David McMahon was quoted in a Jan. 23, 2014, Law360 article, Insurers Will Take Lead On Oil Rail Transport Safety Push, about how a series of fiery derailments of trains carrying crude oil have not only led lawmakers to consider new rules, but also could push insurers to take action, forcing the oil and rail industry to improve safety to cut down on underwriting costs.
According to the article, rail transport of crude oil has grown significantly in recent years with the U.S. energy boom. Three recent crashes have highlighted safety problems: a Dec. 30, 2013, collision near Casselton, N.D.; a November derailment in rural Alabama; and a derailment in Lac-Megantic, Quebec in July. That accident set off massive blasts, destroyed part of the town and killed 47 people.
There was a real concern about the condition of the railroad’s assets in [the] Alabama [crash]. You might see carriers put inspection requirements on their own assets before writing the coverage,” McMahon said. “The carrier doesn’t want to write coverage where the assets of the railroad are dilapidated and haven’t been maintained.”
McMahon told the publication that the crashes and the resulting push for tougher rules governing the transport of oil by rail could lead insurers to limit what they are willing to underwrite.
You can see them saying, 'We’re not going to give you a blank check and allow you to carry 100 tanker cars with oil. We’re going to limit it to 40 to 50 cars,’” he said. “Or there could be outright exclusions of some particular activities.”
McMahon said insurers will not doubt embrace whatever rules regulators and lawmakers enact to improve safety.
The tighter the regulations are ... it can result in a safer environment, which insurers like,” he said. “They like things they can effectively evaluate — the safer it is, it tends to be safer to insure.”