SB
2405 Testimonies on FELA
TESTIMONY OF LARRY ASH, SECURITY INSURANCE AGENCY Good morning Mr. Chairman and members of the Industry Business & Labor Committee. My name is Larry Ash. I am a commercial insurance agent with Security Insurance Agency in Jamestown, ND. I have been in the Agri-business insurance since 1976. Federal Employers Liability Act (FELA) was made a federal law by Congress in 1908. FELA is a law that provides special protection to employees of railroads. If the injured worker can prove that his employer was negligent (that is, provided an unsafe place to work) then he can recover for pain and suffering and disability and can recover full compensation. Such a case is usually worth much more than a Workers Compensation loss since Workers’ Compensation has a strict statutory limits. The injured worker with FELA can have his case decided by a jury, which is always preferable since they have more in common with the injured worker. The lease contracts states that the grain elevator shall indemnify and hold the railroad harmless from any liability or claim related to FELA regards of negligence or strict liability of the railroad. The problem with these contracts is that Insurance contracts excluded coverage for FELA and they are unable to endorse the coverage onto their insurance contracts. It is my understanding that a signed lease contract will hold up in court of law and insurance companies are not required to pay if there is no negligence on the part of the grain elevator. So, if the grain elevator signs this lease and has a FELA claim, they will probably be put out of business if the claim is large. Since, the grain elevators Worker Compensation, General Liability or Employers Liability will not endorse coverage for the FELA exposure, the only remedy is the Excess & Surplus market. I have inquired with some of the large Broker Firms that deal with the E & S lines that write this type coverage and they have stated they don’t have a market that would provide coverage for the FELA coverage for a small country elevator. One broker stated that some of the large companies that purchase the FELA endorsement usually have very large deductibles ranging from $250,000 to $500,000 and the cost are very expense. It appears the railroad is trying to contract their liability away to the grain elevators. The grain elevators do not have any control over the railroad employees and therefore cannot control the work environment of the railroad employees. Insurance coverage’s are written to protect individual businesses for their own negligence, not those of others, there for I am in support of Senate Bill 2405. WRITTEN TESTIMONY
OF BARB
BIERBRAUER, AG STATES AGENCY
The
Federal Employers’ Liability Act is a federal law passed by Congress
in 1908. It was designed to
protect and compensate railroad employees injured on the job.
The law makes every common carrier by railroad engaging in
commerce between any of the States or territories liable in damages to
any person employed by the carrier (or under the direction of the
railroad) for injury or death resulting in whole or in part from the
negligence of any of the officers, agents or employees of the carrier or
by reason of any defect or insufficiency due to its negligence in its
cars, engines, appliances, machinery, track, roadbed, works or other
equipment. The railroad has lobbied unsuccessfully for years to
get the act repealed. Is
that an indicator? The BNSF contract
states the industry (grain elevator) shall indemnify and hold the
indemnitee (railroad) harmless from any liabilities arising out of or
related to any claim related to FELA regardless of any negligence or
strict liability of the railroad. The
railroad also wants to be indemnified for FELA claims based on actual or
alleged violations of any federal, state or local laws or regulations
including FELA, The Safety Appliance Act, The Boiler Inspection Act, The
Occupational Health & Safety Act, The Resource Conservation Act.
A railroad employee cannot bring an action under the latter four
acts but must bring it under FELA alleging a violation of the acts in
the complaint. Violation of the Safety Appliance Act, for example, may
result in absolute liability without comparative negligence (See
attached addendum for an explanation of these acts). These federal acts
are designed to ensure worker and workplace safety.
The Safety Appliance Act and Boiler Inspection Act pertains
specifically to safe railroad cars and locomotives. 1.
FELA, a federal law, was passed by Congress to “put on
the railroad industry some of the costs of the legs, arms, eyes and
lives which it consumed in its operation”.
Grain elevators have no control over railroad operations.
They cannot control the safe operations of the cars and
locomotives or workplace safety of its employees.
To ask a grain elevator to be liable for an injury to a
railroad employee due to contractual obligations is ludicrous.
Contractually, that is what BNSF is asking of the grain elevator.
This is the only contract I have read in 30 years of
insurance experience that requires the indemnitor to be responsible for
work related injuries to the indemnities employees.
2.
Insurance does not cover violations of law – If the
indemnification agreement in the railroad contract holds up in a court
of law, any serious injury as a result of a violation of law could put
the average grain elevator out of business or force that elevator into
bankruptcy. Neither Nationwide
Agribusiness Insurance Company/Farmland Mutual Insurance Company or
Michigan Millers Mutual Insurance Company will endorse their policy to
provide FELA coverage in order to comply with BNSF’s contract.
