Consultation on the Review of Railway Third Party Liability Insurance Coverage Regulations: What We Heard Report

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Introduction

The Canadian Transportation Agency (Agency) initiated a consultation on possible improvements to the current regulatory framework, as prescribed in the Railway Third Party Liability Insurance Coverage Regulations (Regulations). The consultations focused on the adequacy of insurance coverage for the issuance of certificates of fitness required for federal railway companies and possible improvements to the current regulatory framework on insurance requirements.

As part of this review, the Agency explored whether:

  1. it should expand the current list of 10 risk factors it currently considers to better assess risks or remove factors;
  2. there should be additional and/or different third party liability insurance requirements related to the transportation of certain commodities, such as dangerous goods and for the transportation of passengers;
  3. it should establish minimum coverage requirements for liability insurance and, if so, what should they be and what approach should the Agency use to establish a minimum requirements (e.g. should there be a distinction made between general commodities and dangerous goods, should there be separate minimum requirements for Class I and for shortline railway companies);
  4. mechanisms should be established in the Regulations to ensure that railway companies notify the Agency of all substantive changes on a timely basis;
  5. administrative monetary penalties or other mechanisms would be appropriate in the case of non-compliance;
  6. the Agency should continue to assess:
    1. the financial capability of the applicant to sustain any level of self-insurance, whether it is a deductible or self-insured amount, and whether it should establish additional requirements; and
    2. the financial strength of the insurance company if the Agency believes that the insurance company may not have the financial ability to pay its contractual level of insurance coverage;
  7. information, in whole or in part, submitted in an application for, or a variance to, a certificate of fitness should be made public and what should remain confidential; and
  8. the amount of third party liability insurance and the self-insured retention amount should be made public.

The Agency also invited stakeholder input on other third party liability insurance coverage issues, accountability related issues or any other opinions related to the Agency’s current third party liability insurance coverage regulatory regime.

The Agency sought submissions from the railway companies, railway associations, shippers, shipper associations, provincial governments and municipal associations and insurance bodies. Twenty-two submissions were received and may be viewed on the Agency’s Website at:

This report provides excerpts taken directly from the submissions received through this consultation process, by question posed by the Agency. In the case of any discrepancy between this report and submissions by parties, the submissions will prevail.

Next Steps

Based on the input received, the Agency may then make changes to its administration of the current regulatory framework, propose revisions to the regulatory framework and consult again with stakeholders on any proposed regulatory changes.

What We Heard – By Question

Topic: Requirements specified in the Regulations

The Regulations currently state that the Agency will examine the risks associated with the proposed construction or operation of a railway based on these ten factors:

  1. passenger ridership,
  2. passenger and freight train miles,
  3. volume of railway traffic,
  4. class and volume of dangerous goods transported by rail,
  5. types of population areas served,
  6. number of level crossings,
  7. speed of trains,
  8. train crew training,
  9. method of train control, and
  10. overall safety record of the applicant.

Q1. Are those factors sufficient or should the Agency expand the list to better assess the risks and why?

Railway Companies & Railway Associations

Canadian National Railway Company stated: The factors currently identified in the Regulations appear sufficient and inclusive. The question remains how each of those factors impact or determine the level of insurance requirement.

Canadian Pacific Railway Company stated: The factors that are currently considered by the Agency appear to be in order but the relative weighting is unclear and we do not have any insight as to how the factors are applied in practice.

Chemin de fer Arnaud stated: [translation] We consider that the factors looked at are sufficient.

Genesee & Wyoming Canada stated: Factors currently looked at by the Agency are sufficient – no need to add more.

Great Western Railway Ltd. stated: Factors are sufficient.

Railway Association of Canada stated: There is no reason to expand the existing list. However, the Agency should recognize that railways manage their risks through several mechanisms, such as Safety Management Systems (SMS), and they will be required to demonstrate their safety performance by receiving a Railway Operating Certificate (ROC) from Transport Canada, once the relevant regulation is adopted.

Shippers & Shipper Associations

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada agreed that the ten factors in the list are appropriate, but not complete. Other factors that should be added include:

  1. a detailed assessment of the overall safety record of the applicant in the handling of dangerous commodities for the current and past 5 years;
  2. a detailed assessment of the overall safety record of the applicant in relation to the severity of accidents involving dangerous commodities for the past 5 years;
  3. the sufficiency of, and the railway’s adherence to rail operating rules under the Railway Safety Act over the past 5 years; and

Chemistry Industry Association of Canada stated: that in addition to the above, it would add:

  1. verification and assessment of existing safety management systems as well as audit frequency, findings and whether or not corrective actions have been taken when appropriate.

Freight Management Association of Canada stated: that in addition to the above, it would add:

  1. the seasonality of the railways’ overall safety record of the applicant over the past 5 years, especially of dangerous goods; and
  2. the geographical area of operation relative to populated areas, including route miles, rail yards.

Mining Association of Canada stated: that in addition to the above, it would add:

  1. the condition and level of track maintenance.

These additional factors should be included because the safety record and state of a railway company’s track are important factors in determining that company’s risk of having an accident, and the risk of accidents is an essential factor in determining the extent of insurance a railway company should be required to have to operate.

Provincial Governments & Municipal Associations

Alberta Transportation stated: We feel the additional factors should be included: state of rail infrastructure, track, crossings, mechanical state of trains & maintenance records and the proximity to environmentally sensitive areas.

Manitoba Infrastructure and Transportation stated: These factors should be expanded to include remoteness, climate and ecological considerations. Accidents in remote, climate-challenged and ecologically sensitive areas may face additional challenges in response times, and pose increased environmental harm to pristine and protected ecosystems. This needs to be included when the Agency assesses risk factors in determining insurance coverage (or as it may apply to a broader compensation approach).

Federation of Canadian Municipalities stated: The factors set out in the Regulations adequately capture most of the common risk factors that need to be considered…would suggest adding two elements that would complete the list of factors: the geography and the particular environmental risks of the area where a railway operates.

As was the case in Lac-Mégantic, topography is a significant risk factor that should be taken into account when assessing the risk involved in a railway’s operations. In addition, if a railway crosses environmentally sensitive areas (designated lands, significant waterways, waterways that constitute a source of drinking water for local communities, etc.), an accident can have very costly consequences to the environment (e.g. clean-up and remediation) and to infrastructure (e.g. water filtration and distribution plants).

FCM would also urge the Agency to consider adding a clear list of the types of occurrences that must be covered by a railway’s insurance (e.g. personal injury, broad form property damage, environmental protection liability for gradual and sudden contamination, etc.).

Even with an improved framework in place, the real issue does not relate to the elements that are used as part of the “adequacy” test set out in the Regulations. Rather, improvements must be made to the manner in which these elements are interpreted and applied in order to assess the adequacy of a railway’s insurance coverage.

Insurance Bodies

Insurance Bureau of Canada stated: These factors provide a good indication of the likelihood of whether a railway will experience a loss and the potential scope of such loss. But, the unique characteristics of an individual railway’s operations dictate the emphasis insurance companies place on any given factor.

Insurance companies consider additional factors when underwriting a railway that the CTA may want to consider as well:

  1. The age of the locomotives, other railway stock and equipment;
  2. Company maintenance schedules and loss prevention and mitigation measures;
  3. The identity and reputation of the shippers using the railway’s services and supplying railway stock;
  4. The railway’s disaster recovery plan; and
  5. From the perspective of assessing moral hazard, the financial condition of the railway.

