Train Wreck Damages Cap May Impede Subrogation Recovery In Rail Disaster Cases

The Amtrak Cascades 501 departed Seattle on its inaugural voyage on the morning of December 18, 2017. Just after 7:30 a.m., the train derailed at high speed in DuPont, Washington, causing three fatalities, dozens of injuries, and widespread destruction. Government reports state that the derailment occurred because of excessive speed and emphasized that operators of the train did not activate positive train control, a mechanical safeguard designed to prevent this sort of disaster. The train was travelling 80 mph in a section of track with a speed limit of 30 mph.

The Cascades 501 crash echoes a number of rail accidents in modern American history, notably the deadly Amtrak crash in Philadelphia, Pennsylvania just over two years ago. On May 12, 2015, a packed commuter train derailed at high speed, killing eight passengers and injuring hundreds more. The maximum designated speed for the stretch of track was 50 mph. The train was going more than 100 mph.

The damage wrought by train wrecks is devastating to the people involved. Yet the misfortunate passengers and bystanders are not the only victims. The expense of medical treatments, loss of income, and property damage occasioned by rail accidents can be astronomical, and the modern reality is that only a small portion of the financial impact is absorbed by the injured people themselves. Rather, the initial burden falls primarily on the health, accident, worker’s compensation, and property casualty insurers. Ideally, the parties liable for rail disasters are ultimately made to bear the cost of the resulting damages through subrogation. That may occur to some degree, depending on the facts and circumstances, but in serious cases, a lesser-known federal statute can leave both insurers and insureds woefully under-compensated.

In the late 1990s, the Amtrak national rail passenger system was – not surprisingly – struggling financially. Hoping to “get the railroad back on track,” Senate Republican Kay Bailey Hutchison introduced the Amtrak Reform and Accountability Act of 1997 (“ARAA”). Pub. L. 105-134, Dec. 2. 1997, 111 Stat. 2577; 143 Cong. Rec. S4479-07, 1997. The reforms were designed to “allow Amtrak to operate more like a business.” Id. The reforms were generally consistent with that philosophy – elimination of termination provisions and scrapping prohibitions on subcontracting – though the strict limitations on civil liability for personal injury, death, and property damage sustained by passengers, seems less in tune with the spirit of free enterprise. Regardless, controlling federal law now limits Amtrak’s liability for injury to passengers and their property. 49 U.S.C. § 28103.

The ARAA limits a railroad defendants’ exposure to punitive damages. To the extent punitive damages are even permitted by state law, they may only be awarded if the plaintiff establishes by “clear and convincing evidence” that the harm was the result of conduct “with a conscious, flagrant indifference to the rights or safety of others.” 49 U.S.C. § 28103(a)(1). The limitation applies notwithstanding any contrary statute or common law, or the nature of the conduct giving rise to damages or liability. Id. However, if the law of the state in which the act or omission occurred limits damages in death cases to punitive damages only, subsection (a)(1) does not apply.

Perhaps more importantly in catastrophic cases with large numbers of plaintiffs, the ARAA provides that “[t]he aggregate allowable awards to all rail passengers, against all defendants, for all claims, including punitive damages, arising from a single accident or incident, shall not exceed $200,000,000.” 49 U.S.C. § 28103(a)(2). A provider of rail passenger transportation may contractually allocate financial responsibility for claims, although Amtrak must always maintain minimum liability coverage of $200 million per accident or incident. 49 U.S.C. § 28103(b) and (c). That may sound like a great deal of money – until a single accident results in multiple deaths and dozens of very serious injuries. Suddenly $200 million seems a lot smaller and the recovery process can become very complicated for injured passengers and subrogated carriers, even when liability is clear.

That is precisely what occurred following the 2015 Philadelphia derailment. Immediately following the crash, claimant after claimant filed suit against National Railroad Passenger Corporation (“Amtrak”) in various state and federal courts. All pending federal cases were consolidated into multidistrict litigation (MDL) and transferred to the Eastern District of Pennsylvania on June 22, 2015. In Re: Amtrak Train Derailment in Philadelphia, Pennsylvania, on May 12, 2015, E.D. Pa. Case No. 2:15-md-2654. Amtrak admitted that the train was travelling more than the allowable speed and did not contest liability for compensatory damages proximately caused by the derailment, though they denied liability for punitive damages pursuant to the ARAA.

On December 4, 2015, congress passed the Fixing America’s Surface Transportation Act” (“FAST”) PL-114-94, which retroactively raised the damages cap to $295 million in connection with the Philadelphia derailment specifically, and directed the Secretary of Transportation to adjust the $200 million cap to reflect changes in the Consumer Price Index between 1997 and 2015, which amounted to $294,278,983. 81 FR 1289-01. The Secretary is also directed to adjust the cap every five years, which would next occur in February of 2021. These changes are not reflected in the main text of 49 U.S.C. § 28103, but rather appear as a note to that section. Interestingly, the FAST Act did not increase Amtrak’s insurance requirements, so it may technically operate while uninsured by nearly $100 million.

The Amtrak MDL plaintiffs settled via a comprehensive $265 million settlement program in October 2016. The settlement was available to plaintiffs in the 188 lawsuits pending before the court as well as any unfiled and unsettled claims, provided they file suit on or before January 31, 2017. The funds were paid into a trust account, after which plaintiffs submitted their damages supports for review by two court-appointed Masters. The plaintiffs’ awards were then adjusted on a pro rata basis to match the settlement fund. This led to substantial reductions which, in turn, complicated resolution of subrogation claims to varying degrees. Fortunately for some carriers, § 28103 of the ARAA expressly provides that it does not affect the damages that may be recovered under any workers’ compensation act, although limited recoveries tend to invite conflict over liens even when there is a clear right of subrogation. 49 U.S.C. § 28103(d).

As to the Washington derailment, suits have already been filed and based on the facts, this litigation is likely to resemble the Philadelphia MDL, which just concluded six months ago. Liability seems no less clear in the present instance. Although, it may be more favorable based on the operators’ failure to use Positive Train Control, which the Philadelphia train did not have. Insurers, plans, and employers may be wise to start their subrogation efforts and get on board early so that they can assert and protect their rights throughout the complex litigation process. Medical claims data could be a proactive, means of identifying claims for carriers with coverage in the area, as opposed to waiting for notice from an insured or their counsel, which may not be forthcoming at all.

If you have any questions about train derailment litigation, mass torts, or subrogation generally, contact Gary Wickert at [email protected].