BACKGROUND
The Railroad Protective Liability Policy meets several important insurance needs with respect to work conducted on or near railroad tracks or railroad property. In the definition of Insured Contract contained in the Commercial General Liability (CGL) Policy, railroad sidetrack agreements are covered contracts; however, specifically excluded is any part of any contract or agreement that indemnifies a railroad for losses that result from construction or demolition within 50 feet of any railroad property, or that affects any railroad bridge, trestle, track, roadbed, tunnel, underpass or crossing. This definition also clarifies that covered contracts include an easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad.
What this means is that the CGL does not cover construction or demolition operations within 50 feet of any railroad property, railroad bridge, trestle, track, roadbed, tunnel, underpass or crossing. This may leave property owners, contractors and railroads with a significant coverage gap should there be proximity to a railroad exposure. Refer to PF&M section 270.4-2 for the CGL Coverage Form Analysis.
In addition to covering an otherwise uninsured exposure on the CGL, the Railroad Protective Liability Policy offers the same type of protection that the OCP Policy offers in connection to the vicarious liability experienced by a property owner or general contractor with respect to an independent contractor or sub-contractor. The Railroad Protective Liability Policy can be used in the same manner as the OCP, which is to have the independent or sub-contractor purchase the policy for the insured, to cover the contracting operations performed by the independent contractor on the insured's behalf. The cost of the policy is shifted from the insured to the designated contractor who is performing the operations.
Vicarious liability is when one party is held responsible for the actions or conduct of another party based solely on the relationship of the two parties. To apply this to a Railroad Protective Liability Policy, it is when the named insured is ultimately held liable for the acts of a hired contractor, sub-contractor or independent contractor, who is working for or on behalf of the insured. In the case of the Railroad Protective Liability Policy, the named insured can be either a railroad operation, a property or business owner, a general or other contractor who is using independent or sub-contractors. Refer to PF&M section 272.1 for the OCP Program Overview.
The Railroad Protective Liability Policy is the only standard ISO method of providing coverage for contracting and demolition activities on or near railroad properties that are otherwise excluded in the CGL. It is also very important to note that this policy is limited in its coverage. It is not a comprehensive CGL policy and does not cover all of the insured's activities or operations and should in no way be considered a replacement to a CGL program. This policy simply buys back a piece of coverage normally excluded by the CGL, for those limited insureds who may experience this specific exposure.
ELIGIBILITY
There are no stated eligibility requirements for the Railroad Protective Liability Policy. However, the need for the policy is limited to very specific circumstances. Only those insureds that either are railroad operations or that have property on or near (defined as 50 feet) railroad property and that also have construction or demolition operations planned, need consider this coverage. Any insured that has these exposures may use the Railroad Protective Liability Program.
WHAT IS COVERED
The Railroad Protective Liability Policy has two coverage parts in the insuring agreements. Coverage A provides coverage for the bodily injury or property damage from the operations of a sub-contractor or independent contractor, performed for or on behalf of the insured, as they specifically relate to the job location and work defined in the Declarations. The insured may be either a railroad, the property or business owner or a contractor. Basically, the Railroad Protective Liability Policy affords coverage for the vicarious liability from the operations of an independent or sub-contractor for either the railroad, owner or another contractor.
Losses and losses-in-progress known by the insured or a representative of the insured prior to policy inception are not covered.
Coverage B--Physical Damage to Property provides coverage to pay for direct and accidental loss of or damage to rolling stock and their contents, mechanical construction equipment or motive power equipment, railroad tracks, roadbeds, catenaries, signals, bridges or buildings without regard to legal liability, (a type of no-fault coverage), as long as the physical damage to property is a result of the acts or omissions at the job location or in connection with the work, described in the Declarations. The property must be owned by, leased or entrusted to the named insured under a lease or trust agreement.