Burns and Wilcox Canada stated: The … Agency (CTA) may consider expanding the list to allow for an assessment of the following additional factors:

  1. Corporate Governance Policies: …
  2. Financial Position: …
  3. Pollution Risk: …
  4. Railcar Integrity and Safety Testing: …
  5. Railcar Ownership: …

The CTA could review the risks associated with the ownership and rental of railcars by closely evaluating:

  1. The percentages of railcars that are owned by railways and the percentage that are owned by third parties not responsible for the operation of railways;
  2. Safety standards and test records for railcar owners;
  3. Accuracy of railcar inventories;
  4. The types of contracts between railcar owners and railway operators. Specifically, who assumes the liability when a railcar owned by a third party is transported on a railway?

Q2. What factors, if any, should be removed and why?

Railway Companies & Railway Associations

Canadian National Railway Company stated: see its response to Q1.

Canadian Pacific Railway Company stated: CP does not see any items that need to be removed from the 10 factors listed but whether or not any one factor is applied or not applied will depend on the facts of the case under review and any relevant sub factors. The metrics cannot be seen as a ‘one size fits all’ review or, worse, a ‘checklist’.

Chemin de fer Arnaud stated: [translated] We consider that point 1 does not apply as we are a company that carries cargo only.

Genesee & Wyoming Canada stated: Railway Safety Management System Regulations states that employees must have the appropriate skills and training and adequate supervision - making the inclusion of employee training as a risk factor redundant.

Great Western Railway Ltd. stated: None of the factors should be removed as they are all applicable to a variance of individual Railways.

Railway Association of Canada stated: There is no reason to remove items from the existing list. Rather, the Agency should clarify how it applies the list of factors to assess the adequacy of a railway’s insurance coverage.

Shippers & Shipper Associations

Chemistry Industry Association of Canada stated: None, as all factors, including the additional ones set out in its reply to Q1, should be considered in a comprehensive risk assessment.

Freight Management Association of Canada stated: No factors should be removed…. However, the factors should be supplemented by the additional items set out in its response to Q1 above, which need to be thoroughly evaluated and provide more detailed information than is currently available in statistics published and available from Transport Canada’s records and other data.

Mining Association of Canada stated: Acknowledging the complexity in assessing train crew training, and acknowledging that training strongly correlates with safety performance and adherence to operating rules, whether train crew training should remain on this list should be reviewed.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Consideration should be given to all factors.

Federation of Canadian Municipalities stated: …the removal of any factor from the list could only potentially weaken the existing insurance framework and is this not desirable.

Insurance Bodies

Burns and Wilcox stated: No factors should be removed.

Q3. Should there be additional and/or different third party liability insurance requirements related to the transportation of certain commodities, such as dangerous goods? If so, why?

Railway Companies & Railway Associations

Canadian National Railway Company stated: As all freight railways are subject to common carrier obligations and are required to move whatever commodities are offered for carriage, the fact that no dangerous goods move on a particular railway at a given time is not determinative of the risk exposure of such railway.

Canadian Pacific Railway Company stated: CP and other North American Class 1 railways purchase what the insurance market offers commercially. The limits purchased are not specifically tied to the transportation of certain commodities, such as dangerous goods.

Shippers/Brokers must also ensure they have the financial capacity to address the risks associated with the commodities they ship.

Chemin de fer Arnaud stated: [translation] We are covered for the transportation of mineral ore as it represents practically all of our traffic.

Genesee & Wyoming Canada stated: Dangerous Goods present a significantly different risk profile that other commodities. Toxic and Poison by inhalation products (TIH/PIH) present an even greater risk.

Great Western Railway Ltd. stated: …believe there shouldn’t be any additional and/or different third party liability insurance requirements related to the transportation of certain commodities, such as dangerous goods. There have never been any claims over the 25 to 50 million dollar coverage now required by federal railways for third party liability coverage except for the Lac Megantic disaster, and no amount of insurance could have compensated for this tragedy...

Association of American Railroads stated: …it has advocated that a long-term legislative policy solution based on overall limitations on liability for the transport of hazardous materials.

Railway Association of Canada stated: Third party liability insurance requirements should align with the risks associated with moving specific commodities such as dangerous goods. Dangerous goods present a different risk profile compared to other commodities and as a result expose the carrier, the public and the environment to greater risk.

Shippers & Shipper Associations

Canadian Fertilizer Institute stated: CFI members operate within a framework which places liability with the party that has care and control of a product, regardless of the commodity. Transferring that liability from those with care and control to others may remove some of the incentive for safe operations.

…all railways regulated by the Agency are subject to a “common carrier obligation” to transport all cargo offered, including dangerous goods. CFI members pay substantially higher rates to transport ammonia - one of the industry’s primary products - in order to compensate railways for any perceived risk or additional costs of carrying this product, including liability insurance.

Differentiating insurance requirements for dangerous goods will support railway efforts to evade their common carrier obligations, and unreasonably transfer responsibility for risk - and its costs - to shippers.

Canadian Renewable Fuels Association stated: Third party liability insurance plays an important role in ensuring accountability on the part of shipping companies.

The ethanol industry operates under the understanding that liability rests with the party that has care and control of the product. As such, it is incumbent upon the shipping railway to meet their common carrier obligations and take out sufficient liability insurance to cover any claims that may arise, based on the historical potential for claims.

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada all agreed that “Railway common carrier” obligations require railways to handle all traffic offered; therefore liability insurance requirements should cover all risks associated with all traffic carried. The first two associations stated, in addition to the above that the existing laws suffice to allocate all liabilities. Freight Management Association of Canada and Mining Association of Canada are also of the view that assessing the different risks associated with different commodities would be complex and the administration would be difficult.

Mining Association of Canada stated, in addition to the above, that: …if there is an insistence on moving in this direction, stakeholders who ship dangerous goods should be consulted beyond this document about any specific changes being contemplated, and how these changes are likely to impact their business, safety of operations, the communities in which they operate, etc.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes. Dangerous Goods should carry a minimum amount of insurance to ensure factors such as environmental impact, damage to infrastructure and personal injury or loss of life is covered.

Manitoba Infrastructure and Transportation stated: We would leave to the Agency to assess how principles can best be operationalized in a revised insurance regime - or perhaps, through a combination of a revised regime along with other institutional coverage requirement to apply to catastrophic accidents from the movement of dangerous good by rail.

…no federal railway companies’ claims have exceeded the limits of their third party liability insurance coverage in the last 10 years, with the exception of Lac Mégantic. We acknowledge that it may be unrealistic to have individual railway secure third party liability insurance to cover such extreme accidents…

For this reason, the Agency and federal review should be expanded to explore other compensation coverage mechanisms beyond mere liability insurance requirements to provide adequate protection under scenarios of catastrophic train accidents…

Federation of Canadian Municipalities stated: The Regulations already stipulate that the “class and volume of dangerous goods transported by rail” are to be considered in assessing the adequacy of a railway’s insurance adequacy.

By their very nature, dangerous goods pose a much greater risk to public safety, property and the environment. The potential to cause harm being far greater for chlorine gas than for iron ore, the insurance coverage required of railways that carry dangerous goods should be much greater as a matter of course, not as a matter of exception.

It is FCM position that this higher “adequacy” threshold should already be the result of the existing requirements set out in the Regulations…CTA already has the regulatory authority and obligation to recognize the distinct nature of various dangerous goods and the risks they pose. It must ensure that its internal systems and resources allow it to adequately fulfill this obligation...

