Commuter Rail: Many Factors Influence Liability and Indemnity Provisions, and Options Exist to Facilitate Negotiations
Published: 2009-02-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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. 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. 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. 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.  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. 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.  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. 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. 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. 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. We conducted our work between July  2008 and February 2009. See appendix I for detailed information about our  scope and methodology.
subsections: section_title: Background
paragraphs: 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 figs. 1 and  2 for an overview of these relationships.)
section_title: Liability and Indemnity Provisions in Agreements Differ, but Commuter Rail Agencies Generally Assume Most of the Financial Risk for Their Operations
paragraphs: 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.
subsections: section_title: Liability and Indemnity Provisions of Passenger Rail Agreements Differ in their Allocation of Financial Responsibility
paragraphs: 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.  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.
Although most of the agreements between commuter rail agencies  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. 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. For example, 1 agreem ent  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. 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 d Finally, the remaining 12 agreements are silent on excluded conduct, and  discuss indemnification of negligence without explicit regard to its degr Often, in these cases, the degree of negligence will depend on state  law,  rugs.  ee.
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. and a determination concerning the enforceability of the provision may  require litigation.
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 comm rail agency—referred to as a self-insured retention—before the railroa 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 leve 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. Append 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 genera fault arrangements. 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. 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  ause  no-fault agreements are the easiest way to settle liability claims bec they avoid the need for additional litigation to try to ascertain blame.  Officials in Florida, for example, said a fault-based agreement would be  ecause of the costs of  much more expensive than a no-fault agreement b 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 claim These officials also said that contrary to some views, passenger and frei 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.
section_title: Liability and Indemnity Provisions Have Cost Implications for Commuter Rail Agencies and Taxpayers
paragraphs: 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 commut 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. Newer and smaller (as defined by ridership)  commuter rail agencies typically spend more of their operating budgets o insurance premiums, in part because they do not have an established  claims record, which factors into the premiums that a commuter ra agency must pay to cover its potential risk. Officials at proposed  commuter rail agencies told us that they anticipated spending a substantia portion of their operating budgets on insurance. For exa 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  o  are publicly subsidized, the premium costs for commuter rail agencies alsl  mple, officials at a  represent a cost to taxpayers. Furthermore, the potential for high premium r  costs may impede or stop the development of new or expanded commute 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 commute rail agency must pay before the insurance company pays for claims. For  example, a commuter rail agency with a $2 million self-insured re tention  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, th e  self-insured retention is per incident, that is, a commuter rail agency  would pay each time a claim fell within the self-insured retention, 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 co 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.
section_title: Federal Statutes, STB Decisions, and Federal Court Decisions Are Instructive in Interpreting Liability and Indemnity Provisions, but Questions Remain
subsections: section_title: ARAA Addresses Many Liability Concerns, but Railroad Officials Question the Applicability of the Statute’s Liability Cap
paragraphs: ARAA introduced tort reform measures that limit the overall damage passenger claims to $200 million, including punitive damages to the exten 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 fo 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 agen These concerns were heightened after a 1988 district court decision put in doubt the enforceability of contractually negotiated indemnity  provisions. 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 speedin and was operating a train in which an audible warning device had bee intentionally disabled. The engineer pleaded guilty to manslaughter and  was given the maximum penalty. The plaintiffs in m brought against Conrail and Amtrak alleged that Conrail or Amtrak, or  b 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 fo r  any claims and damages arising out of the Chase accident. The trial court  held that Amtrak was not required to indemnify Conrail where ther e were  allegations and a showing of gross negligenc wanton misconduct, intentional misconduct, or conduct so serious that it  w arranted the imposition of punitive damages. The court found that public  policy would not allow the enforcement of indemnification provisions that  a ppear to cover such extreme misconduct, because serious and significant  disincentives to railroad safety would ensue.  cies.
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).
