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Railroad Legal Issues and Resources (2015)

Chapter: XXVI. Insurance and Indemnity Agreements

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Page 105
Suggested Citation:"XXVI. Insurance and Indemnity Agreements." National Academies of Sciences, Engineering, and Medicine. 2015. Railroad Legal Issues and Resources. Washington, DC: The National Academies Press. doi: 10.17226/22093.
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Page 106
Suggested Citation:"XXVI. Insurance and Indemnity Agreements." National Academies of Sciences, Engineering, and Medicine. 2015. Railroad Legal Issues and Resources. Washington, DC: The National Academies Press. doi: 10.17226/22093.
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Page 106
Page 107
Suggested Citation:"XXVI. Insurance and Indemnity Agreements." National Academies of Sciences, Engineering, and Medicine. 2015. Railroad Legal Issues and Resources. Washington, DC: The National Academies Press. doi: 10.17226/22093.
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Page 108
Suggested Citation:"XXVI. Insurance and Indemnity Agreements." National Academies of Sciences, Engineering, and Medicine. 2015. Railroad Legal Issues and Resources. Washington, DC: The National Academies Press. doi: 10.17226/22093.
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Page 108

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

105 Articles 590 D. Continued Growth of High-Speed Rail 590 A law review article argues that “high-speed rail transit would serve as a meaningful form of alternative transportation” and that the “political will and growing public–private partnerships” could overcome the “challenges in adopting high-speed trains within existing transportation schemes.”485 E. Insufficient Funding for High Speed Rail 590 According to one source, studies have shown that “high speed rail operating at an average speed of more than 150 mph can compete favorably with air travel over distances of 500 miles or less,” but that the cost would be “anywhere from $400–$800 billion” to establish a successful nationwide high-speed rail system.486 XXVI. INSURANCE AND INDEMNITY AGREEMENTS 592 A. Introduction 592 Railroad companies often purchase insurance and have indemnification agreements to protect them in the conduct of their business and operations.487 Sections B through D discuss Mandatory Insurance for the Feeder Railroad Development Program; Railway–Highway Insurance Protection; and the Amtrak Reform and Accountability Act of 1997. Section E discusses a case involving railway–highway insurance issues. Section F analyzes cases dealing with disputes over insurance coverage, whether a complaint must include facts sufficient to determine insurance coverage, and escape clauses and excess insurance. Section G reports on cases involving indemnification agreements, including whether 49 U.S.C. § 28103 preempts state law on such agreements and whether an indemnity clause in an agreement is a waiver of sovereign immunity. Section H discusses arbitration of disputes arising under indemnification agreements, such as whether a public policy defense precludes enforcement of an indemnity agreement and whether an arbitral panel may enforce an indemnity agreement notwithstanding the other party’s gross negligence that resulted in the liability claims sought to be indemnified. Sections I and J discuss a report issued by the U.S. Government Accountability Office regarding 485 Kamaal R. Zaidi, High Speed Rail Transit: Developing the Case for Alternative Transportation Schemes in the Context of Innovative and Sustainable Global Transportation Law and Policy, 26 TEMP. J. SCI. TECH. & ENVTL. L. 301, 302 (2007). 486 Joshua Rogers, Note, The Great Train Robbery: How Statutory Construction May have Derailed an American High Speed Rail System, 2011 U. ILL. J.L. TECH. & POL’Y 215, 224, 227 (2011). 487 See, e.g., CSX Transportation, Inc. v. Mass. Bay Transp. Auth., 697 F. Supp. 2d 213 (D. Mass. 2010); Orr v. Indiana Harbor Belt R.R., 976 F. Supp. 1151 (N.D. Ill. 1997).

106 insurance arrangements between freight railroads and railroad passenger carriers and alternative insurance arrangements for the transportation of hazardous material. Statutes 593 B. Mandatory Insurance for the Feeder Railroad 593 Development Program The Feeder Railroad Development Program includes a statutory mandate that private railroads must carry insurance.488 C. Railway–Highway Insurance Protection 593 When FHWA provides funding for highway construction projects that affect property owned by railroads, the federal government may pay for public liability insurance for contractors and for insurance for property damage for the contractors and railroads.489 D. Amtrak Reform and Accountability Act of 1997 594 The Amtrak Reform and Accountability Act of 1997 (ARAA), which limited the liability to rail passengers to $200 million,490 was the result of freight railroads requesting increased compensation associated with the risks of sharing a freight railroad’s right-of-way.491 ARAA also provided that “[a] provider of rail passenger transportation may enter into contracts that allocate financial responsibility for all claims,” so that state law would not interfere with the railroads’ indemnification agreements.492 Cases 595 E. Railway–Highway Liability Insurance 595 In Orr v. Indiana Harbor Belt Railroad,493 a construction company had agreed to obtain liability insurance to cover the railroad for any injuries caused by the construction company’s work. A federal district court in Illinois held that because the parties had agreed only to use the 488 49 U.S.C. § 10907 (2014); see 49 C.F.R. § 1151.3(8) (2014). 489 23 C.F.R. §§ 646.101–111 (2014). See 23 U.S.C. §§ 109(e), 120(c), 130, 133(d)(1), and 315 (2014). 490 49 U.S.C. § 28103(a)(2) (2014). 491 Amtrak Reform and Accountability Act of 1997, S. REP. NO. 105-85, at 5 (1997), available at: http://www.gpo.gov/fdsys/pkg/CRPT-105srpt85/html/CRPT-105srpt85.htm (last accessed Mar. 31, 2015). 492 49 U.S.C. § 28103(b) (2014). 493 976 F. Supp. 1151, 1152–1153 (N.D. Ill. 1997).