Saskatchewan Association of Rural Municipalities stated: …we do not believe that there should be additional or different third party liability insurance requirements related to the transportation of certain commodities such as dangerous goods.

…there have never been any claims that have exceeded the limits of their current third party liability insurance. The Lac-Mégantic tragedy was a rare case in which no reasonable requirements for third party liability insurance would have provided adequate coverage.

Insurance Bodies

Burns and Wilcox stated: …instead of third party liability protection, the Agency may consider requiring a more comprehensive Commercial General Liability (CGL) policy. CGL policy provides broader coverage as compared to Third Party Liability, including bodily injury, property damage and product liability. It covers not only third parties but also employees, vendors and investors.

CGL coverage often includes Sudden and Accidental pollution coverage with significant sub-limits. If the pollution exposure is high hazard, CGL carriers will often add absolute pollution exclusions which should trigger an Insured to purchase a separate Environmental Impairment Liability (EIL) policy but many choose to leave this exposure unprotected.

We suggest that the CTA review CGL, EIL and D&O insurance requirements. CGL insurance limits should be increased for dangerous goods and there should be separate requirements for EIL. In addition and as noted above, there is a gap in D&O coverage with respect to pollution coverage. As such, requirements for EIL will ensure that gaps in third party liability for both CGL and D&O are covered. Please see the limit grid enclosed in Appendix 1 [to its submission].

Additional requirements may also include:

  1. Environmental Impairment Liability: …
  2. Directors & Officers Liability:
  3. Geographic area: …
  4. Training: …
  5. Method of Train Control: …
  6. Length and Weight of Trains: …

Q4. Should there be additional and/or different third party liability insurance requirements related to the transportation of passengers? If so, why?

Railway Companies & Railway Associations

Canadian National Railway Company stated: the factors currently identified in the Regulations appear sufficient and inclusive. The question remains how each of those factors impact or determine the level of insurance requirement...

Canadian Pacific Railway Company stated: After the Metrolink incident in California, the cap of $200M in the US for passenger liability is perhaps one that Canada should adopt as well. This will give certainty of exposure to all parties facing a passenger exposure and will provide clearly defined limits of insurance that must be maintained.

Chemin de fer Arnaud stated: [translation] We do not transport passengers.

Genesee & Wyoming Canada stated: A railway’s insurance requirements should be reflective of the risk the railway is exposed to: Freight is different from Passenger.

Great Western Railway Ltd. stated: Not applicable to Great Western Railway Ltd.

Association of American Railroads stated: In the U.S. “Congress acted to limit damages, including punitive damages, from claims arising from a single passenger rail accident to $200 million. The ARAA [Amtrak Reform and Accountability Act (1997)] also specifically authorized providers of passenger rail transportation to enter into contracts allocating financial responsibility for claims.

Railway Association of Canada stated: Third party liability insurance for the transportation of passengers should differ from insurance requirements for transporting freight, including dangerous goods.

In the case of passenger transportation, liability insurance should correspond with the appropriate level of risk. Consideration needs to be given to whether passenger and freight operations share the same corridor.

Shippers & Shipper Associations

Chemistry Industry Association of Canada and Freight Management Association of Canada stated: No. The comments included in answers to questions 1 to 3 apply to this question.

Mining Association of Canada stated: Yes. Some MAC member companies who also own and operate their own railways also have passenger ridership and specific third party liability insurance coverage associated with this aspect of their business. Risk associated with people is different than risk associated with cargo, equipment or the environment.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes. There needs to be a minimum to ensure injury and loss of life is covered.

Federation of Canadian Municipalities stated: FCM has no specific experience or expertise with respect to the transportation of passengers by rail. However, in light of awards for personal injuries resulting from automobile accidents, it is safe to assume that a severe accident involving a passenger train has the potential to generate significant awards of damages. Any minimum set for passenger trains should be sufficient to cover the significant damages that would flow from a worst-case scenario.

Insurance Bodies

Burns and Wilcox stated: As a result of a rise in bodily injury claims generally, regulations should be reviewed related to the insurance requirements for the transportation of passengers. In case of a catastrophic loss, the costs will exceed the insurance limit easily. See the limit grid in Appendix 1 [to its submission] for suggested minimum limits.


TOPIC: Minimum Requirements

Railway operations can vary a great deal in terms of the volume of traffic, commodity mix, scope of operations, whether in rural or urban areas, number of crossings, etc. Because of this, the current federal Regulations do not set definite amounts, neither minimum nor maximum.

Q5A. Should the Regulations be revised to establish minimum requirements? If so, why?

Railway Companies & Railway Associations

Canadian National Railway Company stated: The determination by the Agency of what is “adequate” will … presumably become the minimum for that company who could nevertheless decide for commercial reasons to have a higher amount…

Canadian Pacific Railway Company stated: After the Lac Megantic incident it would seem that there should be minimum insurance requirements placed on both the shipper and the carrier of hazardous commodities. This issue will be more acute when addressing the transportation of hazardous commodities on Shortline railways…Setting unattainable minimum insurance coverage can potentially drive a Shortline out of business. Not imposing sufficient minimum levels will leave the potential for shortfall to be imposed on the public as the Lac Megantic incident has demonstrated…

Chemin de fer Arnaud stated: [translation] We …are covered beyond the minimum required by the law.

Genesee & Wyoming Canada stated: Minimum insurance could be excessive in some instances and prohibitive for some smaller operators, in other cases, it might not be sufficient to address a carriers’ risk profile.

Great Western Railway Ltd. stated: No.

Railway Association of Canada stated: In principle, no, but there might be cases, where it might be suitable. Insurance coverage should be determined by a company’s exposure to risk. Railway companies and their respective operations are diverse. The type and volume of dangerous goods varies from carrier to carrier as does the topography associated with each railway’s network...

Shippers & Shipper Associations

Canadian Fertilizer Institute stated: Railways should obtain the amount of insurance that will be sufficient to cover all claims that would be reasonably expected based on the level of risk and the historical potential for claims, regardless of the size of railway.

Canadian Renewable Fuels Association stated: Current third party liability insurance regulations are sufficient to ensure the safety of railway operations. If third part liability insurance regulations are increased, the Agency must conduct a thorough study on the potential impacts on short line railways.

Canadian Wheat Board stated:the Agency’s test for adequacy of third party liability negates the need for minimum coverage requirements.

Chemistry Industry Association of Canada stated: Yes. The Agency already determines the adequacy of insurance coverage based, in part, on the risk assessment carried out by the insurance company and the railway. If these are carried out with evaluations of safety performance, full disclosure of risks and regular reporting of changes that may alter these risks, the necessary coverage as required for the types of goods being carried can be established and adjusted as necessary…the Agency should require railroads to provide their level of self-insurance and make a specific determination as to the maximum insurance that they can purchase in current insurance and reinsurance markets.

Freight Management Association of Canada stated:Regulations currently establish the requirements. There are…additional safety requirements for the handling of dangerous commodities. Strict adherence to existing regulations should provide for safe railway operations. Parsing or qualifying requirements based on such terms would create different classes of railway safety, create unnecessary confusion among railway operations personnel and be difficult, if not impossible to enforce.

