In early February, a Norfolk Southern Railway train derailed in East Palestine, Ohio. Several of the cars on the train contained toxic chemicals, and officials evacuated the immediate area due to potential concerns after the accident. One particular chemical, vinyl chloride, was released from train cars and then burned as part of the clean-up.
This has led to many questions about the long-term impact that the burning of this chemical may cause for those in the area, as well as the potential obligations of the railway company and its insurers. Norfolk Southern Railway has $75 million in coverage that applies before its excess insurance policies are triggered, but several suits were filed in the immediate aftermath of the accident by concerned residents which could easily exhaust that initial $75 million amount.
Property Damage Claims and The Insurance Policies Connected to The Claims
Residents are concerned that the vinyl chloride may have seeped into the groundwater in the region. This potential contamination of the water may allow for residents and property owners to have property damage claims against the railroad. If claims are filed, they could conceivably implicate several different types of liability policies.
For instance, chemicals that are released into the waterway (e.g., creek or river), or that seep underground into a water supply (e.g., aquifer) may trigger a pollution liability insurance policy, or insurance that is purchased to cover pollution-related claims. Typically, pollution liability insurance will cover damages caused by environmental incidents, including clean-up costs.
If there is no pollution policy in place, businesses will typically look to find coverage under other third-party liability policies, like CGL policies. Such policies are apt to include exclusions, like pollution exclusions, which would likely severely narrower (if not eliminate) coverage, especially in cases of traditional environmental pollution cases. However, the wording of policies can vary significantly and, consequently, such liability policies represent at least a potential source of alternative insurance coverage. (For example, the damage caused by the train derailment itself, versus the resulting pollution event, could trigger coverage under a CGL policy.)
Time Of the Accident and Success of The Clean-Up
Another insurance issue to consider is the timing of the damage or the accident. In this case, the insurance policies that were in effect at the time of the accident would seem to be the ones most likely to apply. This result would seem obvious. But there could be an extra wrinkle here. The reason? The damage caused by the introduction of harmful chemicals into the surrounding land and water could present long-term damage.
If the damage continues over time (i.e., across different policy periods), it is possible that subsequent policies could apply. This is a possible result when dealing with occurrence-based policies, like CGL policies. Pollution policies, in contrast, are typically claims-made policies, meaning that continuing damages are likely to be captured by a single policy—the one in effect when the claim is first made—rather than trigger multiple policies as is possible under occurrence-based CGL policies.
This unfortunate event has caused much damage and has the potential for widespread and/or long-term impacts. It illustrates, though, how important it is for insureds to closely scrutinize potential insurance coverage in cases of significant loss events. The claims-made nature of some policies, like many pollution policies, underscores the importance of undertaking this insurance review promptly, as delay can sometimes adversely impact possible sources of insurance coverage. Prompt and careful examination of potential insurance coverage is often critical for insureds in the aftermath of a significant loss or other event.
Our experts can provide a comprehensive evaluation of your risk transfer plans or insurance coverage program, whether you need to explore options after a loss or implement a strong risk transfer program. We’re committed to safeguarding your company and its assets, and our team is ready to assist you in achieving that goal.