Fort Worth-based BNSF Railway has sharply increased the insurance coverage requirements for shippers of toxic inhalation hazard (TIH) chemicals, including anhydrous ammonia, prompting The Fertilizer Institute (TF) and other industry groups to draft a letter expressing “grave concerns” to CEO Katie Farmer.
As of Sept.1, BNSF is requiring shippers of TIH materials to have a minimum of $100 million in insurance coverage, up significantly from the prior $10 million minimum, Trains magazine reported. The move reportedly comes in the wake of the February 2023 hazardous materials derailment in East Palestine, Ohio, which has cost Norfolk Southern more than $1.7 billion to date, Trains reported.
BNSF is also requiring shippers to equally share liability for damages up to $1.8 billion where the cause of an accident is unclear or is caused by a third party. Additionally, the railway now requires shippers to accept full responsibility for and indemnify BNSF against liabilities over $1.8 billion.
“This 10-fold increase over BNSF’s current insurance requirement is excessive,” said TFI, the American Chemistry Council, Alliance for Chemical Distribution, The Chlorine Institute, and American Fuel & Petrochemical Manufacturers in an Aug. 28 letter to Farmer, which was also sent to members of the Surface Transportation Board (STB).
“With a limited number of insurance carriers in the market, your customers face significant challenges in obtaining coverage for their full range of products,” the letter states. “Moreover, the Sept. 1 deadline fails to provide customers with a reasonable amount of time to work through these challenges.”
BNSF Spokesman Zak Andersen said the higher insurance requirement is necessary and reasonable considering the risks involved with carrying TIH materials, and is “consistent with the levels of insurance these types of customers already carry in their business.”
“The changes we made to our insurance requirements in our TIH tariff terms were the first ones we have made in 20 years, and none of our revisions change the basic structure that our TIH customers have always shipped under,” he said. “We raised the insurance requirement to more closely reflect current realities, informed by recent events.”
TFI has sparred with the rail industry before over the common carrier obligation of Class 1 railroads to transport TIH commodities, including in 2007 when some railroads hiked freight rates for ammonia (GM Feb. 5; April 16, 2007) and in 2014 when certain railroads placed restrictions on the type of TIH tank cars they would accept (GM April 28, 2014).
Anderson warned that an incident involving a significant TIH release “could have financial impacts that jeopardize the ability of a railroad to continue operating.” One such accident occurred in January 2002 when a Canadian Pacific train derailment near Minot, N.D., caused an ammonia release that killed one local resident and sent dozens of others to the hospital (GM Jan. 21, 2002).
TFI and the other trade groups, however, argue in the letter that BNSF’s “unilateral rule changes impose unworkable insurance requirements and disproportionately shift greater liability to TIH customers.” They said liability should rest instead “on the party with operational control over safety,” noting that railroads “are the parties in the primary position to mitigate risks during transportation, including those associated with third-party actions and natural forces.”