Mining Association of Canada stated: …Would likely support minimum insurance requirements and distinctions made based on the types of goods shipped, our concern …is that in the absence of a more comprehensive approach to rail liability issues, any [Agency] attempt to establish an insurance level that would address catastrophic incidences would not be properly informed.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes. There should be a minimum amount established to provide industry and regulators with a base amount. The minimum amount of insurance should be determined through establishing risk factors, and determining the appropriate level of insurance for the different levels of risk. An established amount gives the provincial authorities a baseline and allows for consistency across Canada.

Federation of Canadian Municipalities stated: The establishment of minimum levels of liability insurance for day-to-day operations would be an improvement on the current insurance framework as it would provide a level of certainty to the public and the industry…

…There is merit to relying on market forces to establish the adequacy of insurance coverage for day-to-day operations and minor incidents…railway companies should be challenged to purchase as much insurance as the private market will allow them to reasonably purchase…to the point where the premiums are no longer economically viable…

Saskatchewan Association of Rural Municipalities stated: If minimum requirements are imposed, we ask that the shortline railway requirements should be less than those of Class 1 railways. Provincially regulated shortlines are a lot different than the federally regulated, high volume, high speed railways. Because of railway operation vary in terms of the volume of traffic, commodity mix, scope of operation and number of crossings, minimum requirements should be less on shortline railways and based on individual risk assessments, past history and length of service. We would like to see adequate consideration given to the level of risk posed by provincially regulated shortlines and that, if regulations are imposed on them, that they correlate with that level of risk.

Insurance Bodies

Insurance Bureau of Canada stated: If…the government is considering establishing minimum insurance requirements, we advise that it would be more appropriate to limit their application to passenger trains. Because the scope of loss is easier to define, passenger trains are more suitable to a minimum requirement than are the freight railways which carry a great variety of cargo types. In addition, the bodily injury exposure is typically greater for passenger trains. Accordingly, minimum insurance requirements could be helpful in ensuring that victims of rail accidents and their families are compensated financially for their losses.

Burns and Wilcox Canada stated: We recommend that the [Agency] consider the length and weight of trains...A maximum length and weight should be set and standards with respect to when a railway must employ distributed power systems for longer and heavier trains should be evaluated.

In addition, regulations should be revised to establish minimum insurance limits carried by each railway company as well as proper insurance coverage for each line of business.

Q5B. If so, should there be a distinction made between general commodities and dangerous goods? Please provide your reasons.

Railway Companies & Railway Associations

Canadian National Railway Company stated: The answer to this question is relevant only to the extent a carrier is allowed to refuse to carry dangerous goods…all freight railways are currently subject to common carrier obligations and are required to move whatever commodities are offered for carriage; the fact that no dangerous goods move on a particular railway at a given time is not determinative of the risk exposure of such railway.

Canadian Pacific Railway Company stated:This issue will be more acute when addressing the transportation of hazardous commodities on Shortline railways in terms of how much insurance is actually available for purchase and at what cost.

Chemin de fer Arnaud stated: [translation] Yes! The impact of transporting dangerous goods versus transporting rock does not have the same severity.

Great Western Railway Ltd. stated: No.

Railway Association of Canada stated: A railway’s insurance coverage should be reflective of the risk the railway is exposed to and factor in commodities and their respective volume and route of travel. Moving some dangerous goods might present a distinct risk.

Shippers & Shipper Associations

Canadian Fertilizer Institute stated: Differentiating insurance requirements for dangerous goods will support railway efforts to evade their common carrier obligations and inappropriately transfer responsibility for risk—and its costs—to shippers.

Canadian Renewable Fuels Association stated: Fuel and other dangerous goods producers already pay significantly higher rates for shipping to compensate for the higher liability and additional safety requirements for the handling of dangerous commodities being taken on by the shipping company. If insurance on shipping dangerous goods by rail is too expensive, it will affect the profitability of ethanol in Canada. As such, the cost of liability insurance is a factor in keeping the industry competitive.

Canadian Wheat Board stated:if minimum levels of coverage were required by regulation, …there should be a distinction made between general commodities and dangerous goods. The minimum level of third party coverage should be higher for dangerous goods as a result of the additional risk…

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada stated: see their respective responses to Q5A.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes. Dangerous goods are classified as such because their properties can cause serious damage to the environment and loss of life. The handling and transportation of dangerous goods should require a higher level of insurance than general commodities. This is evident in the railway incidents involving dangerous goods and the costs due to loss of life, injury, damage to assets and impacts on the environment.

Federation of Canadian Municipalities stated: …the risks associated with dangerous goods are much more significant than those of other merchandise transported by rail. This distinction must be reflected in the adequacy threshold and, if minimum requirements are established, these amounts should reflect this difference in risk. In addition, it would…be desirable to distinguish between the various categories or classes of dangerous goods as many of them pose unique risks.

The requirement to obtain specific insurance coverage for unusual shipments of dangerous goods should also be considered (nuclear materials, dangerous biohazards, etc.) to reflect the specific nature of the goods and the route that they will travel...

Saskatchewan Association of Rural Municipalities stated: …we would ask that no additional or different third party liability insurance requirements related to the transportation of certain commodities be imposed.

Insurance Bodies

Burns and Wilcox Canada stated: …the proper placement and distribution of dangerous goods throughout a train can help to minimize incidents. As such, standards could be allocated in the following categories:

  • Length/weight maximums for trains with general commodities only.
  • Length/weight maximums for trains with a mixture of general commodities and dangerous goods.
  • Length/weight maximums for trains with dangerous goods above a certain threshold (for example; if 30% of a train’s railcars contain dangerous goods, then a restriction on length/weight must be applied).
  • Maximum threshold for dangerous goods cargo (for example; no more than 40% of the train will consist of railcars designated as dangerous goods).
  • Stipulations on when distributed power systems must be used for more hazardous loads/trains….

Q6. Should there be separate minimum requirements for Class I railway companies and for shortline railway companies? Please provide your reasons.

Railway Companies & Railway Associations

Canadian National Railway Company stated: …While the volume of dangerous commodities moving over the lines of a railway company may affect the level of insurance required, it is important to note that the risk associated with any one car of dangerous commodity does not diminish once it is transferred from a Class I Railway to a short line railway…

Canadian Pacific Railway Company stated: The risks associated with movement of hazardous commodities…does not change when the traffic moves from a Class 1 to a Shortline railway, or from a Shortline to a Class 1 railway. It is the product shipped that presents the risk to the public.

Chemin de fer Arnaud stated: [translation] … the existing minimum requirements are sufficient for our needs.

Great Western Railway Ltd. stated: There should be separate minimum requirements for Class I Railway Companies and for shortline railway companies…our maximum track speed is 25 MPH and we have restricted the maximum speed to 20 MPH for the movement of loaded crude oil cars. The difference in Class I Railway and Shortline Railway speeds are significant when handling any commodity that may be involved in a derailment. Cars hauled, distances, and train lengths are also vastly different between Class 1s and Shortlines.

Railway Association of Canada stated: No, a railway’s insurance coverage should be reflective of the risk the railway is exposed to and factor in commodities and their respective volume and route of travel.

Shippers & Shipper Associations

Canadian Renewable Fuels Association stated: As ethanol producers in Canada primarily utilize short-line railways when shipping by rail, any increase in the costs incurred by these smaller rail lines – which are in turn passed on to clients – must be taken into consideration…

The Chemistry Industry Association of Canada, Freight Management Association of Canada Mining Association of Canada stated: see their respective responses to Q5A.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Class 1 railways typically operate longer trains with more types of products including dangerous goods, passenger traffic, higher rates of speed, and over larger territories. Considering increased level of risk added when operating a Class 1 railway, there should be a higher amount of insurance required. Shortline railway companies may be limited in the products they carry, distance traveled and speed operated at, so a higher amount of insurance may not be required...

