency
must carry until the cap's applicability to commuter rail agencies has
been tested in a court of law. No courts have decided whether the cap
applies to commuter rail agencies.
Questions Remain Regarding Indemnification for Gross Negligence and
Willful Misconduct:
In addition to establishing the $200 million cap on liability, ARAA
states that "a provider of rail passenger transportation may enter into
contracts that allocate financial responsibility for claims."[Footnote
39] As we noted in our 2004 report, this language forms the statutory
underpinning for the indemnification agreements that the passenger and
freight railroads use to allocate liability between the two parties.
[Footnote 40] ARAA's allocation of financial responsibility for claims
was not addressed in a court of law until July 2008, when a federal
court interpreted the language in the act that authorizes providers of
passenger rail transportation to allocate financial responsibility for
claims. The opportunity for interpretation arose when the United States
Court of Appeals for the Second Circuit addressed two consolidated
claims resulting from an accident involving Amtrak.[Footnote 41] In
2008, the Second Circuit held in the O&G Industries v. National
Railroad Passenger Corp. opinion that 49 U.S.C. § 28103(b), the
provision in ARAA that authorizes a provider of rail passenger
transportation service to enter into contracts that allocate financial
responsibility for claims, preempted a Connecticut statute that
prohibited agreements that indemnify a party for its own negligence.
[Footnote 42] The court stated, in addition, that the provision
superseded the opinion concerning the 1987 Chase, Maryland, accident in
which the district court found that it was a contravention of public
policy to indemnify for gross negligence, recklessness, or willful
misconduct. Some commuter rail agencies have questioned whether this
2008 opinion would apply to commuter rail agencies. In addition, some
officials have questioned whether ARAA would preempt state sovereign
immunity provisions.[Footnote 43] However, a federal district court
held in a January 2009 memorandum of decision that 49 U.S.C. § 28103(b)
preempted Pennsylvania's sovereign immunity statute.[Footnote 44] The
2008 federal court of appeals opinion is very recent, and it will take
time to see how the opinion is interpreted and applied to indemnity
provisions in agreements between commuter rail agencies and freight
railroads.
While the Court of Appeals stated in the O&G Industries opinion that it
was the intent of Congress to permit indemnity agreements regarding any
claims against Amtrak, STB, when setting the terms of agreements
between Amtrak and freight railroads, has held that it is against
public policy to indemnify an entity against its own gross negligence
or willful misconduct.[Footnote 45] For example, in a 2006 decision,
STB held that an indemnity provision could not be used to indemnify a
freight railroad against its own gross negligence or willful
misconduct, since such an interpretation would "contravene well-
established precedent that disfavors such indemnification provisions"
and would be contrary to provisions in the federal government's rail
transportation policy[Footnote 46] that requires STB to "promote a safe
and efficient transportation system" and "operate facilities and
equipment without detriment to the public health and safety."[Footnote
47] STB staff told us that they could not speak for the board, but
because the O&G Industries opinion involved preemption of a state
statute, they were not sure that the opinion would have any effect on
future STB decisions.
Various Factors, Such as Financial Conditions and Federal and State
Laws, Influence Negotiations of Liability and Indemnity Provisions:
Commuter rail agency, Amtrak, and freight railroad officials identified
several factors that influence negotiations of liability and indemnity
provisions. These factors are the freight railroads' business
perspective, the financial conditions at the time of negotiations,
increased awareness or concern about liability and insurance
requirements, and federal and state laws. The influence of each of
these factors on liability and indemnity provisions varies. For
example, while state laws may be an important factor in influencing
liability and indemnity provisions between a commuter rail agency and a
freight railroad in one agreement, they may have little to no influence
on the negotiations of liability and indemnity provisions in another
agreement. Similarly, the effects of any of these factors also vary,
and each of them has the potential to delay or stall negotiations.
However, other factors that might be considered influential, such as
commuter rail ownership of infrastructure, were generally reported as
having little effect on negotiations of liability and indemnity
provisions.
Several Factors Influence Negotiations of Liability and Indemnity
Provisions:
* Freight railroads' business perspective. In negotiations between
commuter rail agencies and freight railroads, the freight railroads'
business perspective influences their starting position for
negotiations of liability and indemnity provisions. Commuter rail
agencies do not have statutory access to freight-owned rights-of-way.
Rather, as owners of the infrastructure, freight railroads can decide
whether to allow commuter rail agencies to use their rights-of-way.
Officials from freight railroads told us that they are willing to share
their infrastructure with commuter rail agencies when sharing makes
business sense and does not impinge on their freight operations. From
the freight railroads' perspective, commuter rail agencies'
compensation offers for the use of freight-owned rights-of-way are
often inadequate, and when they are not compensated for all of the
costs incurred from hosting a commuter rail train, the result is that
the freight railroads subsidize the commuter rail service. In addition,
freight service is the freight railroads' core business, and their
ability to efficiently move freight through their systems must be
protected. As a result, freight railroad officials said they are
unwilling to assume any additional risk from allowing commuter rail
agencies to use their rights-of-way.
Understandably, freight railroads want to minimize their exposure to
liability from any potentially large damage awards and associated costs
that may result when they allow commuter rail agencies to operate on
their rights-of-way. As a result, freight railroads have adopted what
is referred to as the "but for" philosophy--that is, but for the
presence of the commuter rail service, the freight railroad would not
be exposed to certain risks; therefore, the freight railroad should be
held harmless. Freight railroad officials stated that they must take
this position to protect their businesses and shareholders from
potential lawsuits that could financially ruin their company.
To protect themselves from additional liability, freight railroads
typically require that commuter railroads purchase liability insurance
that covers both parties. Officials from several commuter rail agencies
told us that they recognize and understand the freight railroads'
viewpoint. Nearly half of commuter rail agency officials acknowledged
insurance as a cost of doing business, and eight mentioned that they
would purchase the amount that they currently carry even if the freight
railroad did not require them to do so. Officials from five commuter
rail agencies said they purchase more insurance than is required in
their agreements because they recognize that potential claims may
exceed the amounts stated in their agreements.
* Financial conditions at the time of negotiations. Officials from
several commuter rail agencies and freight railroads said that the
financial health of the freight railroads at the time of their
negotiations affected the liability and indemnity provisions. For
example, officials from one commuter rail agency said they were able to
secure favorable liability and indemnity provisions by providing
revenue to two freight railroads that were struggling financially in
the early and mid-1990s. Officials from another commuter rail agency
said that the terms of their agreements that originated from freight
railroad bankruptcies in 1983 are more favorable to the commuter rail
agency than the agreements they have subsequently negotiated with other
freight railroads. Over the last 25 years, freight rail traffic has
significantly increased and the financial health of the industry has
improved. As a result, hosting commuter rail service is not a
significant source of revenue for freight railroads. For example,
officials from one freight railroad said that revenue from commuter
rail agencies does not compensate for the associated capacity loss.
Furthermore, officials from another freight railroad said that no
amount of revenue from commuter rail agencies could sufficiently
compensate them for the risk in assuming liability for passenger
claims.
* Increased awareness or concern about liability and insurance
requirements. Eight commuter rail agency and freight railroad officials
also said that the level of awareness or concern about liability issues
has grown over time. For example, one commuter rail agency official
said that negotiations have become more difficult, in part, because
both freight railroads and commuter rail agencies are more
knowledgeable about liability issues--that is, freight railroads are
now more precise in the terms they require, and commuter rail agencies
are more aware of the implications of these agreements. Officials from
four of the five freight railroads that host commuter rail operations
said that they now would not agree to some terms that they had agreed
to in the past. In some cases, these railroads are trying to
renegotiate the liability and indemnity provisions in existing
agreements. Freight railroads also expressed concern about changes in
how courts interpret gross negligence and about the application of
punitive damages. In particular, freight railroads expressed concern
that what juries once viewed as normal negligence, they may now view as
gross negligence; therefore, they want commuter rail agencies to
indemnify them against both negligence and gross negligence. For
example, one freight railroad views a new project as a "nonstarter" if
the commuter rail agency refuses to indemnify the freight railroad for
incidents involving gross negligence. Additionally, if a railroad is
found guilty of gross negligence, a jury may award punitive damages;
therefore, one freight railroad is trying to renegotiate its insurance
provisions in a 25-year-old agreement to include coverage for punitive
damages.
Additionally, views on sufficient amounts of insurance have changed
over time. Specifically, freight railroads are requiring more insurance
coverage for new commuter rail projects than what they had required in
some past agreements. For example, officials from one freight railroad
said that $100 million seemed sufficient when the railroad signed an
agreement with a commuter rail agency in 1992. However, these same
officials stated that they now seek much higher levels of coverage to
use their rights-of-way, citing concerns about potential lawsuits and
large settlements awarded by juries. Similarly, officials from other
freight railroads told us that, to the extent possible, they seek
between $200 million and $500 million in insurance when negotiating new
agreements or renewing existing ones. Officials from two proposed
commuter rail agencies noted that they anticipate it could be
challenging and costly to obtain insurance coverage for the amount of
insurance the freight railroads are requiring them to obtain. Officials
from freight railroads and commuter rail agencies also questioned how
claims from the recent Metrolink accident will affect the amount of
insurance required and the accessibility of insurance. For example,
officials from one commuter rail agency stated that the Metrolink
accident and current economic conditions could cause their insurance
premiums to spike, and they are, therefore, exploring options to
stabilize their insurance costs.
* Federal and state laws. While ARAA has addressed many major liability
concerns, some freight railroads and commuter rail agencies are
reluctant to rely on some of its provisions. We have previously
reported that all commuter rail authorities or operators, as well as
Amtrak, are covered by the $200 million cap on awards for claims by or
on behalf of rail passengers resulting from an individual rail
accident.[Footnote 48] However, although a majority of the freight
railroads and commuter rail agencies with whom we spoke told us that
the liability cap applies to commuter rail agencies, a majority of
freight railroads and a few commuter rail agencies expressed concern
because the statute has not been tested in court. One freight railroad
has addressed this concern by including a clause in its agreements that
would reopen negotiations if the ARAA cap were overturned by a court or
amended. Other freight railroads seek higher levels of insurance
coverage to mitigate their concerns about the ARAA cap. Officials from
one commuter rail agency told us that the freight railroad wants to
increase the level of insurance in their existing agreement from $250
million to $500 million, which has been a sticking point in
renegotiating the agreement. Officials from this freight railroad told
us they are seeking $500 million in insurance, in part, because the cap
has not been tested in court and because the cap does not cover third-
party claims. For example, as we have reported, claims from third
parties affected by a hazardous material release that might occur as a
result of a commuter-freight collision would not be capped at $200
million. Officials from several freight railroads and commuter rail
agencies said that the applicability of the $200 million liability cap
to commuter rail agencies will likely be tested in court as a result of
the recent Metrolink accident.
Amtrak's statutory rights influence the negotiations of liability and
indemnity provisions in agreements between Amtrak and freight railroads
as well as between Amtrak and commuter rail agencies. For example,
because Amtrak has statutory access rights to freight rail
infrastructure, Amtrak and freight railroads must reach an agreement
for the shared use of freight-owned infrastructure, or, in the event of
an impasse, STB will resolve the outstanding issues. Although the
provisions in agreements between Amtrak and freight railroads vary,
freight railroad officials said that their negotiation processes were
fairly standardized as a result of Amtrak's statutory access rights. In
addition, Amtrak officials noted that Amtrak is prohibited from cross-
subsidizing commuter rail agencies and freight railroads on the NEC for
some costs.[Footnote 49] According to Amtrak officials, these statutes
influence their negotiations with freight railroads and commuter rail
agencies, and Amtrak cannot assume any additional liability for these
parties in its agreements for the shared use of infrastructure.
Specifically, Amtrak officials stated that Amtrak cannot assume
liability for commuter rail agencies when allowing commuter rail
agencies to use Amtrak's infrastructure. As a result, Amtrak's
negotiations with commuter rail agencies generally result in no-fault
liability and indemnity provisions in which the commuter rail agency
assumes most of the liability.
Commuter rail agency, freight railroad, and Amtrak officials also
identified various types of state laws that influence negotiations of
liability and indemnity provisions.[Footnote 50] The following
information briefly describes examples of the different types of state
laws that can influence negotiations. See table 1 for examples of these
types of laws.
* Liability caps for railroads or transit agencies. Some state laws
limit commuter rail agencies' liability exposure for accidents.
* Sovereign immunity laws or tort caps. These laws limit the types of
claims that may be filed against public agencies and limit the amount
of liability to which a public agency can be exposed.
* Prohibition against public indemnification of private entities. Some
state laws prohibit a public commuter rail agency from agreeing to any
indemnification provisions.
