HomeMy WebLinkAboutMMIA Risk Management Bulletin MMIA Montana Municipal Insurance Authority
PO Box 6669
Helena, MT 59604-6669
Please distribute to all appropriate personnel and post in a conspicuous place.
DATE: January 5, 2004 R.M. Bulletin #10-03 . .c~-~;
TO: All Members of MMIA Liability Insurance Program ~
FROM: John D. Craig - Property Program Manager/fi. sst. Risk Manager
Montana Municipal Insurance Authority
RE: Acquiring, Leasing or Sub-leasing Railroad Properties
We have recently received several questions relating to the liability exposure and
insurance coverage associated with the municipal acquisition of properties on railroad rights of
way. As with any contractual obligation, the 'key' is to proceed with caution.
Railroad properties are different in that the site or ground is usually owned in fee by the
railroad. Seldom will the railroad give or sell their fee interests to another party. They opt instead
for a direct lease arrangement or r~tam approval of any sublease. In these lease and sub-lease
agreements the rallro~,d strives for (to the point of insistence) an indemnity clause that requ/res
the lessee to protect, defend~ and hold harmless the railroad from any legal or liability challenge.
It may also include language to be construed as requiring the lessee to protect the railroad even if
the ca, use or 'event' was the result of railroad negligence.
MMIA's liability coverage addresses this issue quite simply. The Municipality cannot,
extend coverage by contract or agreement to a tl~ird party. The railroad eanuot be covered by
your liabili~ insurance poliny as an 'additional insured', for liability damages nor can they be
defended in a law suit. These exclusions are referenced in Section IX Exclusions Paragraph 32 of
the Inly 1, 2002 - Memorandum of Liability Coverage.
Additional concerns with raikoad properties could be environmental clean up. Property
damage and associated liability coverage for spills and disbursement of hazardous materials is
excluded by the policy (Section IX Paragraphs 2 & 3). If you inherit, through lease or purchase,
liabilities for environmental damages, you will be lef~ alone to defend and mitigate the problem at
your expense.
Wh~le these may appear to be huge pitfalls to a railroad transaction, they must be
weighed against the positive potentials of a project. Remember the time to resolve conflict is in
contract negotiation and not in the insurance claims process. Investigate, research, and negotiate
with caution.
For more information about what is or is not covered by your inaurma~, p~as~u??~
your Memorandum of Liability Coverage end your policies, ur give M/v-~--)a ~ll.(~Ve~a~ t~
help you deal proaetively not reactively! Phone (800) 635-3089 ~ [
7.2004
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