We have previously concluded that the $200 million cap on passenger  claims arising from a single rail accident applies to all commuter rail  operators as well as to Amtrak, based on the plain language of the  statute. The act creates a $200 million cap for passenger injuries arisin g  “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 commuter authority or operator, any rail carrier, or any State.” 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.” We also co that the cap does not apply to third-party claims—that is, claims by partie other than passengers. 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 o 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 tested in a court of law. No courts have decided whether the cap applie commuter rail agencies.
section_title: Questions Remain Regarding Indemnification for Gross Negligence and Willful Misconduct
paragraphs: 49 U.S.C. § 28103(a)(1).
The Second Circuit consists of all federal courts within Connecticut, New York, and  Vermont.
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  For example, in a 2006 decision, STB held that an indemnity misconduct. provision could not be used to indemnify a freight railroad against its own  gross negligence or willful misconduct, since such an interpretation w “contravene well-established precedent that disfavors such  indemnification provisions” and would be contrary to provisions in the  federal government’s rail transportation policy that requires STB to  “promote a safe and efficient transportation system” and “operate facilities  and equipment without detriment to the public health and safety.” ST 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.
section_title: Various Factors, Such as Financial Conditions and Federal and State Laws, Influence Negotiations of Liability and Indemnity Provisions
paragraphs: 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. reported as having little effect on negotiations of liability and indemnity  provisions.
subsections: section_title: Several Factors Influence Negotiations of Liability and Indemnity Provisions
paragraphs: 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 o infrastructure, freight railroads can decide whether to allow commuter r agencies to use their rights-of-way. Officials from freight railroads told 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  fr eight railroads subsidize the commuter rail service. In addition, freight  service is the freight railroads’ core business, and their ability to efficient move freight through their systems must be protected. As a result, freig railroad officials said they are unwilling to assume any additional risk fro 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 th commuter rail service, the freight railroad would not be exposed to cert 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 ra of the freight railroads at the time of their negotiations affected the  li ability and indemnity provisions. For example, officials from one  commuter rail agency said they were able to secure favorable liabi indemnity provisions by providing revenue to two freight railroads  were struggling financially in the early and mid-1990s. Officials from  another commuter rail agency said that the terms of their agreements th at  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  try  traffic has significantly increased and the financial health of the indus 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. il agencies and freight railroads said that the financial health  Increased awareness or concern about liability and insurance  requirements. Eight commuter rail agency and freight railro also said that the level of awareness or concern about liability issues has  grown over time. For example, one commuter rail agency official said  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 te 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 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 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  agreements. Freight railroads also expressed  provisions in a 25-year-old agreement to include coverage for punitive  damages.
Additionally, views on sufficient amounts of insurance have change d over  time. Specifically, freight railroads are requiring more insurance coverage  for new commuter rail projects than what they had required in some pas agreements. For example, officials from one freight railroad said that 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  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 cove 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 M a 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. etrolink accident will affect the  mount of insurance required and the accessibility of insurance. For  Federal and state laws. While ARAA has addressed many major liabili concerns, some freight railroads and commuter rail agencies are reluctant  to rely on some of its provisions. We have previously reported th commuter rail authorities or operators, as well as Amtrak, are covered b the $200 million cap on awards for claims by or on behalf of rail  passengers resulting from an individual rail accident. However, althoug a majority of the freight railroads and commuter rail agencies with w we spoke told us that the liability cap applies to commuter rail agen majority of freight railroads and a few commuter rail agencies expressed  concern because the statute has not been tested in court. One freigh railroad has addressed this concern by including a clause in its agreeme that would reopen negotiations if the ARAA cap were overturned by a  court or amended. Other freight railroads seek higher levels of insu coverage to mitigate their concerns about the ARAA cap. Officials from one commuter rail agency told us that the freight railroad wants to  rance  500 million, which has been a sticking point in renegotiating  e agreement. Officials from this freight railroad told us they are seeking  increase the level of insurance in their existing agreement from $250  million to $ th $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 ofthe $200 million liability cap to commuter rail agencies will likely be teste 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. 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. 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 o f  claims that may be filed against public agencies and limit the amount liability to which a public agency can be exposed.  te entities. Some  Prohibition against public indemnification of priva state laws prohibit a public commuter rail agency from agreeing to any  indemnification provisions.