* Prohibition against indemnification for negligence or gross
negligence. Some state laws prohibit indemnification of an entity
against its own negligence or gross negligence.
* State laws addressing punitive damages. Some state laws prohibit
insuring against punitive damages. Additionally, in some states,
commuter rail agencies are immune from paying punitive damages because
they are public entities.
Table 1: Types and Examples of State Laws That May Affect Liability and
Indemnity Negotiations:
Type of state law: Liability caps for railroads or transit agencies;
Example of state law in select states: North Carolina set its liability
cap at $200 million to mirror the amount in ARAA; however, the North
Carolina statute caps all liability, including third-party claims, in a
commuter rail incident. A Massachusetts statute limits claims to the
amount of insurance, which is $75 million, and applies to the commuter
rail agency, its contract operator, and other entities that provide
commuter rail services.
Type of state law: Sovereign immunity laws or tort caps;
Example of state law in select states: Pennsylvania law caps most
claims filed against the Southeastern Pennsylvania Transportation
Authority at $250,000 per person and $1 million per incident. Florida
law caps payments for tort claims against the state and its agents at
$100,000 per person or $200,000 per incident. Although the sovereign
immunity provisions have been extended to commuter rail contractors for
the Tri- Rail service in Southern Florida, the Florida legislature was
unable to pass legislation during the 2008 legislative session
extending sovereign immunity to contractors for the proposed SunRail
service in Central Florida.[A]
Type of state law: Prohibition against public indemnification of
private entities;
Example of state law in select states: The New Mexico constitution
prohibits the state government from subsidizing a private entity and,
as a result, prohibits indemnification of a private entity. State laws
were changed to allow the state to purchase insurance covering BNSF
Railway's (BNSF) liability associated with New Mexico Rail Runner
Express's service by listing them as a named-insured. However, some
concerns exist that this statute could still be invalidated by the
state constitution. Sovereign immunity laws in New Mexico have also
resulted in Amtrak's assumption of more liability than it assumes under
some agreements with other commuter rail agencies. In Minnesota, state
law prohibited a public agency from indemnifying a private company for
exposure that the private company could face in the event of a
catastrophic loss. To facilitate the negotiations between Northstar and
BNSF, the state passed legislation that treats the planning, operation,
and maintenance of commuter rail facilities and services as
governmental functions serving a public purpose. The statute allows
Northstar to provide indemnification and to procure insurance that
would protect both itself and BNSF. The statute authorizes
indemnification for all types of claims or damages.
Type of state law: Prohibition against indemnification for negligence
or gross negligence;
Example of state law in select states: Massachusetts case law prohibits
indemnification against gross negligence; however, there are no
statutes codifying this prohibition.[B] Negotiations between the
Massachusetts Bay Transportation Authority (MBTA) and CSX
Transportation (CSX) have stalled over the general issue of how to
allocate risk. The public side (MBTA) has stated that it cannot
indemnify the private side (CSX) for its gross negligence or
intentional acts, and CSX officials say they do not anticipate changing
their position on indemnification provisions for willful misconduct and
gross negligence.[C]
Type of state law: State laws addressing punitive damages;
Example of state law in select states: Although the Illinois Tort
Immunity Act does not give the Northeast Illinois Regional Commuter
Railroad Corporation (Metra) sovereign immunity protections, the act
protects Metra from punitive damages. According to Metra officials,
local government entities cannot indemnify for punitive damages because
such indemnification is considered against public policy. In
California, punitive damages are not allowed in lawsuits against
government entities, such as the Joint Powers Board that operates the
Caltrain commuter rail service. The board does not indemnify the Union
Pacific Railroad Company for any punitive damages. Furthermore, in
California, punitive damages are not insurable.
Source: GAO analysis of state laws.
[A] The proposed SunRail commuter service was known as Central Florida
Commuter Rail until December 2008.
[B] See Massachusetts Bay Transportation Authority and Massachusetts
Bay Railroad Co. v. CSX Transportation Inc. and Cohenno Inc. (Super.
Ct. Civ. Action 2008-1762- BLS1) (Memorandum and Order on Defendant CSX
Transportation, Inc.'s Motions to Dismiss).
[C] CSX believes that the preemptive nature of ARAA negates any state
prohibition of MBTA indemnifying for gross negligence. MBTA officials
stated that they believe ARAA does not preempt Massachusetts state case
law, but even if the act is preemptive, the authority is only
permissive (i.e., the act would allow a party to contractually
indemnify for gross negligence, but would not require it to do so).
[End of table]
Other Factors Generally Have Little Effect on Negotiations of Liability
and Indemnity Provisions:
Several factors that might be considered influential, such as commuter
rail ownership of shared-use infrastructure, were generally reported as
having little effect on liability and indemnity negotiations.
* Commuter rail agencies' ownership of infrastructure. Commuter rail
agencies that own their infrastructure are not necessarily able to set
the terms of their agreements with freight railroads. A majority of
commuter rail agencies that own their infrastructure purchased it from
freight railroads. In general, as a condition of the sale of
infrastructure, freight railroads maintain rights for continued freight
use and require specific liability and indemnity provisions. For
example, a commuter rail agency is currently seeking to purchase a
segment of freight track to expand its service, but negotiations have
stalled because the commuter rail agency does not want to agree to
certain liability and indemnity provisions. Officials from one freight
railroad said that in negotiations for the purchase of rail lines, the
liability terms are a trade-off for a lower cost for the
infrastructure. For example, in this freight railroad's negotiations
with one commuter rail agency, the price for purchasing the right-of-
way without attached liability and indemnity provisions would have been
$1.3 billion; rather, the parties settled on a price of $150 million,
with an agreement for continued freight operations that included the
freight railroad's required liability and indemnity provisions.
* Extent of use. The extent of a tenant commuter rail agency's use of
the host freight railroad's infrastructure, which can be measured by
such metrics as the number of trains or ridership, does not generally
influence the liability and indemnity provisions. For example, one
freight railroad official said that the number of planned commuter
trains is not specifically relied upon in determining the amount of
insurance required in the agreement. However, two of the insurance
brokers with whom we spoke said that such metrics may be used to help
calculate insurance premiums. According to one broker, however, a
change in one of these metrics may not affect the insurance premium
unless the change is significant--for example, an increase from 100,000
to 200,000 daily passengers.
* Funding of improvements on freight-owned infrastructure. Commuter
rail agencies' funding of infrastructure improvements, such as track
upgrades, on freight infrastructure does not generally affect liability
and indemnity provisions. Officials from one freight railroad said that
such improvements do not compensate for the liability risks associated
with allowing passenger railroads to use freight infrastructure.
However, funding for infrastructure improvements may have other
effects, such as influencing freight railroads' initial willingness to
enter into overall negotiations for shared use or securing priority
dispatching for commuter trains.
* Advanced safety technologies. Employing advanced safety technologies
does not necessarily affect negotiations over liability and indemnity
provisions. Although improved safety may not influence the liability
and indemnity provisions, officials from three freight railroads or
commuter rail agencies mentioned that improved safety could reduce
insurance premiums. Similarly, two of the insurance brokers with whom
we spoke said that a railroad's safety program can influence the
calculation of insurance premiums because improved safety reduces the
likelihood of accidents and, therefore, decreases the likelihood that
the insurance company will suffer a loss. However, according to Amtrak
officials, although such technologies may reduce the incidents of
smaller claims that fall within the self-insured retention, they may
not reduce premiums for liability insurance until the long-term loss
history for the rail agency improves.
Commuter Rail Agency, Amtrak, and Freight Railroad Officials Identified
Several Options for Facilitating Negotiations:
Commuter rail agency, Amtrak, and freight railroad officials identified
several options for facilitating negotiations of liability and
indemnity provisions, including amending ARAA, establishing
alternatives to commercial insurance, increasing commuter rail
agencies' leverage in negotiations with freight railroads, and
separating passenger and freight rail infrastructure.[Footnote 51]
While each of the options could facilitate negotiations on liability
and indemnity provisions, each option has advantages and disadvantages
to consider. The discussion that follows is not intended to endorse any
potential option, but instead to describe some potential ways to
facilitate negotiations.
Commuter Rail Agency, Amtrak, and Freight Railroad Officials Suggested
Amending ARAA to Address Concerns:
Officials from commuter rail agencies, Amtrak, and freight railroads
cited amending ARAA as an option for facilitating negotiations on
liability and indemnity provisions. In particular, officials from
commuter rail agencies and freight railroads stated that the statute
should be amended to make it clear that the liability cap applies to
commuter rail agencies, and officials from commuter rail agencies,
freight railroads, as well as Amtrak, stated that the statute should be
amended to include nonpassenger claims.
Officials from commuter rail agencies, Amtrak, and freight railroads
cited several advantages to amending ARAA. First, clarifying that the
statute applies to commuter rail agencies would eliminate the
uncertainty about its applicability in the absence of a court decision.
In addition, such a clarification, along with the inclusion of
nonpassenger claims in the liability cap, could lower costs for
commuter rail agencies by limiting the amount of insurance that freight
railroads require commuter rail agencies to carry. For example,
officials from one commuter rail agency stated that if ARAA were
amended to make it clear that it applied to commuter rail agencies and
covered nonpassenger claims, freight railroads would be less likely to
seek insurance beyond the $200 million liability cap to cover claims to
which the cap does not apply. Similarly, Amtrak officials stated that
including nonpassenger claims under the liability cap could reduce
Amtrak's need for excess liability insurance. Officials from several
freight railroads also noted that such changes could facilitate future
negotiations with commuter rail agencies. Officials from freight
railroads also stated that a clear federal cap on liability for
commuter rail agencies could eliminate the need to adapt to various
state laws that can affect liability and indemnity negotiations. For
example, according to officials from two freight railroads, a uniform,
standardized cap that applies to all commuter rail agencies would
preempt some state laws, such as those that cap damages for commuter
rail claims at an amount lower than $200 million.
Commuter rail agency and freight railroad officials also cited several
disadvantages to amending ARAA. Officials from one freight railroad
stated that ARAA already applies to commuter rail agencies and limits
the amount of liability insurance commuter rail agencies are required
to obtain to $200 million. According to these officials, although there
is some lack of clarity about the statute's applicability to commuter
rail agencies and the statute does not cover all types of claims, these
issues can be addressed by requiring the commuter rail agency to obtain
comprehensive insurance coverage or through other provisions in the
agreements. For example, adequate insurance coverage can mitigate the
issues that may arise from various and conflicting state laws by
providing protection for various kinds of liabilities. Similarly,
although ARAA does not cover liability claims resulting from a
hazardous materials spill, an agreement can be structured in such a way
that these claims are covered. According to these freight railroad
officials, the provisions in ARAA provide adequate protections for
negotiating railroad liability and indemnity provisions. Furthermore,
these officials told us it may be difficult to make some changes to the
statute without opening up its entire liability section to
reexamination. Finally, some commuter rail agency officials stated that
amending ARAA could cause them to have less favorable liability
provisions than they currently enjoy. For example, officials from
several commuter rail agencies told us that they carry less insurance
than the $200 million cap. According to officials from one commuter
rail agency, amending ARAA to clarify that the $200 million liability
cap applies to all commuter rail agencies could result in higher levels
of insurance and increased costs for this commuter rail agency.
Commuter Rail Agency, Amtrak, and Freight Railroad Officials Identified
Alternatives to Traditional Commercial Insurance:
Commuter rail agency, Amtrak, and freight railroad officials and
representatives from the insurance industry identified the following
three alternatives to traditional commercial insurance options that
could increase the availability and affordability of liability
insurance coverage:
* Insurance pool. A group of organizations with similar
characteristics, such as a group of commuter rail agencies, pool their
assets to obtain a single commercial insurance policy, rather than
obtaining individual commercial insurance policies.
* Captive insurance. A privately held insurance company that issues
policies, collects premiums, and pays claims for its owners, but does
not offer insurance to the public. This company may be either a single-
parent captive, which is owned by a single entity that insures the
risks of its parent company, or a group captive, which is owned by
multiple entities and the owners are also the policyholders. Usually,
the owners of a group captive are fairly homogenous and have similar
risks, such as a group of commuter rail agencies, although this is not
a requirement of a captive. A captive would allow a commuter rail
agency or a group of commuter rail agencies to self-insure for
liability or provide liability insurance for its members outside of the
traditional commercial insurance market.
* Risk retention group. Similar businesses with similar risk exposures
create their own liability insurance company to self-insure their risks
as a group. Risk retention groups were established through the Product
Liability Risk Retention Act of 1981, as amended by the Liability Risk
Retention Act of 1986, which partially preempts state insurance laws by
allowing risk retention groups to operate in states in which they are
not domiciled.[Footnote 52] Commuter rail agencies, therefore, could
form a risk retention group without having to consider the various
state laws that could affect their liability negotiations with freight
railroads.