Federation of Canadian Municipalities stated: For day-to-day operations, it is important that any minimum requirements established reflect the size of the carrier’s operations. It would be illogical to impose the same minimum on a shortline railway as the one imposed on a Class 1. As is the case for the adequacy threshold, some elements reflecting the risk posed by the size and scale of a carrier’s operations should be included in the calculations of the minimum required.

Saskatchewan Association of Rural Municipalities stated: If minimum requirements are imposed, we ask that the shortline railway requirements be less than those of Class 1 railways. Provincially regulated shortlines are a lot different than the federally regulated, high volume, high speed railways.

Insurance Bodies

Burns and Wilcox Canada stated: No. If the railways are transporting the same type of cargo, then the risk exposure and potential liability for each train is similar. Trains should adhere to the same standards for length/weight, dangerous goods distribution, and the application of distributed power systems for longer trains. It is possible that a company may have fewer and shorter trains and, therefore, not reach proposed thresholds. However, companies still need to be aware of train length and weight, and how they distribute dangerous goods on their trains.

Q7. If you think minimum requirements should apply, what should they be and what approach should the Agency use to establish a minimum requirement?

Railway Companies & Railway Associations

Canadian National Railway Company stated: The 10 factors identified in the current Regulations appear sufficient for the determination of what will constitute “adequate” insurance coverage. It is not clear to the railway industry how those factors are applied to determine the adequacy of the level of insurance. These factors should also take into account the risk reduction measures implemented by the railway.

However, assuming that a level of insurance of $25M was established as being adequate for a given railway at the time the provisions came into effect in 1996, such amount would have been eroded by inflation since then…the amount would likely need to be fixed at $35M in today’s dollars…with the increase in dangerous goods either being moved or potentially being moved, it is possible that this amount would now need to be established in the $50M - $75M range.

…the risk associated with any one car of dangerous commodity does not diminish once it is transferred from a Class I Railway to a short line railway…, a Class II or Class III railway shortline likely has a more limited financial ability than a Class I’s. For this reason, the capping of liability in relation to the Class of railway together with the creation of fund for damages in excess of this limit (similar to the marine mode) would effectively address this situation consistent with the public policy issue discussed below.

It is also important to remember the public policy underlying Division V of the Act entitled Transferring and Discontinuing the Operation of Railway Lines. As the Agency has mentioned in a number of decisions, the intention was to attempt to keep railway lines in operation by favouring their transfer to lower cost railways. Establishing a level of insurance requirement to a cost prohibitive level would undermine this element of the transportation policy.

Canadian Pacific Railway Company stated: Arguably, shortline operations not handling hazardous commodities could exist with some lower level of coverage, but this approach raises the scope of the common carrier obligation. It would require a shortline to be able to refuse to carry certain hazardous commodities in order to stay within its limits. Consideration needs to be given to how shippers will be practically prevented from sending hazardous commodities to a shipper on a federal shortline.

Chemin de fer Arnaud stated: [translation] A regulatory approach!

Great Western Railway Ltd. stated: Minimum requirements should be less on shortline railways based on their individual risk assessments, past history, and length of service. Minimum requirements of the host railway or at interchanges would still be applicable.

Railway Association of Canada stated: There could be a role for minimums in some situations, but the requirements should be based on risk. Railways that do not transport dangerous goods could be potential candidates for less important insurance requirements.

Shippers & Shipper Associations

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada stated: see their respective responses to Q5A.

Provincial Governments & Municipal Associations

Alberta Transportation stated: This should be looked at on a National level and discussed with the insurance experts.

Federation of Canadian Municipalities stated: FCM does not have the expertise to propose a set amount as a minimum. In fact, the establishment of minimum requirements should be subject of a comprehensive consultation process.

Saskatchewan Association of Rural Municipalities stated: see its response to Q5A.

Insurance Bodies

Insurance Bureau of Canada stated: Currently, there are minimum insurance requirements for airline passenger operations and buses.

Burns and Wilcox Canada stated: There should be a minimum requirements scheme giving different minimum limits for different type of goods transported. The CTA should evaluate the railway industry to determine:

  1. The length/weight of average trains;
  2. The percentage of dangerous goods being transported on average;
  3. If certain geographic areas have a higher percentage of dangerous goods being transported;
  4. The percentage of railcars that are transporting dangerous goods.

Such information may be difficult to obtain because many railways do not have up to date inventories of railcars, ownership records or guidelines as to what railcars are allocated to haul. The CTA should request this information from the industry.

Please see the…limit grid in Appendix 1 [to its submission] for suggested minimum limits.


TOPIC: Federal Railway Companies’ Obligations to Inform

Legislation places the onus on the railway company to notify the Agency in writing, without delay, whenever it cancels or alters its third party liability insurance coverage, or whenever a change in construction or operation may mean that its coverage is no longer adequate.

Q8. What mechanisms should be established in the Regulations to ensure that railway companies notify the Agency of all substantive changes on a timely basis?

Railway Companies & Railway Associations

Canadian National Railway Company stated: …[the Agency] could clarify the matter by identifying the types or magnitude of changes that would trigger the notification requirement. For example, an increase of X to Y carloads of dangerous goods handled on a shortline may constitute a major change, whereas it may constitute a fraction of a percentage point on a Class I.

Canadian Pacific Railway Company stated: The Agency needs to define what is meant by “substantive changes”. It is not practical to inform of every change made to insurance coverage and as long as the minimum requirements are being met and evidenced with a certificate of insurance on an annual basis, there should be no other need to notify other than cancellation of coverage…

One risk factor examined by the Agency is the “class and volume of dangerous goods transported by rail” and the legislation purports to place the onus on the railway company to “notify the Agency in writing, without delay” where change in operation may mean that its coverage is no longer adequate. The difficulty is a railway may be presented with hazardous commodities at any time, either directly from a shipper or indirectly on interchange with another carrier or series of carriers. A railway does not necessarily know in advance that this traffic is coming as timing, volumes, origin, destination and routing are determined by the shipper, but what is clear is the traffic cannot be refused under current applications of the common carrier obligation. At that point, a single TIH car on a railway which has not carried this traffic before has created a change in operations that may mean coverage is no longer adequate and any notification to the Agency is necessarily after the fact.

Chemin de fer Arnaud stated: [translation] the existing law is appropriate as it requires all companies to advise the Agency, in writing, of any changes.

Genesee & Wyoming Canada stated: the CTA should consider developing a guideline or tool to clarify when a substantive change has occurred and when a railway should consider reviewing its insurance coverage (with its insurer).

Great Western Railway Ltd. stated: present regulations are sufficient.

Railway Association of Canada stated: it would support the development of a guideline that clarifies when a substantive change has occurred and when a notification should be sent by the railway to its insurer.

Shippers & Shipper Associations

Chemistry Industry Association of Canada stated: the regulations could establish mandatory reporting requirements on an established scheduled monthly, quarterly or annually and these should be accompanied by proof of notification to insurance companies. This would be in addition to the continuing requirement for railways to report on their own initiative when substantive changes occur.

Freight Management Association of Canada stated: there could be mandatory requirement for railways to report on periodic basis, …monthly, annually or biannually, whether or not there were significant changes, as established by the Agency. This would be in addition to the continuing requirement for railways to report on their own initiative when substantive changes occur as they occur.