107 insurance in the event of an injury, the Indiana Harbor Belt Railroad could not seek contribution from the construction company.494 F. Disputes Over Insurance Coverage 596 1. Use of Declaratory Judgment Action to Determine 596 Insurance Coverage In All American Insurance Co. v. Steadfast Insurance Co.,495 two insurance companies insuring the Chicago Freight Car and Leasing Company (CFCL) sought a declaratory judgment that a policy issued by a third insurance company, Steadfast Insurance, Co. (Steadfast), applied to a wrongful death suit that was pending at the time against CFCL in an Illinois state court. An Indiana federal court held that the absence of an identification of the railcar in the welder’s wrongful death complaint was not sufficient evidence that Steadfast’s policy did not cover the wrongful death suit, that declaratory judgment actions are appropriate in Indiana to determine insurance coverage, and denied Steadfast’s motion to dismiss because of an insufficient record to determine the parties’ rights and duties.496 2. Escape Clauses and Excess Insurance 597 In Federal Insurance Co. v. Lexington Insurance Co.,497 two insurance companies supplied insurance policies to Trona Railway Co., which was involved in a lawsuit. A federal district court in California held, inter alia, that as a matter of public policy Federal should not be able to use a clause “buried in a general liability policy” to escape its obligations to provide primary insurance coverage.498 G. Indemnification Agreements 599 1. Whether 49 U.S.C. § 28103 Preempts State Law 599 In CSX Transportation, Inc. v. Massachusetts Bay Transportation Authority,499 a federal district court in Massachusetts ruled that 49 U.S.C. § 28103(b), which allows railroads to enter into indemnification agreements, did not preempt a Massachusetts law that prohibited a party 494 Id. at 1153. 495 2011 U.S. Dist. LEXIS 54435, at *1 (N.D. Ind. 2011). 496 Id. at *10, 11. 497 2011 U.S. Dist. LEXIS 91375, at *1 (C.D. Cal. 2011). 498 Id. at *15. 499 697 F. Supp. 2d 213 (D. Mass. 2010).

108 from indemnifying another party for injuries or damage caused by gross negligence or recklessness. In O&G Industries, Inc. v. Amtrak,500 the Second Circuit held that 49 U.S.C. § 28103(b) preempted a Connecticut law banning indemnity agreements in a construction contract when the agreement indemnified a party for acts caused by its own negligence. 2. Interpretation of Indemnification Provisions 601 In Fekete v. Amtrak,501 Amtrak argued that a quarry should indemnify Amtrak because the damage arose out of work performed under the contract and because the language of the contract was sufficiently broad to include liabilities caused by Amtrak’s negligence. A federal district court in Pennsylvania, however, held that the quarry was liable only for claims resulting from Amtrak’s negligence that involve personal injury or wrongful death, not property damage as in this case.502 3. Whether Indemnity Clause in a Lease Waives Sovereign Immunity 602 In Apfelbaum v. National Railroad Passenger Corporation,503 a federal district court in Pennsylvania held that under Pennsylvania law an indemnification clause in a lease between the Southeastern Pennsylvania Transportation Authority (SEPTA) and Amtrak did not waive SEPTA’s immunity.504 H. Arbitration of Disputes Arising Under Indemnification Agreements 604 1. Whether a Public Policy Defense Precludes Enforcement of an 604 Arbitration Agreement In National Railroad Passenger Corporation v. Consolidated Rail Corporation,505 arising out of an accident in Maryland in 1987 involving a Conrail locomotive and an Amtrak train, the District of Columbia Circuit held that the issue of whether an indemnification clause was contrary to public policy and unenforceable did not preclude arbitration of the dispute.506 500 537 F.3d 153 (2d Cir. 2008). 501 2012 U.S. Dist. LEXIS 109771, at *1, 6 (E.D. Penn. 2012). 502 Id. at *17. 503 2002 U.S. Dist. LEXIS 20321, at *1 (E.D. Pa. 2002). 504 Id. at *13 (footnote omitted). 505 892 F.2d 1066 (D.C. Cir. 1990). 506 Id. at 1071.

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TRB’s National Cooperative Rail Research Program (NCRRP) Legal Research Digest 2: Railroad Legal Issues and Resources presents legal issues of importance that attorneys may encounter when representing both freight and passenger railroad owners, and operators involved in railroad-related transactions. Issues explored in the report range from abandonment and discontinuance to constitutional law, construction, contracts, interaction with regulatory agencies, safety, retirement, and numerous other subjects.

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