Commuter rail agency, Amtrak, and freight railroad officials identified
several advantages to pooling insurance as a way to facilitate
negotiations on liability. First, all of the industry insurance options
identified would allow members to pool their assets, which could allow
them to obtain more or cheaper insurance coverage than they could
obtain independently. For example, a group of commuter rail agencies
could form a captive to obtain coverage for their primary layers of
insurance, which are the most expensive, given that most claims beyond
the self-insured retention would be expected to fall within these
layers.[Footnote 53] Second, pooled insurance coverage would spread out
liability across a wider base of commuter rail agencies, with varying
risk levels, which also would allow participants to obtain greater and
more affordable coverage than some individual commuter rail agencies
could obtain independently in the commercial insurance market. For
example, officials from one commuter rail agency stated that forming a
group captive with other commuter rail agencies could level out the
insurance premiums paid by each commuter rail agency participating in
the captive, and that the agency plans to reach out to other commuter
rail agencies to further explore this option. Third, pooled insurance
options could make it easier for new or smaller commuter rail agencies
with limited or no risk history to obtain affordable insurance
coverage. Similarly, according to a captive insurance broker, by
combining the loss histories of newer commuter rail agencies with those
of other commuter rail agencies, a group captive could better predict
potential claims than an individual insurance company could predict for
a commuter rail agency with no risk history. Finally, forming a risk
retention group could eliminate the challenges associated with various
state laws that limit the types of indemnification and insurance
options available to commuter rail agencies. Risk retention groups are
required only to register with the regulator of the state in which they
intend to sell insurance, whereas traditional captives are subject to
the licensing requirements and oversight of each state outside of their
state of domicile.[Footnote 54] Although no commuter rail agency or
freight railroad currently participates in an insurance pool with other
commuter rail agencies or freight railroads,[Footnote 55] some commuter
rail agency officials told us they are interested in exploring this
option for facilitating negotiations. In addition, officials from two
freight railroads said they would consider joining an insurance pool as
a way to pool their risk with other railroads, and several freight
railroad officials also stated they would accept pooled insurance from
commuter rail agencies as a valid option for providing liability
coverage.
Commuter rail agency, Amtrak, and freight railroad officials also
identified several disadvantages to the various alternatives to
traditional commercial insurance options identified. First, some
commuter rail agency officials stated that their commuter operations
were already very safe; therefore, they would not benefit from an
insurance pool with other commuter rail agencies. Similarly, according
to an insurance broker, larger commuter rail agencies, or those with a
better risk profile, may not join a pool or might leave the pool if
they could obtain cheaper insurance coverage on the commercial
insurance market. Their decision not to participate in the pool would
lead to adverse selection, with only smaller or riskier commuter rail
agencies remaining in the pool, which could reduce some of the
advantages that a pool would provide. Second, some commuter rail agency
officials stated that they have not had problems obtaining insurance
because of the soft, or competitive, insurance market. According to an
insurance broker, pooling insurance during a soft market is likely more
expensive than obtaining individual commercial insurance policies
because of the administrative and capital costs of maintaining an
insurance captive or risk retention group. In addition, some commuter
rail agency officials stated that insurance pools can be difficult to
administer and require decisions about who will participate, whether
participation will be voluntary or mandatory, and what should be done
if claims exceed the pool's reserves. However, if the insurance market
became less competitive, pooling might provide a more affordable
option, particularly for new or smaller commuter rail agencies that
could have difficulty obtaining coverage.[Footnote 56] For example,
Florida set up an insurance pool because of a severe shortage of
catastrophe property reinsurance capacity, stricter policy terms and
conditions, and sharp increases in property catastrophe cover rates
following Hurricane Andrew. Finally, one commuter rail agency official
stated that it could be difficult for participating agencies to reenter
the commercial insurance market if, for example, an insurance pool
falls apart because it is undercapitalized--that is, there is a risk
for commuter rail agencies in ending their current insurance policies
to join a pool. Amtrak officials also stated that these pooled
insurance options are unlikely to be viable without federal financial
backing or verifiable commercial reinsurance. Furthermore, officials
from two freight railroads noted they would not likely join an
insurance pool with commuter rail agencies because it is not in their
business interests to help pay for claims involving passenger rail.
Commuter rail agency, Amtrak, and freight railroad officials also
identified several federal insurance options that could facilitate
negotiations of liability and indemnity provisions. Specifically,
several commuter and freight railroad officials identified catastrophic
incident insurance programs as potential models for providing railroad
liability insurance. These insurance programs exist to cover risks that
the private sector has been unable or unwilling to provide by itself.
Commuter rail agency and freight railroad officials most frequently
identified the Price-Anderson Act as a model for providing railroad
liability insurance.[Footnote 57] Under this model, commuter rail
agencies would obtain primary insurance up to a certain amount and
could pool their assets to obtain secondary insurance coverage for
incidents with claims that exceed the primary insurance amount. The
federal government could also be called upon to provide additional
funding if an incident's claims exceeded both the primary and secondary
insurance coverage. Officials from one freight railroad stated that a
Price-Anderson type of insurance program could address current
limitations in the railroad insurance market because the act
contemplates appropriations if additional funding is needed, among
other benefits. Similarly, insurance coverage provided under other
federal government programs, such as terrorism insurance, also was
cited as a potential model for providing railroad liability insurance
coverage. For example, officials from one freight railroad stated that
the fund established to compensate victims from the September 11, 2001,
terrorism attacks could be useful for considering how to compensate
victims of a catastrophic railroad incident.
Commuter rail agency and freight railroad officials identified several
advantages of a federally backed insurance program for railroads. For
example, some of these officials stated that such programs could reduce
insurance premiums, could spread out risk among participating
railroads, and would ensure that claims could be paid to those affected
by a high-cost, or catastrophic, incident. However, as we have
previously reported, such programs also could crowd out private
insurers and reduce the private market's ability and willingness to
provide coverage.[Footnote 58] In addition, a federal insurance program
would expose the federal government to potentially significant claims
on future resources, which could ultimately result in costs to
taxpayers.
Commuter Rail Agencies Identified Options That Would Increase Their
Leverage in Negotiating Liability and Indemnity Provisions:
Some commuter rail agencies identified options that would give them
additional leverage in liability and indemnity negotiations with
freight railroads. In particular, a few commuter rail agencies stated
that statutory access rights to freight-owned infrastructure, similar
to Amtrak's statutory access rights, could facilitate negotiations by
forcing freight railroads to the negotiating table. However, although
freight railroads might be required to enter into negotiations, they
would not necessarily change their positions on the levels of liability
and indemnification they would require. In addition, providing
statutory access to commuter rail agencies could interfere with the
freight railroads' ability to make business decisions about their
operations, particularly if the commuter rail operations would restrict
the capacity of a major freight route that otherwise would not have
commuter rail service. Officials from one commuter rail agency also
stated that requiring freight railroads to allow commuter rail agencies
to operate on their infrastructure could make relationships with the
freight railroads more acrimonious. Instead, incentives that encourage
freight railroads to cooperate with commuter rail agencies, such as tax
incentives or service expansions in other areas, could do more to
facilitate negotiations, according to these officials.
Officials from a few commuter rail agencies also stated that having an
independent entity mediate liability and indemnity negotiations between
commuter rail agencies and freight railroads could be helpful if the
parties reached an impasse. For example, officials from one commuter
rail agency stated that a mediating body could facilitate negotiations
by requiring the freight railroad to consider the commuter rail
agency's position. A provision in the Passenger Rail Investment and
Improvement Act of 2008 recently extended STB's role to mediate
disputes between public authorities, including commuter rail agencies
and host carriers.[Footnote 59] However, the mediation is nonbinding--
that is, if the dispute cannot be resolved, there are no additional
mechanisms in place to compel a resolution.
Commuter Rail Agency and Freight Railroad Officials Suggested
Separating Passenger and Freight Traffic as an Ideal, but Costly,
Option:
A few commuter rail agency and freight railroad officials identified
separating passenger and freight traffic as an ideal, but cost-
prohibitive, option for facilitating negotiations on liability and
indemnity provisions. Commuter and freight traffic could be separated
temporally, with commuter rail agencies and freight railroads operating
at different times of the day, or physically, with commuter rail
agencies and freight railroads operating on separate tracks either in
the same corridor or in separate corridors. For example, the Utah
Transit Authority purchased rights-of-way from Union Pacific and built
new tracks in a parallel alignment with Union Pacific tracks. As a
result, the commuter and freight operations do not share the same
track, with a small exception, limiting the potential for a collision.
Similarly, officials from one freight railroad stated that in
negotiations with an existing and new commuter rail agency, they are
working to shift some of the freight operations onto different routes
to minimize the interaction between commuter and freight trains.
Separating passenger and freight infrastructure also could lower
insurance costs for commuter rail agencies because the potential for a
catastrophic incident would be significantly reduced. According to
officials from a few freight railroads, the potential for a
catastrophic incident, although small, drives the indemnification
provisions and insurance requirements of passenger and freight rail
agreements. Although the Utah Transit Authority was able to purchase
rights-of-way from Union Pacific, in most cases, purchasing rights-of-
way or constructing new tracks is cost-prohibitive and time-consuming
for commuter rail agencies. For example, officials from one commuter
rail agency examined whether to build new tracks for initiating its
service, but the costs were much higher than the costs of buying the
tracks and sharing them with the freight railroad and paying the
associated insurance costs. In addition, capacity constraints, whether
they are based on future growth projections or geographic limitations,
make it difficult to separate passenger and freight traffic--through
either temporal or physical separation. For example, officials from one
commuter rail agency stated that the geography surrounding their
commuter service makes capacity expansions very difficult and costly.
Concluding Observations:
The expeditious flow of people and goods through our transportation
system is vital to the economic well-being of the nation. The movement
of people and goods by rail is an important part of the nation's
transportation system and is likely to play an even greater role in the
future as companies and communities look for ways to avoid highway
congestion. An attractive feature of both commuter rail and intercity
passenger rail is that they can operate on the same infrastructure as
freight railroads. However, mixing passenger and freight traffic
entails a certain level of risk. Fortunately, accidents are rare,
undoubtedly due in part to the safety focus of passenger and freight
rail operators, but they can be deadly, as evidenced by the September
2008 Metrolink accident.
As owners of most of the rail infrastructure in the United States,
freight railroads determine whether to allow commuter rail operations
on their infrastructure and set the terms and conditions, including the
liability and indemnity provisions, of this access. To protect their
business and shareholders, freight railroads understandably seek to
shift the risks associated with allowing passenger traffic on freight-
owned infrastructure to the commuter rail agencies. By accepting some
of the liability and indemnity provisions demanded by freight
railroads, commuter rail agencies expose themselves, and ultimately
taxpayers, to significant costs. Rejecting the liability and indemnity
provisions sought by freight railroads, however, can cause negotiations
to stall or fail, meaning that new commuter rail systems or expansions
may not be realized. Different options exist to help facilitate
negotiations over liability and indemnity. All of these options have
advantages and disadvantages that must be carefully considered so that
one form of rail does not succeed at the expense of the other.
Agency Comments:
We provided a draft of this report to DOT, STB, and Amtrak for their
review and comment prior to finalizing the report. Amtrak provided
technical comments, which we incorporated where appropriate. DOT and
STB had no comments on the draft report.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to other
interested congressional committees; the Secretary of the Department of
Transportation; the President and CEO of Amtrak; the Chief of Staff of
the Surface Transportation Board; and other parties. The report is also
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-4431 or flemings@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix V.
Signed by:
Susan A. Fleming:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Scope and Methodology:
To address our objectives, we obtained information from all existing
and proposed commuter rail agencies, Class I freight railroads, and the
National Railroad Passenger Corporation (Amtrak). To identify the
universe of existing and proposed commuter rail agencies, we obtained a
list of such rail agencies from the American Public Transportation
Association (APTA). Using publicly available information, we narrowed
the list of proposed commuter rail agencies to those that plan to
initiate service within the next 5 years because these commuter rail
agencies were more likely to have entered into negotiations with
another railroad regarding liability. We then refined our list of
existing and proposed commuter rail agencies to 21 existing commuter
rail agencies and 5 proposed commuter rail agencies.[Footnote 60] We
also obtained a list of Class I freight railroads from the Association
of American Railroads (AAR). We limited our scope to Class I freight
railroads because they own the majority of all rail lines in the United
States and, therefore, are likely to have more interaction with
commuter rail agencies than short-line or regional railroads. We
subsequently interviewed officials at four state departments of
transportation that commuter rail agency officials identified as
integral to commuter rail operations or initial start-up work. (Table 2
lists the names and locations of the railroads and the state
departments of transportation we contacted as part of our review.) We
also obtained information through interviews with officials from
Amtrak, the Federal Railroad Administration (FRA), and the Federal
Transit Administration (FTA); Surface Transportation Board (STB) staff;
and representatives from industry associations, including AAR and APTA.
