STB Rejects Mandatory Indemnification for TIH Shipments
Date: April 30, 2013
On April 30, 2013, the Surface Transportation Board (STB) issued a decision addressing tariff rules applicable to toxic-by-inhalation (TIH) and poisonous-by-inhalation (PIH) traffic carried by Union Pacific Railroad Company (UP). The UP tariff required shippers to indemnify UP for all liabilities associated with UP transportation of TIH/PIH commodities except to the extent those liabilities are caused by UP negligence. Hence, the tariff would have required shippers to indemnify UP for not just acts of the shippers, but also acts of God and acts of third parties. UP had asked the STB to declare that these tariff indemnity requirements were reasonable under the ICC Termination Act.
According to the STB, UP did not meet its burden to show that the tariff was reasonable. In particular, the STB found that the tariff was overly broad because it could require indemnification even in situations where the liability or damage was unrelated to the presence of a TIH/PIH commodity. UP had tried to justify the tariff because damages from a TIH/PIH release could reach many billions of dollars, and UP could only purchase $1.2 billion in liability insurance. Again, the STB found the tariff to be overly broad because it covered all liabilities, even those of a small dollar value. The STB also stated that UP's other insurance-related arguments were not specific to TIH/PIH commodities, and that UP's desire to create shipper incentives to reduce risk could be accomplished in a less onerous manner.
In reaching its decision, the STB noted that "TIH commodities have long moved over the rail network subject to an extensive regime of federal safety regulations." Given the existing safety regulation by other agencies, the STB stated that it must tread carefully in this area and avoid making broad pronouncements.
The decision was issued in STB Docket No. 35504, Union Pacific Railroad Company - Petition for Declaratory Order. The issues in this decision implicate any entity that tenders or receives TIH/PIH commodities for transportation by rail.