Insurance news from Lac-Mégantic means higher costs for railways

Insurance news Lac Megantic train derailment

The Canadian Transportation Agency is now conducting a review of minimum coverage amounts.

Following the railway disaster in Lac-Mégantic, Quebec, Canada, the Canadian Transportation Agency (CTA) is making insurance news by holding a review of the minimum coverage amounts that railways must carry.

The coverage at the Lac-Mégantic crash was covered only to a small fraction of the total estimated damages.

The federal regulators added to their insurance news announcement by saying that they will be starting consultations on coverage for railway companies in the next few months. The review is occurring two months following the accident in which a train filled with crude oil from Montreal, Maine & Atlantic (MM&A) jumped its tracks and exploded in the town with a number of fiery bursts that annihilated a segment of the downtown area and killed 47 people.

Insurance news Lac Megantic train derailmentWhen the insurance news of the accident first occurred, there was $25 million in liability coverage.

This insurance news was a tremendous disappointment, as this the third party coverage will cover only a fraction of what the cleanup from this accident is expected to cost. The documents filed in August at a Quebec court have suggested that MM&A is anticipating environmental cleanup costs that are greater than $200 million. The railway company has also been sued by many of the families of the people who died in the train crash.

Previous insurance news has revealed that MM&A has received creditor protection and is currently under the supervision of the court as it manages the derailment related claims. A CTA spokesperson has stated that she is unaware of a single situation over the last decade in which a railway that was federally regulated was not adequately covered for providing payments for claims.

This spokesperson, Jacqueline Bannister explained in an insurance news email that “However, the tragic derailment in Lac-Mégantic has raised important questions regarding the adequacy of third-party liability insurance coverage to deal with catastrophic events, especially for smaller railways.” She also added that as the number of hazardous material and crude oil shipments by rail continue to increase, it is important to highlight the requirement for better understanding how railways of all sizes can be properly insured and obtain adequate levels of third party protection.

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