We also interviewed a representative from the law office of K&L Gates,
who has served as a consultant to commuter rail agencies.
To gather information pertaining to our objectives, we conducted
semistructured interviews with officials from all identified existing
commuter rail agencies, proposed commuter rail agencies, Class I
freight railroads, Amtrak, and state departments of transportation. We
asked about the liability and indemnity provisions between railroads,
the financial impact of these provisions, how the courts had
interpreted these provisions, the factors that had influenced
negotiations, and ways to facilitate negotiations.
Table 2: Names and Locations of Existing Commuter Rail Agencies,
Proposed Commuter Rail Agencies, Intercity Passenger Railroads, Class I
Freight Railroads, and State Departments of Transportation That We
Interviewed:
Existing commuter rail agencies:
Name: Altamont Commuter Express;
Location: Stockton, CA.
Name: Connecticut Department of Transportation Shore Line East;
Location: New Haven, CT.
Name: Maryland Transit Administration (MARC);
Location: Baltimore, MD.
Name: Massachusetts Bay Transportation Authority (MBTA);
Location: Boston, MA.
Name: MTA Long Island Rail Road;
Location: New York, NY.
Name: MTA Metro-North Railroad;
Location: New York, NY.
Name: New Jersey Transit Corporation;
Location: Newark, NJ.
Name: New Mexico Rail Runner Express;
Location: Albuquerque, NM.
Name: North County Transit District (Coaster);
Location: Oceanside, CA.
Name: Northeast Illinois Regional Commuter Railroad Corporation
(Metra);
Location: Chicago, IL.
Name: Northern Indiana Commuter Transportation District;
Location: Chesterton, IN.
Name: Peninsula Corridor Joint Powers Board (Caltrain);
Location: San Carlos, CA.
Name: Pennsylvania Department of Transportation (PennDOT)[A];
Location: Harrisburg, PA.
Name: Regional Transportation Authority Music City Star;
Location: Nashville, TN.
Name: Sound Transit, Central Puget Sound Regional Transportation
Authority;
Location: Seattle, WA.
Name: South Florida Regional Transportation Authority (Tri-Rail);
Location: Pompano Beach, FL.
Name: Southeastern Pennsylvania Transportation Authority (SEPTA)[B];
Location: Philadelphia, PA.
Name: Southern California Regional Rail Authority (Metrolink);
Location: Los Angeles, CA.
Name: Trinity Railway Express;
Location: Irving, TX.
Name: Utah Transit Authority (FrontRunner);
Location: Salt Lake City, UT.
Name: Virginia Railway Express;
Location: Alexandria, VA.
Proposed commuter rail agencies:
Name: Charlotte Area Transit System;
Location: Charlotte, NC.
Name: Georgia Rail Passenger Program;
Location: Atlanta, GA.
Name: Northstar; Location:
Minneapolis, MN.
Name: SunRail [C];
Location: Orlando, FL.
Name: TriMet Westside Express Service;
Location: Portland, OR.
Intercity passenger railroad:
Name: National Railroad Passenger Corporation (Amtrak);
Location: Washington, D.C.
Class I freight railroad:
Name: BNSF Railway;
Location: Fort Worth, TX.
Name: Canadian National Railway Company (Grand Trunk Corporation)[D];
Location: Montreal, Canada.
Name: Canadian Pacific Railway (Soo Line Railroad Company)[D];
Location: Calgary, Canada.
Name: CSX Transportation;
Location: Jacksonville, FL.
Name: Kansas City Southern Railway Company[E];
Location: Kansas City, MO.
Name: Norfolk Southern;
Location: Norfolk, VA .
Name: Union Pacific Railroad Company;
Location: Omaha, NE .
State departments of transportation:
Name: Delaware Department of Transportation (DELDOT)[B];
Location: Wilmington, DE.
Name: Florida Department of Transportation (FDOT);
Location: Tallahassee, FL.
Name: New Mexico Department of Transportation (NMDOT);
Location: Santa Fe, NM.
Name: North Carolina Department of Transportation (NCDOT);
Location: Raleigh, NC.
Source: GAO.
Note: The entity names in italics indicate the sites that we visited
during our review.
[A] Amtrak runs additional trains for commuters, which PennDOT
subsidizes.
[B] In addition to its regular commuter rail service, SEPTA provides
"turnkey," or contracted commuter rail service, for the Delaware
Department of Transportation (DELDOT) between Newark/Wilmington, DE,
and Philadelphia, PA. Information on SEPTA's use of Amtrak services and
infrastructure for the Delaware service are included in Amtrak and
SEPTA data; therefore, we did not consider DELDOT as a separate
commuter rail agency.
[C] The proposed SunRail commuter service was known as the Central
Florida Commuter Rail until December 2008.
[D] The entire Canadian National Railway Company and Canadian Pacific
Railway systems are not Class I railroads. However, the U.S. portions
of these railroads (e.g., Grand Trunk Corporation and Soo Line Railroad
Company) meet the U.S. regulatory criteria and are Class I railroads.
[E] The Kansas City Southern Railway Company does not have any
agreements with passenger rail operators.
[End of table]
We conducted site visits to three existing commuter rail agencies, two
proposed commuter rail agencies, and two Class I freight railroads. We
selected existing commuter rail agencies that had agreements for access
to rights-of-way, maintenance-of-way, and maintenance-of-equipment or
operations with a Class I freight railroad and also had contracts with
Amtrak. We also selected existing commuter rail agencies that had
agreements with different freight railroads to determine if agreements
varied across Class I freight railroads. (Because Class I freight
railroads generally own infrastructure in particular regions of the
country, we also found that this criterion gave us geographic diversity
for our site visits.) In addition, we selected existing commuter rail
agencies on the basis of their ridership levels to ensure that we
visited at least one commuter rail agency in the top third of
ridership, middle third of ridership, and bottom third of ridership.
[Footnote 61] We selected proposed commuter rail agencies to visit that
are planning to enter into contracts with different Class I freight
railroads in the next 5 years. In addition, we selected sites to ensure
that we would visit at least one commuter rail agency that proposes to
purchase Class I freight tracks and at least one commuter rail agency
that proposes to lease freight tracks. Finally, we chose to visit Class
I freight railroads with the highest number of contracts with commuter
rail agencies.
To identify liability and indemnity provisions in agreements among
commuter rail agencies, freight railroads, and Amtrak and the resulting
implications of those provisions, we requested and analyzed the
liability and indemnity sections of agreements between commuter rail
agencies and Class I freight railroads, commuter rail agencies and
Amtrak, and Amtrak and freight railroads. We analyzed and organized the
provisions in these contracts and excluded commuter rail agencies that
did not have agreements with either a Class I freight railroad or
Amtrak.[Footnote 62] In addition, we included agreements from two
proposed commuter rail agencies in our analysis because their
agreements with freight railroads were final.[Footnote 63] However, we
did not include information from the other proposed commuter rail
agencies because they either did not have an agreement with a Class I
freight railroad or Amtrak or because the agreements were still
preliminary and subject to change. To ensure the reliability of the
information we obtained, we corroborated information provided by
commuter rail agencies, Amtrak, and Class I freight railroads. For
example, we compared agreements received from a commuter rail agency
with agreements received from the freight railroad to ensure that the
agreements were consistent.
We conducted legislative research to identify federal statutes, federal
and state court cases, and STB decisions that related to contractual
liability and indemnity provisions of passenger and freight railroad
agreements. We also asked Amtrak, STB, the commuter rail agencies, and
the freight railroads for assistance in identifying these types of
cases. In addition, we asked commuter rail agencies and state
departments of transportation for state statutes that had an impact on
the negotiation of contractual liability and indemnity provisions. We
then synthesized and summarized the information that we obtained.
To identify factors that affect negotiations of liability and indemnity
provisions among passenger and freight railroads, we conducted a
content analysis of the information we collected from our
semistructured interviews and site visits. This content analysis
captured the extent to which representatives from existing and proposed
commuter rail agencies, freight railroads, and Amtrak identified
particular factors that affected their negotiations and the associated
effects. In addition to determining the factors that were most commonly
cited, this analysis enabled us to determine whether certain factors
reportedly had little effect on the negotiations. We also interviewed
four state departments of transportation, referred to us by commuter
rail agencies, about state laws that apply to liability and indemnity
provisions and the effects of such laws on liability and indemnity
provisions.
To identify potential options for facilitating negotiations of
liability and indemnity provisions among passenger and freight
railroads, we conducted a content analysis of the information we
collected from our semistructured interviews and site visits. This
content analysis captured potential options mentioned by the entities
we interviewed, the associated advantages and disadvantages from the
perspectives of the entities interviewed, and the change in the federal
role needed to execute the options. We also asked FRA and FTA officials
and STB staff about the federal role in railroad negotiations and the
potential impact of some of the options identified on the federal role.
Furthermore, we interviewed three insurance brokers who represented
commuter rail agencies in obtaining liability insurance to provide
context for the process of securing insurance, the process of
calculating premium costs, and alternative insurance mechanisms that
could be applied to the railroad industry. We also reviewed prior GAO
reports on insurance markets for catastrophic incidents to identify
comparable models for railroad liability insurance.[Footnote 64]
We did not examine the liability and indemnity provisions in agreements
between commuter rail agencies and non-Class I freight railroads, nor
did we look at agreements among commuter rail agencies. However, we did
analyze information provided about the factors affecting negotiations
between commuter rail agencies and non-Class I freight railroads; we
also analyzed information from commuter rail agencies in these
relationships about options for facilitating negotiations. We also did
not examine the merits of Amtrak's statutory access rights to freight-
owned rights-of-way or the costs and benefits of extending these rights
to commuter rail agencies because this was beyond the scope of our
review. Finally, we relied primarily on testimonial evidence to
identify state laws and court decisions related to railroad liability
and indemnity provisions and, therefore, did not analyze the universe
of state laws and court decisions related to liability and indemnity
provisions.
[End of section]
Appendix II: Summary of Liability and Indemnity Provisions in Commuter
Rail Agency and Freight Railroad Agreements:
Commuter rail agency: Altamont Commuter Express (ACE);
Class I railroad: Union Pacific Railroad Company (UP);
Ownership[A]: Freight[D];
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: Peninsula Corridor Joint Powers Board (Caltrain);
Class I railroad: UP;
Ownership[A]: Shared;
Is contract fault-based or no-fault?: Combination[E];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties fault-based);
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: North County Transit District (Coaster);
Class I railroad: BNSF Railway;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: Fault-based[F];
What are provisions for freight-commuter collision?[B]: Fault-based;
Are specific types of conduct excluded or explicitly included?: N/A;
What is the level of insurance that is required[C]: 75 million.
Commuter rail agency: Utah Transit Authority (FrontRunner);
Class I railroad: UP;
Ownership[A]: Shared corridor[G];
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: Silent;
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: Maryland Transit Administration (MARC);
Class I railroad: CSX Transportation;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?:
Both[H];
What is the level of insurance that is required[C]: $500 million.
Commuter rail agency: Massachusetts Bay Transportation Authority
(MBTA);
Class I railroad: CSX (Boston to Framingham);
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: Combination[I];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties and passengers are fault-based);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: MBTA;
Class I railroad: CSX (Worcester to Framingham);
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?:
Included[J];
What is the level of insurance that is required[C]: $75 million.
Commuter rail agency: Northeast Illinois Regional Commuter Railroad
Corporation (Metra);
Class I railroad: BNSF;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: Combination[K];
What are provisions for freight-commuter collision?[B]: Fault-based;
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: 200 million.
Commuter rail agency: Metra;
Class I railroad: Canadian National Railway Company (CN) (Illinois
Central Line);
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Metra;
Class I railroad: CN (Wisconsin Central Line);
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
freight covers all liability;
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Metra;
Class I railroad: CN (Wisconsin Central Line);
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: Metra;
Class I railroad: Canadian Pacific Railway (CP); Ownership[A]:
Commuter;
Is contract fault-based or no-fault?: Combination[L];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Metra;
Class I railroad: CSX;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Metra;
Class I railroad: Norfolk Southern (NS);
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: Metra;
Class I railroad: UP;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: Combination[M];
What are provisions for freight-commuter collision?[B]: Fault-based;
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $200 million.