Prohibition against indemnification for negligence or gross negligen Some state laws prohibit indemnification of an entity against its own  negligence or gross negligence. ce.
State laws addressing punitive damages. Some state laws prohibit  insuring against punitive damages. Additionally, in some states, commute re  rail agencies are immune from paying punitive damages because they a public entities.
section_title: Other Factors Generally Have Little Effect on Negotiations of Liability and Indemnity Provisions
paragraphs: Several factors that might be considered influential, such as commuter rail  ow ving  litt nership of shared-use infrastructure, were generally reported as ha le effect on liability and indemnity negotiations. age ter rail rail rail liab cur ser doe Off pur the one wit bill agr railmuter rail agencies’ ownership of infrastructure. Commuter rail  ncies that own their infrastructure are not necessarily able to set th ms of their agreements with freight railroads. A majority of commute  agencies that own their infrastructure purchased it from freight  roads. In general, as a condition of the sale of infrastructure, freight  roads maintain rights for continued freight use and require specific  ility and indemnity provisions. For example, a commuter rail agency rently seeking to purchase a segment of freight track to expand its  vice, but negotiations have stalled because the commuter rail agenc s not want to agree to certain liability and indemnity provision icials from one freight railroad said that in  negotiations for the  chase of rail lines, the liability terms are a trade-off for a lower c ost for   infrastructure. For example, in this freight railroad’s negotiations with   commuter rail agency, the price for purchasing the right-of-way  hout attached liability and indemnity provisions would have been $1.3  ion; rather, the parties settled on a price of $150 million, with an  eement for continued freight operations that included the freig road’s required liability and indemnity provisions.  s.  tent 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 off reli 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  n example, an increase from 100,000 to 200,000 daily passengers.   liability and indemnity provisions. For example, one freight railroad icial said that the number of planned commuter trains is not specificall ed upon in determining the amount of insurance required in the  ot affect the insurance premium unless the change is significant—for  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  a funding for infrastructure improvements may have other effects, such as  influencing freight railroads’ initial willingness to enter into overall  llowing passenger railroads to use freight infrastructure. However,  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.
section_title: Commuter Rail Agency, Amtrak, and Freight Railroad Officials Identified Several Options for Facilitating Negotiations
paragraphs: 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. 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.
subsections: section_title: Commuter Rail Agency, Amtrak, and Freight Railroad Officials Suggested Amending ARAA to Address Concerns
paragraphs: 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 agenciesto carry. For example, officials from one commuter rail agency stated thato make it clear that it applied to commuter rail  gencies and covered nonpassenger claims, freight railroads would be less  if ARAA were amended t a likely to seek insurance beyond the $200 million liability cap to cover  claims to which the cap does not apply. Similarly, Amtrak officials state that including nonpassenger claims under the liability cap could reduc e freight  Amtrak’s need for excess liability insurance. Officials from several ns  railroads also noted that such changes could facilitate future negotiatio 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 preem damages for commuter rail claims at an amount lower than $200 million.  pt some state laws, such as those that cap  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 liabi lities. 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 $2 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.
section_title: Commuter Rail Agency, Amtrak, and Freight Railroad Officials Identified Alternatives to Traditional Commercial Insurance
paragraphs: 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. Commuter rail agencies, therefore, could form a risk retentio group without having to consider the various state laws that could affect  their liability negotiations with freight railroads.
