Last week the Surface Transportation Board issued their
ruling on a request by Union Pacific Railroad that the STB allow certain
measures in its toxic inhalation hazard (TIH) chemical tariff schedule relating
to requiring shippers to indemnify UP against all liabilities not caused by UP’s
own negligence or fault. The STB denied UPs request. This is part of the
ongoing conflict between railroads and TIH shippers.
Railroad Issues
Under the longstanding common carrier obligation railroad
have a legal duty to provide reasonably priced carriage for all TIH cargos
properly offered. Railroads acknowledge that obligation, but note that they
assume a huge potential liability every time they transport a rail car
containing TIH materials. If that car is involved in an incident where there is
a release of a toxic gas, particularly a catastrophic release, they face
potential law suits and other legal actions that could literally bankrupt a Class
I railroad.
Over the years the various railroads have attempted to take
a number of action to reduce their potential liability. They have attempted to
add TIH surcharges, restrict locations from which they would accept or deliver
TIH cargos, limit the routes and interchanges over which they would transport TIH
cargos, and place burdensome rules on the handling of TIH cargos. In almost all
cases they were stopped or severely limited in the application of these measures
by the STB in its regulatory capacity.
Liability
Indemnification
In this case UP requested that the STB issue a declaratory
order in support of the liability provisions of Items 50 and 60 of UP Tariff 6607,
“General Rules for Movement of Toxic or Poison Inhalation Commodity Shipments
over the Lines of the Union Pacific Railroad”. According to the STB decision
the first item “requires TIH shippers to indemnify UP and any parent or
affiliated companies against ‘any and all liabilities [emphasis
added] except those caused by the sole or concurring negligence or fault’ of UP”
(pg 2).
STB Decision
The Board ruled against UP because the language and effects
of the UP were overly broad. The Board had problems with the tariff language in
two specific areas:
• Indemnification for liabilities
not due to the presence of TIH; and
• Indemnification for liabilities
for which protection is available without up’s tariff provisions.
In the first instance UP had argued that while there was no
specific language in the tariff limiting the liability indemnification
specifically to TIH associated liabilities that in actual application that is
what the tariff provisions meant. STB was not impressed with this line of
argument, noting that “leaving such an ambiguity in place would not adequately
inform TIH shippers what service terms they are accepting under the tariff” (pg
4).
In the second instance UP had reported that the $1.2 billion
dollars of commercial liability insurance that it was able to purchase in 2012
would not have been enough to cover its liabilities in the event of a
catastrophic release in a major urban area. UP noted that those liability costs
could run in the tens to hundreds of billions of dollars in that case. STB rejected
that argument because under the language in the tariff the shippers “would also
be required (sic) to
protect UP from smaller liabilities against which UP can already protect itself
through insurance” (pg 4).
There was nothing, however, in the language of the decision
that indicated that the Board had any general objections to the efforts of
railroads to include liability indemnification in their TIH related tariffs.
They were very careful to only address the overly broad application in this
particular instance. This is part of a long standing STB policy to narrowly rule on TIH issues.
I suspect that we haven’t seen the last of this issue.
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