Commuter rail agency: Southern California Regional Rail Authority
(Metrolink);
Class I railroad: BNSF;
Ownership[A]: Shared;
Is contract fault-based or no-fault?: Fault-based;
What are provisions for freight-commuter collision?[B]: Fault-based;
Are specific types of conduct excluded or explicitly included?: N/A;
What is the level of insurance that is required[C]: $150 million.
Commuter rail agency: Metrolink;
Class I railroad: UP;
Ownership[A]: Shared; Is contract fault-based or no-fault?:
Combination[N];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties fault-based);
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: MTA Metro-North;
Class I railroad: NS;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties and passengers are fault-based);
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Metro-North;
Class I railroad: CSX;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own equipment (passengers shared)[O];
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Metro-North;
Class I railroad: CP;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
freight covers own and 50 percent of other liability;
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: New Jersey Transit Corporation (NJT);
Class I railroad: CSX[P];
Ownership[A]: Shared;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: NJT;
Class I railroad: NS;
Ownership[A]: Shared;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: $100 million.
Commuter rail agency: New Mexico Rail Runner Express;
Class I railroad: BNSF;
Ownership[A]: Commuter, with freight easement[Q];
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: $250 million[R].
Commuter rail agency: Southeastern Pennsylvania Transportation
Authority (SEPTA);
Class I railroad: CSX;
Ownership[A]: Shared;
Is contract fault-based or no-fault?: Combination[S];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties and passengers are fault-based);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: SEPTA;
Class I railroad: NS;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: Combination[T];
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties and passengers are fault-based);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: Sound Transit, Central Puget Sound Regional
Transportation Authority;
Class I railroad: BNSF;
Ownership[A]: Freight, with some commuter easements;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $200 million.
Commuter rail agency: Trinity Railway Express (TRE);
Class I railroad: UP;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: Combination[U];
What are provisions for freight-commuter collision?[B]: Fault-based
(third parties shared);
Are specific types of conduct excluded or explicitly included?:
Excluded;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: TRE;
Class I railroad: BNSF;
Ownership[A]: Commuter;
Is contract fault-based or no-fault?: Combination[V];
What are provisions for freight-commuter collision?[B]: Fault-based
(third parties shared);
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: Unspecified.
Commuter rail agency: South Florida Regional Transportation Authority
(Tri-Rail);
Class I railroad: CSX;
Ownership[A]: Commuter, with freight easements[W];
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $125 million.
Commuter rail agency: Virginia Railway Express (VRE);
Class I railroad: CSX;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $250 million.
Commuter rail agency: VRE;
Class I railroad: NS;
Ownership[A]: Freight;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $250 million.
Proposed commuter rail agencies[X]:
Commuter rail agency: Northstar;
Class I railroad: BNSF;
Ownership[A]: Freight, with commuter easement;
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?: Silent;
What is the level of insurance that is required[C]: $200 million.
Commuter rail agency: SunRail;
Class I railroad: CSX;
Ownership[A]: Commuter (contingent on legislative approval)[Y];
Is contract fault-based or no-fault?: No fault;
What are provisions for freight-commuter collision?[B]: No fault: each
covers own (third parties shared);
Are specific types of conduct excluded or explicitly included?:
Included;
What is the level of insurance that is required[C]: $200 million.
Source: GAO analysis of commuter and freight rail liability and
indemnity provisions.
Note: Each row of this table represents a relationship, although there
may be more than one contract governing this relationship. If the
liability and indemnity provisions are the same, the contracts are not
disaggregated. In cases where liability and indemnity provisions are
different for different sections of shared use, then they are so noted.
This table does not include details on provisions for liability for the
discharge of hazardous substances.
[A] Indicates which party owns the tracks. If a commuter rail agency
owns some sections of track and the freight railroad owns other
sections and each entity hosts each other, then the ownership column is
marked as shared.
[B] This column only describes provisions for collisions between
freight and commuter trains. For this column, "each covers own"
generally refers to liability for employees, equipment, and property.
In the case of commuter rail agencies, the term also refers to
passengers, although the definition of "passenger" and "third party"
varies by agreement.
[C] Insurance indicates minimum level of coverage, but does not address
any self-insured retention the commuter railroad may decide to use to
cover losses below a certain level.
[D] ACE owns 1,000 feet of track.
[E] Caltrain's contract with UP is no fault for liability levels up to
$25 million and fault-based for liability levels above $25 million to
$125 million.
[F] Fault is based on which party is negligent.
[G] FrontRunner and UP share tracks for 4.5 miles. On the rest of the
system, they share a corridor, but each owns and exclusively uses its
own tracks.
[H] MARC is not liable for excluded conduct up to $5 million, but this
conduct is explicitly included for liability above $5 million.
[I] CSX and MBTA take liability for their own employees and property,
regardless of fault, but liability for all other persons, including
passengers, is assigned on the basis of fault.
[J] Conduct is excluded only for CSX property and employees in the case
of gross negligence.
[K] Provisions are generally no fault except in collision, but Metra
covers all liability in excess of $2 million.
[L] Fault-based provisions apply to some situations and could also
result in allocating liability in a collision on the basis of fault.
[M] Provisions are generally no fault except in collision.
[N] Metrolink's agreements with UP are no fault for liability levels up
to $25 million and fault-based in excess of $25 million up to $100
million or $125 million depending on the tracks.
[O] Liability for third parties depends on circumstances.
[P] CSX operations are strictly through their part ownership of
Conrail.
[Q] The New Mexico Department of Transportation is the owner.
[R] Insurance total includes a $50 million escrow account.
[S] CSX and SEPTA take liability for their own employees and property,
regardless of fault, but liability for all other persons, including
passengers, is assigned on the basis of fault.
[T] NS and SEPTA take liability for their own employees and property,
regardless of fault, but liability for all other persons, including
passengers, is assigned on the basis of fault.
[U] TRE indemnifies UP in a no-fault arrangement for passengers, and UP
indemnifies TRE for accidents at crossings.
[V] BNSF indemnifies TRE for accidents at crossings.
[W] The owner is the Florida Department of Transportation (FDOT). FDOT
and CSX have an agreement to raise the insurance limits to $200
million, pending legislative approval, as part of an agreement to
purchase additional tracks for the Central Florida Commuter Rail,
described in note y.
[X] We spoke with three other proposed commuter rail agencies: the
Georgia Rail Passenger Program in Atlanta, Charlotte Area Transit
System (CATS) in North Carolina, and TriMet Westside Express Service
(WES) in Oregon. However, the Georgia Rail Passenger Program and CATS
did not have finalized contracts for liability and indemnity, and WES
had a contract with a non-Class I railroad.
[Y] The owner will be FDOT, and CSX proposes to retain easements.
[End of table]
[End of section]
Appendix III Summary of Liability and Indemnity Provisions in Commuter
Rail Agency and Amtrak Agreements:
Commuter rail agency: North County Transit District (Coaster);
Ownership: Commuter;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
equipment and passengers shared, all other liability Amtrak except
residual damage;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Connecticut Department of Transportation Shore
Line East (SLE);
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability except Amtrak employees;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Delaware Department of Transportation
(DelDOT)[C];
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault under
$300,000: commuter covers all liability except Amtrak employees and
intercity trains;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Florida Department of Transportation (FDOT)[D];
Ownership: Commuter;
Is contract fault-based or no fault?: Combination;
What are provisions for Amtrak-commuter collision?[A]: Fault-based;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: MTA Long Island Rail Road;
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
liability shared equally;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: Maryland Transit Administration (MARC);
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability except Amtrak commuter employees;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Massachusetts Bay Transportation Authority
(MBTA);
Ownership: Shared;
Is contract fault-based or no fault?: No fault[E];
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability except Amtrak employees and Amtrak
intercity operations;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: MBTA;
Ownership: Commuter;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault: Amtrak
covers all liability;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Northeast Illinois Regional Commuter Railroad
Corporation (Metra);
Ownership: Amtrak[F];
Is contract fault-based or no fault?: Combination;
What are provisions for Amtrak-commuter collision?[A]: Combination;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: Metra;
Ownership: Commuter;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers own equipment, employees and passengers and other
residual damage, all other liability shared;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: Southern California Regional Rail Authority
(Metrolink);
Ownership: Commuter;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault: each
covers own, commuter covers third parties;
Are specific types of conduct excluded or explicitly included?[B]:
Excluded.
Commuter rail agency: MTA Metro-North;
Ownership: Commuter;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault: each
covers own (third parties covered by Metro-North);
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: New Jersey Transit Corporation;
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability except Amtrak employees;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: New Mexico Department of Transportation
(NMDOT)[G];
Ownership: Commuter;
Is contract fault-based or no fault?: Fault-based;
What are provisions for Amtrak-commuter collision?[A]: Fault-based;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: Rhode Island Public Rail Corporation[H];
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: Southeastern Pennsylvania Transportation
Authority (SEPTA)[C];
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault:
commuter covers all liability except Amtrak employees;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Commuter rail agency: Virginia Railway Express (VRE);
Ownership: Amtrak;
Is contract fault-based or no fault?: No fault;
What are provisions for Amtrak-commuter collision?[A]: No fault: Amtrak
covers all risk in exchange for risk fee except for VRE property;
Are specific types of conduct excluded or explicitly included?[B]:
Silent.
Source: Amtrak.
[A] This column only describes provisions for collisions between
commuter and Amtrak trains. For this column, "each covers own"
generally refers to liability for employees, passengers, equipment, and
property.
[B] "Excluded conduct" means willful or wanton misconduct explicitly
mentioned in contract.
[C] SEPTA runs a "turnkey" service for DelDOT on Amtrak-owned lines.
DelDOT indemnifies Amtrak for liability up to $300,000 and pays a risk
fee so Amtrak will absorb liability above $300,000.
[D] FDOT owns tracks in South Florida on which Tri-Rail and Amtrak
operate.
[E] Amtrak is responsible for all liability above $75 million to $200
million. MBTA assumes liability for its employees, equipment, and
passengers, except when an incident is the result of Amtrak's sole
negligence or omission.
[F] Amtrak owns about 2 miles of track around Chicago Union Station and
has a fault-based contract for incidents at the station. On the Amtrak-
owned track, excluded conduct is carved out.
[G] NMDOT owns tracks over which Rail Runner and Amtrak operate.
[H] MBTA runs a "turnkey" service for the Rhode Island Public Rail
Corporation on Amtrak-owned lines.
[End of table]
[End of section]
Appendix IV: Summary of Key Case Law Addressing Liability and Indemnity
Provisions:
Federal Cases Addressing Enforceability of Liability and Indemnity
Provisions:
National Railroad Passenger Corp. v. Consolidated Rail Corp., 698 F.
Supp. 951 (D.D.C. 1988), vacated on other grounds, 892 F.2d 1066 (D.C.
Cir. 1990):
Conclusion: A U.S. District Court ruled that the indemnification
provisions in an operating agreement between Amtrak and Conrail could
not be enforced where there were allegations and a showing of gross
negligence, recklessness, willful and wanton misconduct, intentional
misconduct, or conduct so serious as to warrant the imposition of
punitive damages.
Facts: Amtrak owned the segment of the Northeast Corridor that runs
between Washington, D.C., and New York. Conrail used the Northeast
Corridor pursuant to a freight operating agreement.
In January 1987, an Amtrak train collided with three Conrail freight
locomotives that had entered the path of the high-speed Amtrak
passenger train. The accident resulted in 16 deaths and more than 350
injuries. Just before crossing over onto the track being used by the
Amtrak train, the Conrail engineer and brakeman in control of the
Conrail locomotives had failed to heed a series of slow and stop
signals at or before a track juncture near Chase, Maryland. The Conrail
engineer admitted to the following: that the Conrail crew had recently
used marijuana, was speeding, was operating a train in which the cab
signal had been rendered inoperative because the light bulb had been
removed from it, and was operating a train in which an audible warning
device had been intentionally disabled. He also admitted that he had
failed to call signals to his brakeman, as required by applicable
safety regulations, that he had failed to maintain a proper lookout,
and that he had not adhered to the cab signals or the wayside signals.
The engineer pleaded guilty to manslaughter and was given the maximum
penalty for manslaughter, 5 years imprisonment and $1,000 in fines. The
plaintiffs in many of the cases brought against Conrail and Amtrak
alleged that Conrail or Amtrak or both committed reckless, wanton,
willful, or grossly negligent acts and asserted entitlement to
compensatory as well as punitive damages.