Keystone Agriculture Producers stated: …the onus is on the railways to notify the Agency of any changes to their insurance coverage.

Mining Association of Canada stated: mandatory requirements for railways to report on a periodic basis (annually or biannually) and whenever a significant change happens could be introduced, as established by the Agency. For clarity, “significant” should be defined to facilitate clarity of responsibilities. These measures could apply in addition to the continuing requirement for railways to report on their own volition as already required by the regulations.

Provincial Governments & Municipal Associations

Alberta Transportation stated: a penalty section should be enacted, levying large monetary fines for failing to report and regulation regarding notification when there is a change in the insurance, also define substantive change.

Federation of Canadian Municipalities stated: the insurance framework administered by the CTA, currently relies almost entirely on self-declaration by railway companies...this approach should be reconsidered given the significant importance of the insurance component in maintaining public trust and in ensuring proper indemnification when accidents occur.

The Agency should create systematic checks within its approval and review processes to ensure that the insurance purchased by a railway company truly reflects the risks and safety issues involved in the company’s operations, and to ensure that the CTA is kept abreast of material changes. Such checks should include ongoing information sharing between the CTA, Transport Canada (especially the TDG Directorate) and the insurance companies...

…data on dangerous goods generated by Transport Canada, …should be systematically shared with the Agency as well as the railway’s insurance companies to ensuring that full disclosure of the risks to which a railway is exposed. The same could apply to material changes in a railway’s operations. Changes to the coverage provided by an insurer should also be reported immediately to the CTA…

Detailed, periodic checks should be undertaken, either by the Agency or a delegate, to confirm that each railway is fully disclosing its risks to its insurers and that, with the railway’s corporate structure, accountability lines for insurance coverage decisions are clear…

Insurance Bodies

Insurance Bureau of Canada stated: …to strengthen compliance with these statutory disclosure provisions, the CTA could introduce annual attestations, signed by a railway’s senior officer, either confirming that there have been no changes to the railway’s operations or, if there were changes, that the railway has reported them to its respective insurance company

Burns and Wilcox Canada stated: Both railway companies and their insurance carriers should notify the CTA of material change in their operations and coverage levels. In case of insurance cancellation or reducing of liability limit, a registered letter can be required to be sent to the CTA.

It is also possible to add the CTA to an insurance policy as an Additional Insured as the additional insured. If the CTA is listed as an Additional Insured, they will receive a Notice of Cancellation from the insurance provider in a timely manner.

Q9. In the case of non-compliance, would administrative monetary penalties be an appropriate mechanism? Are there better ones? Please provide your reasons.

Railway Companies & Railway Associations

Canadian National Railway Company stated: The Act currently imposes an obligation on the holder of the certificate to notify the Agency of any changes to its insurance policy or in its operation that could cause the insurance coverage to no longer be adequate. CN does not believe that administrative monetary penalties are required or would assist in the administration of this provision of the Act.

Canadian Pacific Railway Company stated: Monetary penalties might be considered, but the value is limited…Class 1 railways buy the commercially available insurance. At a minimum the process of determining non-compliance needs to be clearly defined and communicated to all parties who may be affected by the potential penalty. Currently, there is no visibility in determining how decisions are made with respect to compliance or non-compliance.

Chemin de fer Arnaud stated: [translation] The existing law is appropriate.

Genesee & Wyoming Canada stated: Administrative penalties might not be the right mechanism for compliance. This is more for repetitive infractions.

Great Western Railway Ltd. stated: Administrative monetary penalties are an appropriate mechanism.

Railway Association of Canada stated: No, administrative penalties are not appropriate. Non-compliance is not necessarily intentional or might have no consequences (ex: if the significant change is duly brought to the attention of the insurer and the new or additional risk the change might bring is covered). We believe that administrative monetary penalties are more suitable for repetitive intentional violations.

If it had the jurisdiction to do to so, the Agency should alternatively require a railway or its insurer to provide a certificate of insurance to the Agency when a railway’s insurance policy is renewed.

Shippers & Shipper Associations

Chemistry Industry Association of Canada and Freight Management Association of Canada agree that in the case of non-compliance, administrative monetary penalties would be appropriate. Such penalties should be set high enough to strongly encourage compliance. Such penalties should apply where the regulatory requirement to notify the insurer is breached.

Mining Association of Canada stated: Administrative monetary penalties could effectively serve as a deterrent to non-compliance as are used frequently in our sector.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes, administrative penalties are appropriate. They can be combined with suspensions/cancellations of operating approvals, with or without conditions.

Federation of Canadian Municipalities stated: Penalties should be commensurate to the significance of the non-disclosure, the risks to the public that went uninsured, as well as the length of time the railway was delinquent in its obligations.

FCM would encourage the CTA to consider regulatory changes that would impose sanctions on one or more identified officers or directors of a corporation for recurring or severe infractions.

Insurance Bodies

Burns and Wilcox Canada stated: Monetary penalties are an appropriate initial response to non-compliance. However, repeated violations should result in additional penalties, including possible suspension of operating licenses.

Q10. What, if any, mechanisms should be established in the Regulations to ensure that railway companies notify their insurer of all substantive changes on a timely basis?

Railway Companies & Railway Associations

Canadian National Railway Company stated: Neither the Act nor the Regulations specify what changes or types of changes would trigger the application of the obligation to notify the Agency. The matter is left to the individual judgment of the certificate holder.

Canadian Pacific Railway Company stated: Regulators should not be involved in the management of communication between railway companies and their insurers.

Chemin de fer Arnaud stated: [translation] The existing law is appropriate as it requires all companies to advise the Agency, in writing, of any changes.

Great Western Railway Ltd. stated: Railways that do not notify their insurer of all substantive changes on a timely basis are harming their future chances of successful claims, as well as the ability to be indemnified to adequately run their operations as per the present regulations.

Railway Association of Canada stated: A regulatory requirement is not necessary.

Shippers & Shipper Associations

Chemistry Industry Association of Canada and Freight Management Association of Canada stated: As detailed in our answer to question 8, the railways should be required to include in their periodic report to the Agency, a copy of all reports of substantive changes sent to their insurer since the previous periodic report to the Agency.

Mining Association of Canada stated: see its response to Q8 and Q9.

Provincial Governments & Municipal Associations

Alberta Transportation stated: see its response to Q8 and Q9.

Federation of Canadian Municipalities stated: see its response to Q8.

Insurance Bodies

Burns and Wilcox Canada stated: …if these inventories of railcars were to be updated and made available quarterly, then insurers would be able to collect the information regularly. However, this is contingent on the Agency taking greater steps to ensure that railways and railcar owners track and monitor railcars, the type of materials they contain, and their most recent safety tests.

Alternatively, railway companies could be compelled by regulation to notify both the CTA and their insurance companies of material changes in their operations.


TOPIC: Assessment of Financial Capacity

The Regulations state that the Agency will assess the financial capability of the applicant to sustain any level of self-insurance, whether it is a deductible or self-insured amount. For this purpose, the Agency examines the railway company’s audited financial statements for the three most recent complete fiscal years.

Q11. Should the Agency continue with this practice (i.e., assess financial capability of applicant to sustain any level of self-insurance) or should the Agency establish additional requirements?

Railway Companies & Railway Associations

Canadian National Railway Company stated: …such assessments should continue.