Commuter rail agencies’ insurance coverage is usually structured in layers of $25 m illion  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 inthese layers, rather than the layers covering the upper limits of the insurance coverage. oversight of each state outside of their state of domicile. Although no  commuter rail agency or freight railroad currently participates in an  insurance pool with other commuter rail agencies or freight railroads,  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 identif several disadvantages to the various alternatives to traditional commercia 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 poo 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 agenc 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  y  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.l  For example, Florida set up an insurance poo 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 freight railroad officials identified catastrophic incident insurance  programs as potential models for providing railroad liability insuranc e.  These insurance programs exist to cover risks that the private sector ha been unable or unwilling to provide by itself. Commuter rail agency and  freight railroad officials most frequently identified the Price-Anderso as a model for providing railroad liability insurance. Under this m odel,  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  n Act  limitations in the railroad insurance market because the act contem 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 m 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 us 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 rai and would ensure that claims could be paid to those affected by a high - cost, or catastrophic, incident. However, as we have previously reporte such programs also could crowd out private insurers and reduce the  private market’s ability and willingness to provide coverage. a federal insurance program would expose the federal government to  potentially significant claims on future resources, which could ultimately  result in costs to taxpayers.
section_title: Commuter Rail Agencies Identified Options That Would Increase Their Leverage in Negotiating Liability and Indemnity Provisions
paragraphs: GAO, Natural Disasters: Public Policy Options for Changing the Federal Role in  Natural Catastrophe Insurance, GAO-08-7 (Washington, D.C.: Nov. 26, 2007). incentives that encourage freight railroads to cooperate with commuter  rail agencies, such as tax incentives or service expansions in other are 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. However,  the mediation is nonbinding—that is, if the dispute cannot be resolved,  there are no additional mechanisms in place to compel a resolution.
section_title: Commuter Rail Agency and Freight Railroad Officials Suggested Separating Passenger and Freight Traffic as an Ideal but Costly, Option
paragraphs: ommuter rail agencies and freight railroads operating at different times of  A few commuter rail agency and freight railroad officials identified  separating passenger and freight traffic as an ideal, but cost-prohibitive,  option for facilitating negotia tions on liability and indemnity provisions.  Commuter and freight traffic could be separated temporally, with  c the day, or physically, with commuter rail agencies and freight railroad 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 potent 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. Sep passenger and freight infrastructure also could lower insurance cos commuter rail agencies because the potential for a catastrophic inc would be significantly reduced. According to officials from a few frei 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 wa to purchase rights-of-way from Union Pacific, in most cases, purchasing  arating  ts for  ident  ght  s able  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 associ 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.
section_title: Concluding Observations
paragraphs: The expeditious flow of people and goods through our transportation  system is vital to the economic well-being of the nation. The moveme people and goods by rail is an important part of the nation’s transportation  ystem and is likely to play an even greater role in the future as companies  s ractive  and communities look for ways to avoid highway congestion. An att  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. Fortunat 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 infrastructu to the commuter rail agencies. By accepting some of the liability and re  indemnity provisions demanded by freight railroads, commuter rail  agencies expose themselves, and ultimately taxpayers, to significant costs.  s,  Rejecting the liability and indemnity provisions sought by freight railroad 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 y  of these options have advantages and disadvantages that must be carefull considered so that one form of rail does not succeed at the expense of the  other.
section_title: Agency Comments
paragraphs: 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 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 Amt Surface Transportation Board; and other parties. The report is also  a vailable at no charge on the GAO Web site at http://www.gao.gov.  rak; the Chief of Staff of the  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.
section_title: Appendix I: Scope and Methodology
paragraphs: To gather information pertaining to our objectives, we cond semistructured interviews with officials from all identified existing  commuter rail agen railroads, Amtrak, and state departments about the liability and indemnity provisions between railroads, the  cies, proposed commuter rail agencies, Class I freight   of transportation. We asked  financial impact of these provisions, how the courts had interpreted these provisions, the factors that had influenced negotiations, and ways to  facilitate negotiations.