Amtrak brought this action before the court seeking a declaration of
the rights and obligations of the parties with respect to the
indemnifications of the freight operating agreement.
The operating agreement provided in part as follows:
"Amtrak agrees to indemnify and save harmless Conrail and Conrail
Employees, irrespective of any negligence or fault of Conrail or
Conrail Employees, or howsoever the same shall occur or be caused, from
any and all liability for injury to or death of any Amtrak Employee, or
for loss of, damage to, or destruction of the property of any such
Amtrak Employee. "Amtrak agrees to indemnify and save harmless Conrail
and Conrail Employees, irrespective of any negligence or fault of
Conrail or Conrail Employees, or howsoever the same shall occur or be
caused, from any and all liability for injuries to or death of any
Amtrak Passenger and for loss of, damage to, or destruction of any
property of any such passenger."
The issue presented in the case was "whether Amtrak must indemnify
Conrail for any damages--compensatory, punitive or exemplary--arising
out of the Chase accident that are founded upon reckless, wanton,
willful, or grossly negligent acts by Conrail."
The court found that the parties did not clearly manifest a mutual
intent at the time they executed the freight operating agreement, or
any previous agreement between the parties, for the indemnification
provisions to apply to accidents caused by gross negligence,
recklessness, or wanton and willful misconduct warranting the
imposition of punitive damages. In addition, the court found that
public policy would not allow enforcement of indemnification provisions
that appear to cover such extreme misconduct because serious and
significant disincentives to railroad safety would ensue. Under
District of Columbia law, contractual provisions may be invalidated
when they are contrary to public policy. Accordingly, the court ruled
that Amtrak was not required to indemnify Conrail where there were
allegations and a showing of gross negligence, recklessness, willful
and wanton misconduct, intentional misconduct, or conduct so serious as
to warrant the imposition of punitive damages.
Apfelbaum v. National Railroad Passenger Corp., No. 00-178, 2002 WL
32342481, 2002 U.S. Dist. Lexis 20321 (E.D. Pa. 2002):
Conclusion: The Southeastern Pennsylvania Transportation Authority
(SEPTA) entered into a contract in which it indemnified Amtrak against
any and all liability arising from the use of 30th Street Station in
Philadelphia. Under Pennsylvania law, a party may bring a claim against
the Commonwealth of Pennsylvania only if the basis for the claim falls
within one of the exceptions to immunity enumerated in the Pennsylvania
Sovereign Immunity Act. The U.S. District Court for the Eastern
District of Pennsylvania found that the claim by the plaintiff did not
fall within one of the statutory exceptions to immunity. Accordingly,
the court found that the contractually negotiated indemnity agreement
was unenforceable, stating that a Commonwealth agency could not waive
its sovereign immunity by any procedural device, including a contract,
and expose itself to liability prevented by the legislature.
Facts: An individual alleged that she slipped and fell in the 30th
Street Station in Philadelphia, Pennsylvania. The 30th Street Station
is owned by Amtrak and a portion is leased to SEPTA through a lease
agreement. As part of the lease agreement, SEPTA agreed to indemnify
Amtrak against any and all liability arising from or in connection with
the use or occupation of 30th Street Station. The plaintiff named
several defendants, including SEPTA, Amtrak, and the cleaning service
companies responsible for maintaining the station. SEPTA moved for
summary judgment claiming sovereign immunity. The other defendants
argued that SEPTA waived its sovereign immunity when it agreed to
indemnify Amtrak. Under Pennsylvania law, the Commonwealth of
Pennsylvania enjoys immunity from suit except when the General Assembly
has, by statute, expressly waived the immunity. The court found that
because the alleged dangerous condition resulting in injury was not
caused by a defect in the property owned by Pennsylvania, the claim did
not fall within any of the nine exceptions to immunity enumerated in
the Pennsylvania Sovereign Immunity Act. Accordingly, the court found
that the indemnity agreement was unenforceable.
Maryland Transit Admin. v. National Railroad Passenger Corp., 372 F.
Supp. 2d 478 (D. Md. 2005):
Conclusion: Pursuant to an operating agreement between the Maryland
Transit Administration (MTA) and Amtrak, MTA had agreed to indemnify
Amtrak for any liability except that which was caused by the gross
negligence of Amtrak. An arbitration panel found Amtrak's actions to be
grossly negligent. The court, however, upheld a second arbitration
panel's ruling that MTA was responsible for providing Amtrak with the
insurance coverage specified in the agreement notwithstanding the first
arbitration panel's finding that Amtrak was grossly negligent.
Facts: An Amtrak passenger train proceeded through a stop indication
and collided with a commuter train, causing significant damage. An
arbitration panel found that an Amtrak engineer was guilty of gross
negligence in causing the collision, and on the basis of language of
the operating agreement, determined that MTA was relieved of any
responsibility to indemnify Amtrak. The agreement essentially provided
that MTA agreed to indemnify Amtrak for any liability that would not
have arisen but for the existence of the commuter rail service, except
for any liability that was caused by the gross negligence of Amtrak.
A second arbitration panel independently found that MTA was responsible
for providing insurance coverage to Amtrak notwithstanding the fact
that Amtrak was found to be grossly negligent by the first arbitration
panel.
Amtrak sought confirmation from the United States District Court that
MTA was required to provide insurance coverage to Amtrak
notwithstanding the Amtrak engineer's gross negligence, and MTA
petitioned to vacate this award.
The court confirmed the arbitration panel's finding regarding MTA's
responsibility to provide insurance to Amtrak.
O&G Industries v. National Railroad Passenger Corp., 537 F.3d 153 (2d
Cir. 2008), petition for cert. filed (U.S. Jan. 14, 2009) (No. 08-895):
Conclusion: The United States Court of Appeals for the Second Circuit
held that a Connecticut statute that nullifies indemnity agreements
insulating a party from its own negligence was preempted to the extent
that it conflicted with 49 U.S.C. § 28103 (the provision of the Amtrak
Reform and Accountability Act of 1997 that states that a provider of
passenger rail transportation may enter into contracts that allocate
financial responsibility for claims).
The jury in the lower-court case found that Amtrak's conduct was not
reckless and Amtrak was not required to pay punitive damages, but the
court held that even if the jury had found Amtrak's conduct to be
reckless, O&G Industries (O&G) would still be required to indemnify
Amtrak. The court stated that it was the intent of Congress to allow
Amtrak to enter into indemnity agreements with respect to any claims
against Amtrak. The court also held that Amtrak could be indemnified
against third party as well as passenger claims.
Facts: O&G, a commercial construction company, contracted with the
Connecticut Department of Transportation to perform work related to I-
95 as it passed over Amtrak's tracks in East Haven. Amtrak and O&G
entered into a contract that permitted O&G to enter onto Amtrak
property to perform the work. In the contract, O&G agreed to indemnify
Amtrak. The indemnity agreement stated essentially that O&G would
indemnify Amtrak irrespective of its negligence or fault from any and
all losses and liabilities "arising out of in any degree directly or
indirectly caused by or resulting from activities of or work performed
by [O&G]." The agreement also stated that O&G would not indemnify
Amtrak where the negligence or fault of Amtrak was the sole causal
fault of Amtrak, except for injury or death of employees of Amtrak and
its contractors.
An Amtrak train struck and killed an O&G employee who was working on
the bridge.
Amtrak brought a suit against O&G for indemnification. O&G argued that
Amtrak's claim for contractual indemnification was barred by
Connecticut General Statute § 52-572k and Connecticut public policy.
The statute, based on public policy considerations, bars
indemnification agreements in construction contracts that shield a
party from its own negligence.[Footnote 65] Amtrak responded that 49
U.S.C. § 28103, which permits Amtrak to enter into indemnification
agreements, preempted the Connecticut statute.
The jury found that Amtrak was not reckless and so only had to pay
compensatory damages and not punitive damages. The jury also found,
however, that Amtrak had breached a material term of the contract by
failing to safely operate its train in the area of the work site,
relieving O&G from an obligation to indemnify Amtrak.
Amtrak moved for a judgment as a matter of law that O&G must indemnify
it. Amtrak stated that notwithstanding the jury verdict, the facts of
the accident fell within the wording of the indemnification agreement,
and that O&G was legally obligated to indemnify Amtrak. The lower court
agreed and required O&G to indemnify Amtrak.
O&G appealed its case to the United States Court of Appeals for the
Second Circuit. The court held that the Connecticut statute that
nullified indemnity agreements that insulated a party from its own
negligence was preempted to the extent that it conflicted with federal
law, and the facts of the accident fell within the wording of the
indemnification agreement so that O&G was legally obligated to
indemnify Amtrak.
In addition, the court held that even if the jury had found Amtrak's
conduct to be reckless, O&G would still be required to indemnify
Amtrak. The court stated that 49 U.S.C. § 28103(b), the provision in
the Amtrak Reform and Accountability Act of 1997 that authorizes a
provider of rail passenger transportation service to enter into
contracts that allocate financial responsibility for claims,
legislatively overruled the opinion in National Railroad Passenger
Corp. v. Consolidated Rail Corp. ("Conrail"), 698 F. Supp. 951 (D.D.C.
1988) (invalidating an agreement to indemnify for losses caused by the
indemnitee's gross negligence, as contrary to District of Columbia
public policy), vacated on other grounds, 892 F.2d 1066 (D.C. Cir.
1990). The court stated the following:
"As Judge Dorsey correctly noted in granting summary judgment to
Amtrak, it was precisely the doubts cast by the Conrail decision over
the validity of indemnity agreements by railroad parties that prompted
Congress to enact § 28103(b).... The broad, unqualified language in §
28103(b) leaves no doubt as to the specific intent of Congress to
sanction indemnity arrangements between Amtrak 'and other parties' with
respect to any claims against Amtrak. See S.Rep. No. 105-85, at 5
(1997)."
Deweese v. National Railroad Passenger Corp., 2009 WL 222986, 2009 U.S.
Dist. LEXIS 6451 (E.D. Pa. 2009) (Memorandum of Decision):
Conclusion: The U.S. District Court for the Eastern District of
Pennsylvania held that 49 U.S.C. § 28103 preempted Pennsylvania's
sovereign immunity statute. The court upheld the validity of the
indemnification agreements between Amtrak and the Southeastern
Pennsylvania Transportation Authority (SEPTA). SEPTA has argued that it
did not have the power to waive its sovereign immunity and that this
issue was previously litigated in favor of SEPTA and against Amtrak in
Apfelbaum v. National Railroad Passenger Corp., 2002 WL 3234281, 2002
U.S. Dist. Lexis 20321 (E.D. Pa. 2002), and collateral estoppel
precluded Amtrak from litigating it again.[Footnote 66] Amtrak conceded
that the Commonwealth did not have the power to waive its sovereign
immunity and that the issue had been fully litigated, but instead
argued that the sovereign immunity of the Commonwealth had been
preempted by 49 U.S.C. § 28103(b). The court agreed with Amtrak and
against SEPTA.
Facts: The plaintiff, Deweese, went to the Crum Lynne train station in
Ridley Park, Pennsylvania to board a SEPTA train bound for
Philadelphia. When he arrived at the station, he learned that he had to
board the train from the tracks on the opposite side of where he had
entered the station. He attempted to cross the tracks and was struck by
an Amtrak train, resulting in serious injuries. Amtrak owned the Crum
Lynne station and SEPTA leased the station from Amtrak. The railroad
tracks at the station were owned by Amtrak as well. As part of the
lease agreement between Amtrak and SEPTA, SEPTA agreed to indemnify
Amtrak for all liability which would not have occurred but for the
existence of the commuter service provided by SEPTA. The agreement for
access to the railroad tracks contained a similar provision.
State Cases Addressing Enforceability of Liability and Indemnity
Provisions:
Mass Transit Administration v. CSX Transportation Inc., 708 A.2d 298
(Md. 1998):
Conclusion: The Court of Appeals of Maryland held that a Maryland
statute (which provides that an indemnification in a contract
pertaining to construction is void and against public policy if the
party indemnified is negligent) applies only to construction contracts,
not to indemnification provisions in procurement contracts.
Accordingly, the Mass Transit Administration (now the Maryland Transit
Administration) was required to indemnify CSX Transportation (CSX).
Facts: A Maryland Rail Commuter (MARC) train operated by CSX struck a
backhoe that was performing maintenance on the track. The operator of
the backhoe was a CSX contractor. No one was injured. The backhoe
operator sued CSX for the value of the backhoe, and the parties
settled. CSX then claimed indemnification from MTA, of which MARC is a
part. MTA argued that the indemnification provision in the commuter
rail passenger service agreement between CSX and MTA was void based on
the Maryland statute that provides that an indemnification in a
contract pertaining to the construction, alteration, repair, or
maintenance of a building, structure, appurtenance, or appliance for
damages arising from the negligence of the party indemnified is against
public policy and is void and unenforceable.