Canadian Pacific Railway Company stated: The Agency should establish, that all stakeholders in the transportation of hazardous commodities including carrier, shippers and brokers have the financial capacity to address the risks associated with the commodities they ship.

Chemin de fer Arnaud stated: [translation] The existing law is appropriate and the Agency should continue to evaluate the financial capability.

Great Western Railway Ltd. stated: The Agency should continue to assess the financial capacity of the applicant railway.

Railway Association of Canada stated: Yes the Agency should continue to assess the financial capacity of a railway. No additional requirements are needed at this time.

Shippers & Shipper Associations

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada stated: The Agency should continue with the current practice of examining the railway companies’ financial statements for the three most recent fiscal years and, where the Agency has concerns, the Agency should evaluate the ability of the insurance provider to meet its contractual obligations.

Chemistry Industry Association of Canada and Freight Management Association of Canada stated: The examinations should be done of each railway, each year, even if this requires additional resources at the Agency.

Mining Association of Canada stated: …the railway company may be required to provide the Agency with the last three years of the insurance company’s audited financial statements and/or the insurance company’s solvency rating, as determined by recognized rating agencies.”

Keystone Agriculture Producers stated: …Agency should continue with the practice of verifying the financial capacity of railways to pay claims.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Continue to allow railways to self-insure assuring they are financially stable to cover possible expenses of an accident claim and be financially viable to continue to operate if a claim is made.

Federation of Canadian Municipalities stated: …imperative that an assessment of a railway’s ability to pay for the self-insured risk be done.

Insurance Bodies

Burns and Wilcox Canada stated: The CTA should continue examining railway companies’ audited financial statements, but extend the review to cover a period of five years. A longer review period helps to better determine the actual financial capacity of a company and detect any potential financial problems.

If, for any reason, the CTA believes that the insurance company may not have the financial ability to pay its contractual level of insurance coverage, the railway company may be required to provide the Agency with the last three years of the insurance company's audited financial statements and/or the insurance company's solvency rating, as determined by recognized rating agencies.

Q12. Should the Agency continue to assess the financial strength of the insurance company to pay its contractual level of insurance coverage?

Railway Companies & Railway Associations

Canadian National Railway Company stated: Agrees that such assessments should continue… note that both the Nuclear Liability Act and the Marine Liability Act include provisions for insurers to be approved by a governmental authority.

Canadian Pacific Railway Company stated: If the Agency wishes to assess financial statements of insurance companies, this should be undertaken directly by the Agency, or in conjunction with insurance companies and federal and provincial regulators responsible for those entities and who permit those entities to write and issue policies of insurance in Canada.

Great Western Railway Ltd. stated: Yes.

Railway Association of Canada stated: Yes the Agency should continue to assess the financial strength of a railway’s insurance company.

Shippers & Shipper Associations

Canadian Fertilizer Institute stated: The Agency should continue to assess the financial strength of any insurance company involved in the transportation system.

Chemistry Industry Association of Canada stated: Yes, this should be done yearly.

Freight Management Association of Canada stated: … it would seem prudent for the Agency to carry out a periodic overview of each insurance provider, say yearly.

Mining Association of Canada stated: Yes, it would be prudent for the Agency to continue ensuring that insurance companies are able to meet their contractual obligations to rail companies.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes, absolutely.

Federation of Canadian Municipalities stated: There must be a mechanism to make sure that the coverage purchased by a railway on the open market is credible. However, is it less clear that the work currently performed by the Agency in this area is necessary?

Insurance companies are rated by independent agencies and provincial or federal licensing authorities. It might be preferable to base the admissibility of an insurance company on those ratings instead of attempting to perform an in-house assessment. The Agency could determine a minimum acceptable independent rating for its approval purposes. This minimum could be communicated openly to the public, further improving transparency and accountability.

Insurance Bodies

Insurance Bureau of Canada stated: The Office of the Superintendent of Financial Institutions (OSFI) oversees the solvency of Canadian insurance companies and foreign companies with branch offices in Canada. OSFI sets guidelines and conducts assessments of these companies to ensure they have enough capital to meet their contractual obligations. These companies also belong to the Property and Casualty Insurance Compensation Corporation (PACICC). PACICC is an industry-funded non-profit organization that, in the rare occurrence of an insurance company insolvency, will respond to the claims associated with the policies that the insolvent company issued.

Foreign insurance companies without branches in Canada are not subject to OSFI’s solvency requirements and do not participate in PACICC. To the extent that these insurers are providing coverage to Canadian railways, we suggest that the Agency should consider focusing its assessments of financial capacity on these companies.

Burns and Wilcox Canada stated: The financial strength and rating of the insurance company should continue to be assessed by the Agency. Looking for insurance companies that are A- rated or better will ensure that the insurance company will be able to assist in the event of a claim.

Ensuring the financial stability of insurers is especially important when considering that the potential minimum limits on high-risk railways would likely require coverage from multiple insurers. For example, many Environment Impairment Liability (EIL) insurers will not provide limits higher than $50 million for any one occurrence/aggregate. Therefore, if the Agency believes that limits greater than $50 million should be purchased for Environmental Impairment Liability (mainly, clean-up costs, bodily injury and property damage as a result of a pollution condition) then it is advisable that the railway seek excess coverage from separate insurers. It is best to layer excess EIL coverage and build an insurance program that will respond to large environmental clean-up costs. If the Agency assesses the financial stability of insurance companies, then it is more likely that each company will be able to cover their portion of the liability in the event of an accident.


TOPIC: Confidentiality

Currently, all documents filed with the Agency become part of the public record and may be made available for public viewing. However, in accordance with the Agency's General Rules, a claim for confidentiality can be made. In practice, railway companies tend to claim as commercially confidential all its financial information, including information related to the amounts of insurance coverage.

Q13. What information submitted in an application for, or a variance to, a certificate of fitness should be made public and what should remain confidential? Please provide your reasons.

Railway Companies & Railway Associations

Canadian National Railway Company stated: All commercial and financial information of the company provided in support of a certificate of fitness should remain confidential. CN does not object in the amount of insurance that the Agency considers adequate for each company be made public.

Canadian Pacific Railway Company stated: All financial information (not otherwise publicly disclosed) and all insurance specific information of the applicant railway must be confidential.

Chemin de fer Arnaud stated: [translation] The limitations of a certificate of fitness should remain public.

Genesee & Wyoming Canada stated: Information provided to the CTA in connection with insurance should be treated as confidential and not made public. The CTA should certify and place notice on its website that a railway has met the regulatory requirements.

Great Western Railway Ltd. stated: Any information submitted in an application for, or a variance to a certificate of fitness should be made public. Confidentiality should be limited to the Company’s financial information.

Railway Association of Canada stated: Proprietary information and any financial, commercial, scientific or technical information should be treated as confidential at all times by the Agency, and should be specifically exempt from the Access to Information Act.

Shippers & Shipper Associations

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada stated: While some of the information, required to be submitted to the Agency for a Certificate of Fitness, may be reasonably considered commercially confidential, most of the information should be made public. For example, if the amount of coverage requested by a railway is turned down by an insurance company, it would be in the public interest for this to be known, especially by shippers and municipal governments. All applications for certificates of fitness, or variances to existing certificates of fitness should be disclosed to the public, with as much information being made public as possible.

