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Rail v. Pipe Claims

Adjusters for both p&c insurance carriers and self-insured industries such as utilities, railroads and pipelines will encounter wide-reaching claims involving hazardous materials in the years to come.

By Ken Brownlee, CPCU | Updated on October 01, 2013
When the brakes failed on a 72-car oil tank train on the Montreal, Maine & Atlantic Railways, Inc. in the small village of Nantes, Quebec, about seven miles west of Lac-Mgantic, a string of tank cars rolled downgrade and exploded in the center of the town, killing as many as 50 people, many in the Musi-Cafe enjoying a 1 a.m. Saturday morning dance. What caused the parked train to run away was under investigation by the railroad and the Canadian government, reported Edward Burkhardt, CEO of the MM&A Railways, a Class II railroad, later that week, but it may take time to sort out the facts.

This accident underscores a type of disaster claim that adjusters for both insurers and self-insured industries such as utilities, railroads and pipelines will be presented in increasing numbers in the next decade. Trains of tanker cars full of crude oil from the North Dakota Bakken Oil Shale field (Williston Basin) and similar oil fields in Texas and Pennsylvania move the valuable fossil fuel to refineries. The accident is bound to renew debate in Washington and Wall Street over the need to construct the Keystone XL Oil Pipeline from Hardisty, Alberta to Patoka, Illinois or Houston, Texas. Whether the oil is transported by rail or by pipeline can make a difference in the type of claims that may result. Claims adjusters need to be familiar with the laws that will affect such transport.

Statistics Show Both Are Hazardous

In the rail versus pipeline dispute the fact that the gallons of oil per million ton miles spilled by railroads over the past eleven years is nearly twice that of the number of gallons spilled from pipelines is deceptive. While in 2008 115.86 gallons of oil were spilled per million ton-miles, due to a Minnesota derailment in which a 26,000 gallon oil car was ruptured, the average for the other ten years was only .584 gallons per million ton-miles for railroads verses 5.99 gallons per million ton-miles for oil pipelines. For the same eleven years, reports the Association of American Railroads, railroads had 129 reported incidents of spillage, involving 2,268 barrels of oil, an average of 17.6 barrels per spill, while pipelines had a reported 1,849 incidents with spillage of 474,442 barrels of oil, an average of 256.6 barrels per spill. By comparison pipelines carried 19,467.8 billion barrel-miles compared to only 268.3 billion barrel-miles for railroads. That volume, however, is increasing as ever more oil is shipped by rail.

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