The Court of Appeals of Maryland held that MTA was required to
indemnify CSX. The court stated that the Maryland statute applies only
to construction contracts, not to indemnification provisions in
procurement contracts, and the contract did not become a construction
contract because of the collision between a train and a backhoe.
Pacific Insurance Co. v. Liberty Mutual Insurance Co., 956 A.2d 1246
(Del. 2008):
Conclusion: The Supreme Court of Delaware held that the insurance
policy providing Conrail with coverage would not violate a Delaware
statute providing that public policy precludes contractual
indemnification for a party's own negligence. The court held that the
insurance purchased to protect Conrail, once issued, could not be held
unenforceable against Conrail.
Facts: Conrail is the only rail entity in this case, but the case is
relevant in that it holds if a state law prohibits indemnification for
certain types of conduct, insurance provisions still must be honored if
this type of conduct occurs. This case involved an insurance coverage
dispute that arose from fatal accidents that occurred on a railroad
crossing owned by Conrail during a road construction project carried
out by the Delaware Department of Transportation. Two wrongful death
actions were filed as a result. These actions were settled, but a
dispute over coverage under two insurance policies remained. One of the
insurance companies argued, among other things, that it was not
required to provide the contractual coverage because of a state statute
that precluded contractual indemnification for a party's own
negligence. The court held that the insurance purchased to protect
Conrail, once issued, could not be held unenforceable against the
indemnified party, even where the party was found to be negligent.
Massachusetts Bay Transportation Authority and Massachusetts Bay
Commuter Railroad Co. v. CSX Transportation Inc. and Cohenno Inc.
(Super. Ct. Civ. Action 2008-1762-BLS1) (Memorandum and Order on
Defendant CSX Transportation, Inc.'s Motions to Dismiss):
Conclusion: The Business Litigation Session of the Massachusetts
Superior Court held that provisions that indemnify CSX are
unenforceable on the basis of the Massachusetts common law to the
extent that the contractual provisions indemnify CSX against its own
gross negligence or reckless or intentional conduct.
Facts: In March 2008, a freight car that had been delivered by CSX to a
shipping depot rolled down the siding at the top of a hill, where it
crashed into a commuter train with roughly 300 passengers, injuring
many.
The 1985 trackage rights agreement between the Massachusetts Bay
Transportation Authority (MBTA) and CSX states that MBTA will indemnify
CSX "irrespective of any negligence or fault . . . from any and all
liability, damage, or expense of any kind" arising out of damages or
injury to any MBTA employee or other contractor of MBTA or out of
damage to MBTA property.[Footnote 67] MBTA, and its contractor MBCR,
filed a lawsuit with the Business Litigation Session of the
Massachusetts Superior Court seeking a declaration that CSX was liable
for the damages arising from the accident. CSX filed a motion to
dismiss for failure to state a claim.
The court held that under Massachusetts common law, contracts that
relieve a party of responsibilities in cases of gross negligence or
willful misconduct are against public policy and are not enforceable.
The court stated that it was governed by controlling appellate
authority holding that a party may not shield itself from liability for
gross negligence or reckless or intentional conduct.[Footnote 68] The
court, however, citing Massachusetts case law, stated that it is not
contrary to public policy to exempt a party from its own simple
negligence.[Footnote 69] The court stated that a party, in the absence
of unconscionable conduct, can contractually exempt itself from
liability from negligence. Accordingly, the court held that the
agreement was valid to the extent that it indemnified CSX for
negligence, and invalid to the extent that it indemnified CSX for gross
negligence or reckless or intentional conduct.
Surface Transportation Board Decisions Addressing Enforceability of
Liability and Indemnity Provisions:
The Rail Passenger Service Act of 1970 provides that Amtrak and freight
railroads may contract for Amtrak's use of the freight railroads'
facilities. If the parties cannot agree upon a contract, the Surface
Transportation Board (STB) may order access and prescribe the terms and
conditions of the contract, including compensation.
Application of the National Railroad Passenger Corp. under 49 U.S.C.
24309(a) --Springfield Terminal Railway Co., Boston and Maine Corp. and
Portland Terminal Co., 3 S.T.B. 157 (1998):
Conclusion: Amtrak petitioned STB to set terms and compensation for
Amtrak's use of track owned by the freight railroads in the Guilford
Rail System. Amtrak agreed to indemnify the freight railroads for
certain standard risks. STB determined that other residual damages
arising out of Amtrak's operations were an incremental cost for which
Guilford was entitled to compensation. In addition, STB refused to
require Amtrak to reimburse the freight carriers from damages due to
the freight carriers' gross negligence, recklessness, or wanton or
willful conduct.
Facts: Amtrak petitioned STB to set the terms and compensation for
Amtrak's use of freight carriers' lines to provide passenger service
between Boston and Portland, Maine.
Amtrak asked STB, in prescribing the terms and conditions, to adopt
Amtrak's standard liability agreement with freight railroads, known as
section 7.2. This section essentially allocates liability on a no-fault
basis, that is, Amtrak agrees to indemnify the host railroad against
liability resulting from any damages that occur to Amtrak employees,
equipment, and passengers, regardless of fault, and the host railroad
agrees to indemnify Amtrak against any liability resulting from damages
to the host railroad's employees or equipment, regardless of fault.
In the proposed agreement at issue in this case, Amtrak agreed to
assume full responsibility for the following types of damages: (1)
injury or death to Amtrak employees or damage to their property, (2)
injuries or death to Amtrak passengers and damage to their property,
(3) damage to Amtrak equipment or property, and (4) injuries or death
to any person or damage to property (other than property of Guilford
and of its employees) proximately caused as a result of a collision of
a vehicle or a person with an Amtrak train at a grade crossing.
Amtrak proposed that the freight carriers assume liability for the
following types of damages that could occur because of Amtrak's
presence on the tracks, in return for a payment of approximately
$17,000 per year:
* injury to trespassers and licensees;
* general indirect damages, such as environmental damage to houses near
the tracks; and:
* injuries or death to Guilford employees or damage to their property
or to the property of Guilford.
STB found that the liability for these "residual damages" arising out
of Amtrak operations was an incremental cost for which the carriers
were entitled to compensation. STB directed Amtrak to either:
* fully indemnify the freight railroad for the residual damage
categories, as it had agreed to do for other damage categories;
* purchase insurance to cover the freight carrier's assumption of
liability for all such costs (i.e., without deductibles or low caps,
even if that required the purchase of more than one policy); or:
* combine the first two methods (by, e.g., purchasing insurance with a
deductible or low cap, but agreeing to indemnify the freight railroads
for damages that were subject to the deductible or cap).
In addition, STB would not require Amtrak to reimburse the freight
carriers from damages due to the freight carriers' gross negligence,
recklessness, or wanton or willful conduct. STB stated that statute
requires that compensation levels reflect safety
considerations,[Footnote 70] and thus the freight carriers should be
encouraged to conduct the operations safely. It also stated that public
policy generally disfavors requiring one party to be responsible for
another's gross negligence or willful and wanton misconduct.
Boston and Maine Corp. and Springfield Terminal Railway Co. v. New
England Central Railroad, STB Finance Docket No. 34612 (2006):
Conclusion: STB held that the indemnity provision in the operating
agreement between Boston and Maine (B&M) and the New England Central
Railroad (NECR) could not be used to indemnify NECR, which had been
found to be grossly negligent, since such an interpretation would
"contravene well-established precedent that disfavors such
indemnification provisions" and would be contrary to the rail
transportation policy, which requires STB to "promote a safe and
efficient transportation system" and "operate facilities and equipment
without detriment to the public health and safety."
Facts: Pursuant to a previous Interstate Commerce Commission (ICC)
[Footnote 71] order, B&M conveyed its "Connecticut River Line" to
Amtrak subject to Amtrak's granting B&M trackage rights on the line.
Amtrak transferred the line to the Central Vermont Railway, which
subsequently was purchased by NECR. NECR also took over the trackage
agreement.
A B&M train operating over the Connecticut River Line derailed. B&M
sued NECR for breach of contract and tortuous injury due to gross
negligence, recklessness, and willful misconduct concerning NECR's
alleged failure to maintain the line. NECR responded that any claims
based on the condition of the track were barred by section 7.1 of the
trackage rights order issued by ICC.[Footnote 72] B&M argued that
NECR's interpretation of section 7.1 was contrary to public policy
because it would apportion all responsibility for the derailment to B&M
even if the derailment was caused solely by grossly negligent,
reckless, or willful misconduct by NECR. STB was called upon to
determine whether ICC intended section 7.1 to indemnify for gross
negligence.
STB held that section 7.1 should not be construed to absolve NECR of
gross negligence since such an interpretation would "contravene well-
established precedent that disfavors such indemnification provisions"
and would be contrary to provisions in the federal government's rail
transportation policy that require STB to "promote a safe and efficient
transportation system" and "operate facilities and equipment without
detriment to the public health and safety."[Footnote 73]
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan A. Fleming, (202) 512-4431 or flemings@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Nikki Clowers, Assistant
Director; Alana Finley; Brandon Haller; Hannah Laufe; Nancy Lueke; and
Aron Szapiro made key contributions to this report.
[End of section]
Footnotes:
[1] U.S. Department of Transportation, Freight Facts and Figures 2007.
[2] Commuter rail is a type of public transit that is characterized by
passenger trains operating on railroad tracks and providing regional
service (e.g., between a central city and adjacent suburbs). Commuter
rail agencies are typically owned and operated by state and local
governments.
[3] Rights-of-way include the fixed infrastructure required for train
operations, including tracks and signals.
[4] Class I freight railroads are the largest railroads, as defined by
operating revenue, and account for the majority of U.S. freight rail
activity. The Surface Transportation Board designates the class of
railroad and defined Class I railroads as railroads with operating
revenues of $346.8 million or more in 2006. Currently, seven Class I
freight railroads--CSX Transportation, BNSF Railway, Union Pacific
Railroad Company, Norfolk Southern, Kansas City Southern Railway
Company, Canadian National Railway Company, and Canadian Pacific
Railway--are operating in the United States.
[5] Liability is the legal obligation to pay claims arising from
injuries to people or damages to property. Indemnity is a contractual
provision under which one party agrees to protect the other party
against loss or damages that it may sustain in connection with the
contract. Through an indemnity provision, the parties may allocate
financial responsibility for claims. See, GAO, Commuter Rail:
Information and Guidance Could Help Facilitate Commuter and Freight
Rail Access Negotiations, GAO-04-240 (Washington, D.C.: Jan. 9, 2004).
[6] FRA exercises jurisdiction over all areas of railroad safety under
title 49, chapter 201, of the United States Code.
[7] 49 U.S.C. § 28502.
[8] For the purposes of this report, we define "proposed commuter rail
agencies" as agencies that plan to initiate commuter rail service
within the next 5 years.
[9] We obtained and reviewed agreements between commuter rail agencies
and Amtrak, commuter rail agencies and Class I freight railroads, and
Amtrak and freight railroads.
[10] The court cases and STB decisions that we reviewed are summarized
in appendix IV.
[11] Pub. L. No. 105-134, 111 Stat. 2570 (1997).
[12] The opinion by the U.S. Court of Appeals for the Second Circuit,
entitled O&G Industries v. National Railroad Passenger Corp., 537 F.3d
153 (2d Cir. 2008), petition for cert. filed (U.S. Jan. 14, 2009) (No.
08-895) found that section 28103(b) preempts state law, even if the
contractual indemnification is for Amtrak's reckless conduct. The
Second Circuit opinion concluded that Congress' intent in enacting
section 28103(b) was to "supersede" the effect of a 1988 district court
opinion holding that it was against District of Columbia public policy
to enforce an Amtrak indemnity agreement for losses caused by Amtrak's
gross negligence. See O&G, 537 F.3d at 166-67, citing National Railroad
Passenger Corp. v. Consolidated Rail Corp., 698 F. Supp. 951 (D.D.C.
1988), vacated on other grounds, 892 F.2d 1066 (D.C. Cir. 1990).
[13] However, a federal district court held in a January 2009
memorandum of decision that 49 U.S.C. § 28103(b) preempted
Pennsylvania's sovereign immunity statute.
[14] Pub. L. No. 91-518, 84 Stat. 1327 (1970).
[15] Amtrak operates over 95 percent of its 22,000-mile network on
freight railroad tracks and owns about 655 route miles of track,
primarily on the NEC between Boston, Massachusetts, and Washington,
D.C. In fiscal year 2001, an average of 38 freight trains used the NEC
each day.