Chemistry Industry Association of Canada stated: …the Agency should require railroads to provide their level of self-insurance and make a specific determination as to the maximum insurance that they can purchase in current insurance and reinsurance markets. This information should be made publicly available.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Given the current state of the rail industry and recent rail incidents, information should be made public. The public has a right to know if they are a company able to cover insurance costs.

Federation of Canadian Municipalities stated: …some corporate data used to assess the adequacy of insurance coverage must remain confidential…[it] would like to encourage the CTA to bring full transparency where possible, including by the disclosure of the amount of insurance deemed adequate for each railway company. In addition, trust in the process used to determine adequacy would be greatly increased if the exact processes and grounds to reach a decision were made more transparent to the public. As it stands, how the “adequacy” test set out in the Regulations is applied by the Agency remains, for the most part, a mystery to the public.

Insurance Bodies

Insurance Bureau of Canada stated: It is in the public interest to confirm that a railway is carrying adequate liability insurance. However, we caution against imposing mandatory obligations to disclose specific insurance limits. Disclosing the actual amounts may lead to unintended consequences that would encourage litigation and lengthen legal proceedings.

Burns and Wilcox Canada stated: If possible, the General Liability Insurance limit and the self-insured retention amount should be made public. This will assure the public that the company has a level of coverage in place that is adequate for the types of accidents likely to occur.

Q14. Should the amount of third party liability insurance and the self-insured retention amount be made public? Please provide your reasons.

Railway Companies & Railway Associations

Canadian National Railway stated: see its response to Q13.

Canadian Pacific Railway Company stated: The amount of third party liability insurance and the SIR amount should not be made public. This is extremely confidential information as it is with most Canadian businesses.

Chemin de fer Arnaud stated: [translation] No.

Genesee & Wyoming Canada stated: see its response to Q13.

Great Western Railway Ltd. stated: The amount of third party liability insurance should be made public as per the minimum requirements established by the Agency.

Railway Association of Canada stated: No, the amount of third party insurance coverage should not be disclosed to the public, particularly the self-insured retention portion, which is commercially sensitive information and as a result is confidential.

Rather the Agency should certify and place notice on its website that the railway has obtained adequate third party insurance coverage.

Shippers & Shipper Associations

Chemistry Industry Association of Canada, Freight Management Association of Canada and Mining Association of Canada stated: Yes, this information is vital to the public interest. It would be of value to all levels of government, especially municipal governments to know what level of third party liability coverage exists. It is also of importance to shippers in determining routings and carriers for shipping their products, especially shippers of dangerous goods.

Keystone Agriculture Producers stated: that it fully supports the CTA in requiring railways [to] disclose their third party liability insurance coverage.

Provincial Governments & Municipal Associations

Alberta Transportation stated: Yes, the CTA should ensure the railway companies are open and accountable.

Federation of Canadian Municipalities stated: see its response to Q13.

Insurance Bodies

The Insurance Bureau of Canada and Burns and Wilcox Canada stated: see its response to Q13.

Burns and Wilcox Canada stated: see its response to Q13.


TOPIC: Other Issues

For the purposes of this section, the additional comments provided by stakeholders have been summarized with the exception of Burns and Wilcox Canada which is an excerpt from its submission. This section does not fully capture all the opinions that were submitted, however, the links to those submissions are provided to allow for a comprehensive reading of the issues.

Views on other third party liability insurance coverage or accountability related issues or expression of any opinions related to the Agency’s current regulatory regime

Railway Companies & Railway Associations

Several stakeholders raised the point that alternatives to the status quo approach warrant careful consideration including: a review of the railway common carrier obligation; creating a statutory liability cap for the movement of dangerous goods; or developing a fund to address third party liability associated with incidents. Further, catastrophic incidents can arise without fault or negligence on the part of the railway and there is no accountability in the existing Railway Third Party Liability Insurance Coverage Regulations for those who create, own, and put high risk products into the supply chain. Risk sharing strategies could be encouraged and enhanced by appropriate amendments to the Railway Traffic Liability Regulations, an element that is completely within the Agency’s purview.

For further details on these issues and other opinions not mentioned here and raised in the submissions, see:

Shippers & Shipper Associations

Several parties are of the opinion that in the assessment and enforcement of Railway Third Party Liability Insurance Coverage Regulations, the possible discontinuance of operation by shortline railways will need to be part of the Agency’s evaluation. While appropriate third party losses must be protected, if changes in the regulations cause some shortlines to cease operations, the implications on shippers, communities, local road transportation and infrastructure, and the regional economies affected will need to be taken into consideration by the Agency.

As well, there is a view that the agreements in place between railways relating to the interchange of traffic and provisions the railways have agreed upon when the short-line railways were and are set up are essential to be disclosed. Such agreements further define the liability and indemnity requirements and other provisions between the parties that the Agency, the public and shippers should be aware of in order to assess safety performance, third party liability coverage or accountability related issues.

Also expressed is the view that the Agency should reaffirm that railway companies cannot shift liability to shippers by indemnification clauses.

To read these and other views, see:

Provincial Governments & Municipal Associations

Support exists for a regime founded on the principle that the supply chain participants should be held fully accountable for compensating and remediating for damaged caused by their actions to communities, people, businesses and the environment. These costs should be borne by the industry in accordance with the “polluter-pay” principle through an industry-funded comprehensive liability insurance regime which provides full coverage for catastrophes. Taxpayers should not have to deal with the fall-out of catastrophic accidents.

Insurance Bodies

Burns and Wilcox Canada stated: The regulations for third party liability insurance with respect to “named perils pollution” are out of line with the current pollution products available in the insurance market in Canada.

Insurers that provide standalone pollution policies that go above and beyond the Sudden & Accidental pollution coverage offered on Commercial General Liability policies, generally define pollution as:

Pollution Condition: means the actual or alleged discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land or structures thereupon, the atmosphere or any watercourse or body of water, which results in BODILY INJURY, PROPERTY DAMAGE, or CLEANUP COSTS.

This definition is not universal and every insurance company that provides specialized environmental impairment liability products will have a definition unique to their product.

Some CGL policies provide Sudden & Accidental pollution coverage that may meet the CTA’s current standards for named perils pollution, but do not ultimately provide sufficient coverage… Therefore, the CTA’s current definition of named perils pollution coverage is not sufficient.

We recommend that a requirement be made that all railways provide proof of EIL coverage, which includes:

  • Gradual, Sudden & Accidental EIL coverage for bodily injury and property as a result of a pollution condition
  • Transportation coverage included on EIL policies to provide coverage for railways transporting goods on behalf of third parties
  • EIL coverage that is not subject to time restrictions
  • EIL that provides coverage for natural resource damage.

We further recommend that railway companies evaluate the EIL coverage of and collect certificates of insurance for customers that own, wholesale or broker the sale of dangerous goods being transported on their railways lines…it is recommended that customers transporting dangerous goods demonstrate proof of EIL coverage that is gradual, sudden and accidental, includes bodily injury and property damage as a result of pollution conditions and provides coverage for transportation via rail.

If the CTA continues to accept CGL policies with only Sudden & Accidental pollution, the limits will not be sufficient to respond to large catastrophic losses that result in major clean-up costs. Furthermore, CGL policies are not intended to provide gradual coverage for bodily injury and property damage claims that result from pollution conditions.

More generally, the CTA should ensure that:

  • Railways that accept/transport dangerous goods provide proof of EIL insurance with separate aggregate limits from other CGL insurance
  • That minimum limits of liability for EIL be $100 million for railways that transport a volume of more than 10% of dangerous goods.
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