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 de rmine if agreements te varied Class I freight ra across Class I freight railroads. (Becauseilroads  generally own infrastructure in particular region of the country, we also s  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 ride ridership. We sele cted proposed commuter rail planning to  the next 5 years. In addi visit at least one commuter rail agency that prop freight tracks and at least one commuter rail age freight tracks. Finally, we chose to visit Class I freight railroads with the  highest number of contracts with commuter rail agencies.  rship, and bot  agencies to visit that are  enter into contracts with different Class I freight railroads in  tion, we selected sites to  oses to purcha ncy that propos To ide comtrak and the resulting mmuter rail agencies, freight railroads, and A implications of those provisions, we requested and analyzed the liability  and indemniommuter rail agencies ty sections of agreements between c and Class I freight railroads, commucies and Amtrak, and ter rail agen 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. In addition,  we included agreements from two proposed commuter rail agencies in our  analysis because their agreements with freight railroads were final.  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 agenc with agreements received from the freight railroad to ensure that the  agreements were consistent.  ntify liability and indemnity provisions in agreements among  We conducted legislative research to identify federal statutes, federal an tate court cases, and STB decisions that related to contractual liability  sand 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 liabilityand 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 conten 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 ag 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 law 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  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 assoc 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 securin insurance, the process of calculating premium costs, and alternative  insurance mechanisms that could be applied to the railroad industry. We  g  also reviewed prior GAO reports on insurance markets for catastrophic  incidents to identify comparable models for railroad liability insurance.
section_title: Appendix II: Summary of Liability and Indemnity Provisions in Commuter Rail Agency and Freight Railroad Agreements
subsections: section_title: Class I railroad O
paragraphs: Is contract fault- based or no- fault?
What are  provisions for  freight- commuter  collision?
Are specific  types of  conduct  excluded or  explicitly  included?
No fault: each  covers own (third  parties shared)
No fault: each  covers own (third  parties fault- based)
No fault:  commuter covers  all liability   No fault: each  covers own (third  parties and  passengers are  fault-based)
No fault:  commuter covers  all liability   No fault: each  covers own (third  parties shared)
W provisions for  freight- commuter  collision?
Is contract fault- based or no- fault?
Are specific  pes of  ty conduct  excluded or  explicitly included?
Canadian Pacific  Commuter   Railway (CP)
No fault: eac covers own  parties shared)
No fault: each  covers own (third parties shared)
No fault: each  covers own ( parties s hared)
No fault: each  covers own (third  parties fault- based)
No fault: ea covers own (thi parties and  passengers  fault-based)
No fault: each covers own  equipment  (passengers  shared)
No fault: freight  covers own and  50 percent of  other liability   No fault: each  covers own (third parties shared)
No fault: each  covers own (third parties shared)
Is contract fault- based or no- fault?
What are  provisions for  freight- commuter  collision?
Are specific  types of  conduct  excluded or  explicitly  included?
No fault: each  covers own (third  parties and  passengers are  fault-based)
No fault: each  covers own (thi parties and  passengers are  fault-based)
No fault: each covers own (th parties shared)
Fault-based (third  parties shared)
Fault-bas parties shared)
No fault: each  covers own (third parties shared)
Commuter  (continge legislative  approval)
No fault: each  covers own (thi parties shared) of commuter and freight rail lia s. h row of this table represents  this relationship. If the liability a relationship, althoug  and indemn h there may be more than one contract  ity provisions are the same, the contracts are not  r liability levels up to $25 mi llion and fault-based for liability  negligent. .5 miles. On the rest o  tracks.
CSX and MB TA  all other persons take liability , including p  for their ow assengers, n employees and  is assigned on the b perty, regard sis of fault. less of fault, but liabili ded only for CSX prop n the case of gross negligence.
Provisions are generally no fault except in collision, but Metra covers all liability in excess of $2  million. ituations and could also result in allo is of fault. t in collision.
Metrolink’s agreements with UP are no ls up to $25 million and fault-based in  excess of $25 million up to $100 mill ion or $125 m illion depending on the tra cks. cumstances.
Conrail.
The New Mexico Department of Transportation is the owner.  unt. roperty, regardless of fault, but liability  d on the basis of fault. n employee  is assigned on the b ess of fault, but liabilit asis of fault.  ssengers, and UP indemnifies TRE for  crossings.