Since FELA is a liability of negligence, the compensation granted
to the injured railroad employee is usually many times greater than that
provided by State Workers’ Compensation law for non-railroad workers. Because standard
insurance carriers will not provide coverage for FELA, the grain
elevator is forced to go to an outside market to purchase a “stand
alone liability policy providing FELA coverage”.
Research into domestic outside markets (markets provided by BNSF
Risk Management Department) revealed: 1. Zurich (Steadfast Insurance Company) – will not write country grain elevator operations. The company, owned by Zurich Financial Services Group, will not write stand along FELA coverage. 2. Lexington – owned by American International (AIG) – will not write country grain elevator operations. They may be a market for very large accounts such as ADM/Cargill but not local grain elevators. They will not write stand alone FELA coverage 3.
Arch – Arch Specialty Insurance Company – owned by Arch
Capital Group – will not write country grain elevator operations.
Arch is not a market for stand alone FELA coverage. Other markets include
the Lloyd’s Syndicates or London-Based Companies.
Some of these carriers are located in Bermuda, the Virgin Islands
or Ireland. These markets
would have to be accessed through large brokerage houses.
There would be a starting minimum premium on anything written –
starting between $5,000 and $10,000 to provide stand alone FELA and
probably on the high side if an underwriter understands what is provided
to railroad workers under FELA. This
premium is not affordable to the country grain elevator which is already
paying larger premiums than the average business for insurance. BNSF’s contract also contains a disclaimer. That disclaimer states “acceptance of a certificate that does not comply with this section (insurance requirements) shall not operate as a waiver of industry’s (grain elevator’s) obligations hereunder”. What does this and the insurance requirements mean to the average grain elevator? 1. The grain elevator’s insurance carrier will not provide FELA coverage which forces the elevator to the outside insurance market seeking coverage that is not available at an affordable premium. 2. The grain elevator is held liable for the negligence of the railroad (except for claims caused by the intentional misconduct or gross negligence of the railroad) for injury to its employees and, conversely for injury to the elevator’s employee who was under the direction of the railroad when injured, due to contractual obligation which is totally slanted in favor of the railroad. One claim would seriously impact the elevator’s profitability or force the elevator out of business because the elevator a) did not understand the insurance requirements in the contract or b) could not afford to purchase stand alone FELA coverage or c) signed the contract knowing insurance requirements were not met but had to move grain. Why should local grain elevators be forced contractually to take on the liabilities of the railroad, some of which are mandated through federal law? Why should local elevators be forced to pay for the injury of a railroad employee if negligence clearly rests with the railroad? If the tables were turned, what would the railroad do? TESTIMONY OF GRAIN
DEALERS EXECUTIVE VP STEVE STREGE
The
2003 North Dakota Legislative Assembly dealt with insurance liabilities
imposed on grain elevators by railroads.
FELA was a sticking point.
FELA is the Federal Employers Liability Act.
It is most easily described as work comp coverage for railroad
employees, although it is said to be more favorable to the employee than
something like ND work comp. A
settlement was reached in that 2003 Session by allowing railroads to
require the FELA endorsement, providing coverage for railroad employees,
of only those grain elevators handling more than 250 loaded railcars
annually. We
asked that this bill be introduced for a couple of reasons. One is that the FELA endorsements called for in present law
are simply not available from insurance companies that currently write
North Dakota grain elevators, and we’re quite sure not from anyone
else either at reasonable cost. This
is already in the legislative record through testimony provided by
Jamestown insurance agent Larry Ash to the Interim Transportation
Committee meeting in Minot last March 15, and also in an analysis by a
different insurance underwriter provided to that same committee back in
September. I have copies of
those with me for anyone who wants them, but the testimony to be
presented here by insurance representatives will duplicate that. Last
summer the BNSF gave me a list of FELA providers.
Insurance professionals who checked out the domestic companies
said none would write it for us. Foreign
sources were questionable or very expensive or both. We are
not trying to escape any liability for our own negligent acts by
offering this bill. If the
grain elevator is at fault in the event of a railroad employee injury,
its comprehensive general liability insurance will respond.
But that insurance will not respond when the insured bears no
fault. Grain elevators have
been unknowingly signing railroad leases and track agreements with FELA
requirements in them and have thus exposed themselves to huge uninsured
liabilities. The
consequences of an incident could be huge, and life-threatening to a
small business. In addition to the
practicality of no one writing FELA endorsements, there is the
philosophical view that one party should not be held responsible for the
negligence of another. If
the railroad can transfer its liabilities for such incidents to its
customers, then there is less incentive for it to correct situations
that might bring about such incidents. Testimony being submitted by others goes into more detail, but it is enough for us to say that this is an unreasonable and impractical situation that state law should not allow to go on. This is a simple bill; it eliminates that one item we cannot comply with. Let’s keep it simple. |