[16] 49 U.S.C. § 24308(a)(2)(B), (c).
[17] The shared-use agreement documents how the rights-of-way will be
operated--for example, it will outline the agreed-upon dispatching
rules.
[18] For example, the Northeast Illinois Regional Commuter Railroad
Corporation, which serves the Chicago area, operates on shared rights-
of-way with six Class I freight railroads and Amtrak and has separate
agreements governing each of these relationships.
[19] Pub. L. No. 105-134, title I, § 161 (1997), codified at 49 U.S.C.
§ 28103.
[20] We only analyzed agreements between commuter rail agencies and
Class I freight railroads and did not obtain information from the few
short-line railroads that have agreements with commuter rail agencies.
[21] These agreements are based on the number of distinct liability and
indemnity agreements between a commuter rail agency and a freight
railroad. Therefore, if 2 entities have multiple contracts with the
same liability and indemnity provisions, they are counted as a single
agreement.
[22] This includes an agreement in which the liability and indemnity
provisions exclude certain conduct for liability up to $5 million and
include it for liability above $5 million.
[23] Punitive damages are damages awarded in a lawsuit in addition to
actual damages when the defendant acted with recklessness, malice, or
deceit, and are assessed to penalize the wrongdoer or make an example
to others.
[24] This includes an agreement in which the liability and indemnity
provisions exclude certain conduct for liability up to $5 million and
include it for liability above $5 million.
[25] For example, Massachusetts case law states that it is against
public policy to indemnify for gross negligence. A Massachusetts court
recently held that provisions in a 1985 agreement that indemnified a
freight railroad against all liability were unenforceable based on
Massachusetts common law, to the extent the contractual provisions
indemnified the freight railroad against its own gross negligence or
reckless or intentional conduct. See Massachusetts Bay Transportation
Authority and Massachusetts Bay Commuter Railroad Co. v. CSX
Transportation Inc. and Cohenno Inc. (Super. Ct. Civ. Action No. 2008-
1762-BLS1) (Memorandum and Order on Defendant CSX Transportation,
Inc.'s Motions to Dismiss).
[26] In addition, insurance coverage may protect the indemnified party,
even if the conduct itself cannot be indemnified. For example, a
commuter rail operator agreed to indemnify Amtrak for any liability,
except that which was caused by the gross negligence of Amtrak. A
federal district court held that while an arbitration panel found
Amtrak's actions to be grossly negligent, the commuter rail operator
was responsible for providing Amtrak with the insurance coverage it had
purchased in the agreement. See Maryland Transit Administration v.
National Railroad Passenger Corp., 372 F. Supp. 2d 478 (D. Md. 2005).
[27] When freight railroads access Amtrak infrastructure, 12 of
Amtrak's 13 agreements for hosting freight railroads are no fault.
[28] 49 U.S.C. § 28103(c).
[29] Only 11 commuter rail agencies were able to provide information on
the insurance premiums for their commuter rail operations. The primary
reason the other commuter rail agencies could not provide this
information is that they are part of a transit agency that operates
other modes of transit, such as light rail or bus services, and the
transit agency obtains commercial insurance to cover all of their
services. As a result, the cost of insuring the commuter rail service
could not be disaggregated from the other services. In addition, some
commuter rail agencies do not have commercial insurance or have not yet
obtained insurance for their proposed service.
[30] Claims resulting from the recent Metrolink accident have not yet
been determined, but could exceed the self-insured retention carried by
the Southern California Regional Rail Authority.
[31] The liability provisions set forth in ARAA are contained in
section 161. All references to ARAA that we make in this report refer
to section 161.
[32] A tort is a civil (as opposed to a criminal) wrong that causes
injury, other than a breach of contract, for which the victim may sue
to recover damages. See, Congressional Research Service, Federal Tort
Reform Legislation: Constitutionality and Summaries of Selected
Statutes, February 26, 2003.
[33] National Railroad Passenger Corp. v. Consolidated Rail Corp., 698
F. Supp. 951 (D.D.C. 1988), vacated on other grounds, 892 F.2d 1066
(D.C. Cir. 1990).
[34] We use the term "commuter rail operator" to be consistent with the
language in ARAA. In these cases, a commuter rail operator may be a
commuter rail agency, but it could also be another entity operating the
commuter service on behalf of the commuter rail agency.
[35] [hyperlink, http://www.gao.gov/products/GAO-04-240].
[36] 49 U.S.C. § 28103(a)(1).
[37] 49 U.S.C. § 28103(e)(1).
[38] The cap is restricted to "a claim for personal injury to a
passenger, death of a passenger, or damage to property of a passenger."
49 U.S.C. § 28103(a)(1).
[39] 49 U.S.C. § 28103(b).
[40] An indemnification provision is a contractual provision under
which one party agrees to protect the other party against loss or
damages it may sustain in connection with the contract.
[41] The Second Circuit consists of all federal courts within
Connecticut, New York, and Vermont.
[42] 537 F. 3d 153 (2d Cir. 2008), petition for cert. filed (U.S. Jan.
14, 2009) (No. 08-895).
[43] Two Supreme Court cases reflect the U.S. Supreme Court's fairly
recent shift toward protecting state sovereign immunity against federal
legislation waiving a state's immunity from suit by a private party:
Seminole Tribe of Florida v. Florida, 571 U.S. 44 (1996), which holds
that Congress cannot rely on the Commerce Clause to abrogate the
Eleventh Amendment immunity that states enjoy from suit by a private
party in a federal court, and Alden v. Maine, 527 U.S. 706 (1999),
which holds that Congress cannot force unconsenting states to be sued
by a private party in their own state courts.
[44] Deweese v. National Railroad Passenger Corp., 2009 WL 222986, 2009
U.S. Dist. LEXIS 6451 (E.D. Pa. 2009) (Memorandum of Decision).
[45] The Rail Passenger Service Act of 1970 provides that Amtrak and
the freight railroads may contract for Amtrak's use of the facilities
owned by the freight railroads. If the parties cannot agree on a
contract, STB may order access and prescribe the terms and conditions
of the contract, including compensation.
[46] 49 U.S.C. § 10101(3), (8).
[47] Boston and Maine Corp. and Springfield Terminal Railway Co. v. New
England Central Railroad, STB Finance Docket No. 34612 (2006), at 1-2.
[48] [hyperlink, http://www.gao.gov/products/GAO-04-240].
[49] 49 U.S.C. § 24904(c)(1).
[50] The state laws identified by commuter rail agency, freight
railroad, and Amtrak officials do not represent the universe of state
laws that could influence the negotiations of liability and indemnity
provisions.
[51] The options that we identify in this section of the report are
based on information we obtained from our interviews with commuter rail
agency, Amtrak, and freight railroad officials. Not all of these
officials identified each of these as options for facilitating
negotiations of liability and indemnity provisions. Therefore, our
intent is not to focus on the frequency with which the officials
identified each option, but to inform the reader about the various
options that could facilitate negotiations of liability and indemnity
provisions in the future.
[52] 15 U.S.C. §§ 3901-3906.
[53] Commuter rail agencies' insurance coverage is usually structured
in layers of $25 million beyond the self-insured retention, up to the
total amount of insurance coverage (e.g., $200 million). The lower
layers are typically more expensive because claims are likely to fall
in these layers, rather than the layers covering the upper limits of
the insurance coverage.
[54] We previously have reported that traditional insurers, as well as
nonrisk retention group captive insurers, are subject to the licensing
requirements and oversight of each nondomiciliary state in which they
operate, whereas risk retention groups are required to register only
with the regulator of the state in which they intend to sell insurance
and to provide copies of certain documents originally provided to
domiciliary regulators. See, GAO, Risk Retention Groups: Common
Regulatory Standards and Greater Member Protections Are Needed, GAO-05-
536 (Washington, D.C.: Aug. 15, 2005).
[55] Two commuter rail agencies told us that they have single-parent
captives that provide coverage for some of their other transit programs
or part of their commuter rail operation. In addition, some freight
railroad officials stated that they have single-parent captives.
[56] During a hard market, insurance prices rise and insurers tend to
narrow their coverage, tighten their underwriting standards, and
withdraw from certain markets.
[57] Under the Price-Anderson Act, licensees of nuclear power plants
are required to purchase primary and secondary insurance, up to a cap.
The act also provides a process by which the Nuclear Regulatory
Commission can ask Congress for additional funds if claims for damages
from a nuclear incident exceed the pooled primary and secondary
insurance coverage. 42 U.S.C. § 2210.
[58] GAO, Natural Disasters: Public Policy Options for Changing the
Federal Role in Natural Catastrophe Insurance, [hyperlink,
http://www.gao.gov/products/GAO-08-7] (Washington, D.C.: Nov. 26,
2007).
[59] 49 U.S.C. § 28502.
[60] APTA's list identified 22 existing commuter rail operators. We
excluded 1 commuter agency from our universe, the Alaska Railroad
Corporation, because it is mostly a tourism operation. In addition to
those proposed commuter rail agencies that we eliminated from our scope
on the basis of publicly available information, we eliminated 2
proposed agencies when we contacted them and learned they either did
not plan to initiate service within the next 5 years or did not
consider themselves a commuter rail agency. For purposes of the laws
that FRA and FTA administer or enforce, this list of existing and
proposed commuter rail agencies is not necessarily reflective of what
each agency would identify as commuter rail agencies.
[61] We used APTA data on ridership for 2007 to determine the ridership
levels of commuter rail agencies.
[62] Commuter rail agencies that did not have liability agreements with
Amtrak or a Class I freight railroad were the Regional Transportation
Authority Music City Star and the Northern Indiana Commuter
Transportation District.
[63] The SunRail agreement was contingent on legislative approval.
[64] GAO, Terrorism Insurance: Status of Efforts by Policyholders to
Obtain Coverage, [hyperlink, http://www.gao.gov/products/GAO-08-1057]
(Washington, D.C.: Sept. 15, 2008); Risk Retention Groups: Common
Regulatory Standards and Greater Member Protections Are Needed,
[hyperlink, http://www.gao.gov/products/GAO-05-536] (Washington, D.C.:
Aug. 15, 2005); and Nuclear Regulation: NRC's Liability Insurance
Requirements for Nuclear Power Plants Owned by Limited Liability
Companies, [hyperlink, http://www.gao.gov/products/GAO-04-654]
(Washington, D.C.: May 28, 2004).
[65] On appeal, Amtrak claimed that the Connecticut statute applied
only to construction contracts, and that the contract at issue was not
a construction contract. Because Amtrak did not contest the
applicability of the Connecticut statute during the lower-court
proceedings, the Second Circuit held that Amtrak had waived that
argument and could not raise it on appeal.
[66] Collateral estoppel is a doctrine barring a party from
relitigating an issue determined against that party in an earlier
action, even if the second action differs significantly from the first
one.
[67] The agreement also provides that the party whose negligence caused
injury to any person will indemnify the other party. CSX contended that
this issue had not yet become ripe. The court disagreed but did not
determine as part of this proceeding, which party, if either, was
negligent.
[68] See Zavras v. Capeway Robers Motorcycle Club, 44 Mass. App. Ct.
17, 18-19 (1997); HR Knowledge, Inc. v. Professional Insurance & Risk
Brokerage, 71 Mass. App. Ct. 1127 (Memorandum and Order Pursuant to
Rule 1:28) (2008).
[69] See Cornier v. Central Mass. Chapter of the National Safety
Council, 416 Mass. 286, 287-289 (1993).
[70] As an example of a statute requiring that compensation levels
reflect safety considerations, STB cited 49 U.S.C. § 10101 (3), (8)
(part of the federal government's rail transportation policy), which
requires STB to "promote a safe and efficient transportation system"
and "operate facilities and equipment without detriment to the public
health and safety."
[71] ICC was the predecessor to STB.
[72] Section 7.1 of the Trackage Rights Order provides (6 I.C.C.2d at
564): "Save as herein otherwise provided, each party hereto shall be
responsible for and shall assume all loss, damage or injury (including
injury resulting in death) to persons or property, including the cost
of removing any trackage, repairing trackage and correcting
environmental damage, which may be caused by its engines, cars, trains
or other on-track equipment (including damage by fire originating
therefrom) whether or not the condition or arrangement of the trackage
contributes in any manner or to any extent to such loss, damage or
injury, and whether or not a third party may have caused or contributed
to such loss, damage or injury, and for all loss or damage to its
engines, cars, trains or other on-track equipment while on said
trackage from any cause whatsoever, except in the case of collision, in
which event the provisions of Section 7.2 shall apply."
[73] 49 U.S.C. § 10101 (3), (8).
[End of section]
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