T). FDOT and CSX have an agreement  e approval, as part of an agreement to  additional tracks for the Central Fl mmuter Rail, described in note y.
ES) in Oregon. However, the enger Program and CATS did not have  ts for liability and indemnity, and WES had a contract with a non-Class I railroad.  s.
section_title: Appendix III: Summary of Liability and Indemnity Provisions in Commuter Rail Agency and Amtrak Agreements
subsections: section_title: Owners
paragraphs: Is contract fault- based or no  fault?
What are provisions for Amtrak- commuter collision?
Are specific types of  conduct excluded or  explicitly included?
No fault: equipmen shared, all other liability Amtrak  except residual damage  o fault: commuter covers all liability  Excluded  No fault under  covers all liability except Amtrak  employees and intercity trains  No fault: liability shared equally  No fault: commuter covers all liability  Excluded  except Amtrak commuter employees  No fault: commuter covers all liability  Excluded  except Amtrak employees and  Amtrak intercity operations  No fault: Amtrak cove No fault: commuter covers own  equipment, employees and  passengers and other  damage, all other liabil No fault: each covers own, commuter  Excluded  covers third parties   No fault: each covers own (third  parties covered by Metro-North)
Silent  uipment, and  property. illful or wanton misconduct explicitly men ed in contract.
OT indemnifies bility above $300,000. lorida on which Tri-Rail and Amtrak operate.
Amtrak is responsible for all liability above $75 million to $200 million. MBTA assumes liability for its  employeessengers, except when an incident is the pment, and paresult of As, euis sole mtrak’ ence or omission. eglig f track around Chicago Union Station e Amtrak-owned  and has a fault-based contract for   track, excluded conduct is  ut. ich Rail Runner and Amtrak operate. e for the Rhode Island Public Rail Corporation on Amtra k-owned lines.
section_title: Appendix IV: Summary of Key Case Law Addressing Liability and Indemnity Provisions
subsections: section_title: Federal Cases Addressing Enforceability of Liability and Indemnity Provisions
paragraphs: National Railroad Passenger Corp. v. Consolidated Rail Corp., 69 F. Supp. 951 (D.D.C. 1988), vacated on other grounds, 892 F.2d 1066 (D.C Cir. 1990)
8  .  onclusion: A U.S. District Court ruled that the indemnification provisions  C 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, intentiona conduct so serious as to warrant the imposition of punitive damages.  ed the segment of the Northeast Corridor that runs  etween Washington, D.C., and New York. Conrail used the Northeast  Facts: Amtrak own b Corridor pursuant to a freight operating agreement.
In January 1987, an Amtrak train collided with thre 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. “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 suc 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 suc passenger.”
The issue presented in the case was “whether Amtrak must indemnif 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 in the time they executed the freight operating agreement, or any previous  agreement between the parties, for the indemnification provisions  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 enf of indemnification provisions that appear to cover such extreme  misconduct because serious and significant disincentives to railroad saf would ensue. Under District of Columbia law, contractual provisions may  ingly, the  be invalidated when they are contrary to public policy. Accord court ruled that Amtrak was not required to indemnify Conrail where th 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 Pe (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  nnsylvania Transportation Authority  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 Str 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 occupation of 30th Street Station. The plaintiff named several defendants,  ible  including SEPTA, Amtrak, and the cleaning service companies respons liability arising from or in connection with the use or  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 Pennsylvania law, the Commonwealth of Pennsylvania enjoys immunity  from suit except when the General Assembly has, by statute, expressly s  waived the immunity. The court found that because the alleged dangerou 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 c negligence of Amtrak. An arbitration panel found Amtrak’s actions to be  grossly negligent. The court, however, upheld a second arbitration panel’s h the insurance  ruling that MTA was responsible for providing Amtrak wit 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 indic collided with a commuter train, causing significant damage. An arbitratio panel found that an Amtrak engineer was guilty of gross negligence in  causing the collision, and on the basis of language of the operating  ation and  n  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 independentl for providing insurance coverage to Amtrak notwithstanding the fact that  Amtrak was found to be grossly negligent by the first arbitration panel.  y found that MTA was responsible  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 15 (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 ext 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 Amt rak  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 .” The agreement also  stated that O&G would not indemnify Amtr fault of Amtrak was the sole causal fault of Amtrak, except for injury or  death of employees of Amtrak and its contractors.  ak where the negligence or  An Amtrak train struck and killed an O&G employee who was working o the bridge.
