Liability and compensation regime under the Safe and Accountable Rail Act
Under the Safe and Accountable Rail Act, the Government of Canada has introduced amendments to the Canada Transportation Act that will protect taxpayers from covering the cost of damages in the event of a major rail accident. The amendments, which fulfill a 2013 Speech from the Throne commitment, will provide for enhanced third-party liability insurance for federally regulated railways, as well as a supplementary compensation fund financed by shippers of crude oil.
Under this new regime:
The Canadian Transportation Agency (CTA) will assign legislated minimum levels of insurance to railways based on the type and volume of dangerous goods they transport. Railways will have to demonstrate coverage before the CTA would issue the Certificate of Fitness they need to operate. Minimum insurance levels would vary by type and quantity of crude oil or dangerous goods transported. For example, if a railway moves no crude oil, but between 4,000 and 50,000 tonnes of toxic inhalation hazards, it will require $250 million in insurance:
Table of Minimum Liability Insurance Coverage (volumes expressed in tonnes per year) Minimum required insurance Crude oil Toxic inhalation hazard All other types of dangerous goods $25M 0 0 < 40,000 $100M > 0 - < 100,000 > 0 - < 4,000 ≥ 40,000 $250M 100,000 – < 1.5 million 4,000 – < 50,000 – $1B ≥ 1.5 million ≥ 50,000 –
These legislated insurance levels are the result of analysis of rail accident cost data and the potential severity of accidents involving certain types of dangerous goods.
- To address concerns that some short line railways may have difficulty absorbing the costs of the minimum insurance requirements, the $100 million and $250 million levels will be phased in over time. Initial insurance requirements corresponding to half of the full amount will come into force 12 months after the bill receives Royal Assent. The full levels will be implemented a year later by the Governor in Council. Railways requiring either $25 million or $1 billion are not expected to need more time to adjust, so those levels would take effect immediately after the legislation comes into force.
- Railways must maintain their liability insurance coverage and inform the CTA immediately of any operational changes that may affect their coverage. The CTA could apply administrative monetary penalties of up to $100,000 per violation if railways do not comply.
Amendments will also:
- Create a supplementary shipper-financed fund to be used in the event of a railway accident involving crude oil. Shippers of crude oil would have to pay $1.65 per tonne of crude oil.
- Hold railways involved in crude oil accidents liable for damages up to the amount of their minimum insurance requirement without needing to prove fault or negligence. This provides greater certainty of compensation to accident victims.
- Continue to cover accidents involving dangerous goods other than crude oil within the fault/negligence-based system, with enhanced coverage for victims through increased insurance levels. Other dangerous goods could be included in the supplementary compensation fund as circumstances and levels of risk evolve.
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