COVERAGE LIMITATIONS
This coverage is limited. It pertains only to the job location that must be defined in the Declarations and in connection with the work which also must be defined in the Declarations. Coverage ends when the work is complete or the terms of the contract are fulfilled. However, the policy is not written for more than one year at a time, so if the length of the project is more than one year, the policy will need to be renewed until the project terminates.
WHAT IS NOT COVERED
This is not a comprehensive general liability coverage. It does not cover all the operations and exposures of an insured, only the vicarious liability between the insured and the contractor. It is limited to a very specific, designated job location and in connection with described work, in addition to the specified period of time. Therefore, it is limited in its scope of coverage.
The Railroad Protective Liability Policy contains seven exclusions. These are:
Refer to PF&M section 272.4-2 on the Railroad Protective Coverage Form Analysis.
POLICY MAKE-UP
An important item to consider is the policy make-up. The Railroad Protective Liability Policy Declarations are necessary; however, the Common Policy Conditions--IL 00 17 should not be added to the Railroad Protective Liability Policy as this policy has its own specific policy conditions built into the OCP Coverage Form--CG 00 09. The Common Policy Declarations do not apply.
The Railroad Protective Liability Policy is an occurrence policy, no claims-made policy program is available.
The Nuclear Exclusion Endorsement--IL 00 21 is a mandatory part of this policy.
Any other state specific mandatory endorsements for the Railroad Protective Liability Policy will apply. To this, any tailoring endorsements may be added, however, only 3 endorsements are filed and available with this program.
This coverage part cannot be added in conjunction with or connection with any other coverage part. It must be a stand alone monoline policy, because of the structure of the naming of the insured and the specified coverage for vicarious liability.
AVAILABLE ENDORSEMENTS
Because of the limited scope of the coverage provided, only a limited number of endorsements are available for this coverage part.
Two arbitration endorsements are available: CG 24 01--Non-Binding Arbitration, which establishes the framework procedure for non-binding arbitration; and CG 24 02--Binding Arbitration, which establishes the framework and procedure for binding arbitration.
One endorsement, CG 28 31--Pollution Exclusion Amendment, is available to give back limited pollution coverage for fuels or lubricants for equipment in a railroad operation.
Deductibles do not apply to this Program.
RATING PLAN
The classifications used for the Railroad Protective Liability Program are not in the general section of the ISO Commercial Lines Manual (CLM), but are specifically in Rule 49 of the Commercial General Liability Section. The number of classes available for the program are limited to three, depending on the type work being done. The exposure basis for this program is total cost for each of the three classifications.
The rating formula is the same as the CGL. Manual loss costs are "A" rated for this program and set by each insurer. Loss costs must be multiplied by a Loss Cost Multiplier, the factor by which an individual insurer (taking into account any loss cost modification factor, individual insurer expenses and individual insurer allowance for underwriting profit and contingencies) would multiply by the loss cost to calculate a rate for the insurer's use. The loss costs are based or established on the basis of an Each Occurrence Limit of $25,000 for the Railroad Protective Liability Coverage. If the limits of liability for the policy exceed $25,000, then the manual basic limits rates must be further modified by increased limits factors, also "A" rated in this program, to establish rates per total cost at limits appropriate for the contracting activities.
"A" RATING
Loss costs are not given for all classifications. In some cases, the data and statistics are not of sufficient quantity to be statistically credible or the variance in exposure within that particular classification can swing widely. In those cases, the symbol "A" is shown in the loss cost table. Those classifications which show the symbol "A" instead of a loss cost must be referred to the individual insurer for rating. Each insurer will then develop their own judgment loss cost after evaluating the exposures of the individual risk.
The same applies to increased limits factors. In the case of Railroad Protective Liability, a table applies so an insurer must promulgate their own set of factors.
Records need to be retained and filings made for those classifications using "A" loss costs as well as increased limits factors, and should be sent by insurers to the appropriate Insurance Department for approval.
Refer to PF&M section 272.5-2 for more rating information
for the Railroad Protective Liability Program.