Amtrak brought a suit against O&G for indemnification. O&G 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.  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, relievin from an obligation to indemnify Amtrak.
Amtrak moved for a judgment as a matter of law that O&G must inde it. Amtrak stated that notwithstanding the jury verdict, the facts of th accident fell within the wording of th that O&G was legally obligated to indemnify Amtrak. The lower court  agreed and required O&G to indemnify Amtrak.  mnify  e  e indemnification agreement, and  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. “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, unqua 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 clai 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) 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  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 were owned by Amtrak as well. As part of the lease agreement between  Amtrak and SEPTA, SEPTA agreed to indemnify Amtrak for all liabilit y  which would not have occurred but for the existence of the commuter  service provided by SEPTA. The agreement for access to the ra tracks contained a similar provision.
section_title: State Cases Addressing Enforceability of Liability and Indemnity Provisions
paragraphs: Mass Transit Administration v. CSX Transportation Inc., 708 A.2d  298 (Md. 1998)
Conclusion: The Court of Appeals of Maryl statute (which provides that an indemnification in a contract pertaining to  construction is void and against public policy if the party indemnified isand held that a Maryland  negligent) applies only to construction contracts, not to indemnificationprovisions 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 str 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 se ttled.  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 C SX. The court stated that the Maryland statute applies only to  construction contracts, not to indemnification provisions in procureme 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 d  for a party’s own negligence. The court held that the insurance purchaseto protect Conrail, once issued, could not be held unenforceable against Conrail.   this case, but the case is relevant in  onduct, insurance provisions still must be honored if this type of conduct  Facts: Conrail is the only rail entity in that it holds if a state law prohibits indemnification for certain types of  c occurs. This case involved an insurance coverage dispute that arose from  fatal accidents t during a road construction project carried out by the Delaware  Department of Transportation. Two wrongful death actions were file 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  , once issued, could not be held  insurance purchased to protect Conrail unenforceable against the indemnified party, even where the party was  found to be negligent.  hat occurred on a railroad crossing owned by Conrail  Massachusetts Bay Transportation Authority and Massachus 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 Superi e  Court held that provisions that indemnify CSX are unenforceable on th 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 cr into a commuter train with roughly 300 passengers, injuring many.
The 1985 trackage rights agreement between the Massachusetts Bay  Transportation A indemnify CSX “irrespective of any negligence or fault . . . from any and all  liability, damage, or expense of any kind” arising out of damages or in to any MBTA employee or other contractor of MBTA or out of damage MBTA property. 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 uthority (MBTA) and CSX states that MBTA will   a motion to dismiss for failure to state a claim.
section_title: Surface Transportation Board Decisions Addressing Enforceability of Liability and Indemnity Provisions
paragraphs: The Rail Passenger Service Act of 1970 provides that Amtrak and freigh 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 followin 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, a 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 f 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, and thus  the freight carriers should be encouraged to conduct th It also stated that public policy generally disfavors requiring one party to  be responsible for another’s gross negligence or willful and wanton  misconduct.  e operations safely.
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 woul “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)  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 b on the condition of the track were barred by section 7.1 of the trackage  rights order issued by ICC. 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 sec 7.1 to indemnify for gross negligence.  tion  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.”
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Nikki Clowers, Assistant Alana Finley; Brandon Haller; Hannah Laufe; Nancy Lueke; and Aron  Szapiro made key contributions to this report.