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May 16, 2013
Railroad denied liability protection for TIH commodities

Chemical manufacturers welcomed a decision by the federal Surface Transportation Board (STB) that denied a petition from Union Pacific Railroad Company (UP) to require that shippers of toxic-by-inhalation (TIH) commodities indemnify the UP against any and all liabilities resulting from the negligence or fault of the shippers, the negligence or fault of third parties, or acts of God. 

In general, the STB found that the indemnification language included in UP’s Tariff 6607 (General Rules for Movement of Toxic or Poison Inhalation Commodity Shipments over the Lines of the Union Pacific Railroad) is overly broad and requires shippers to provide protection that the UP already has through insurance.

UP’s tariff

Conditions covered by the indemnity provision in UP’s tariff include:

  • Any failure of, release from, or defect in equipment tendered by customer for the transportation of a TIH commodity;
  • Loading, sealing, and securing a TIH commodity in such equipment;
  • Release, unloading, transfer, delivery, treatment, dumping, storage, or disposal of a TIH commodity not caused by the sole or concurring negligence or fault of the railroad;
  • Any fines, penalties, or suits resulting from alleged or actual violation of federal, state, or local environmental or other law, statute, ordinance, code, or regulation that was not attributable to the railroad; and
  • Any loss caused by the sole negligence or fault of the customer.

Cost recovery

The STB denied the petition for the following reasons:

  • The tariff language could subject TIH shippers to a wide range of liability not related to the presence of TIH.  For example, if a train carrying TIH derails, resulting in a spill of diesel fuel but no TIH release and no evacuation or other TIH-related impact, the tariff provisions could nonetheless subject TIH shippers to liability to the extent the damage was caused by a third party or act of God.
  • Shippers would also be requiredto protect the UP from smaller liabilities against which the UP can already protect itself through insurance.  The UP argued that it is compelled to self-insure for incidents up to       $25 million and claimed that there is no assurance that it can recover these costs.  The STB disagreed.  “To the extent appropriate, UP can recover these costs just as it would recover any other operating cost, such as labor, equipment, fuel cost, real estate, or advertising,” said the STB.
  • The UP also argued that indemnity would give shippers an incentive to consider what TIH materials to ship, how much to ship, when to ship, and the origin and destination of the shipment.  The STB disagreed that UP’s tariff provision would be the only option available to provide such incentives to shippers and that other options are significantly less onerous than requiring shippers to bear liabilities for which they are not directly responsible.

The STP concluded that the UP did not meet the burden of proof to support its tariff provision that shippers must protect the UP from smaller, noncatastrophic risks and from liabilities not due to the presence of TIH.

Click here for the STB decision.

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