Beyond catastrophic loss (earthquake, hurricane, flood, man-made disasters such as terrorist attacks), and release of certain hazardous materials (toxic or poisonous inhalants) a railroad’s most significant exposure to risk of casualty loss is created by its vendors, contractors, and invitees.
Despite the significant potential for loss created by these parties, very few railroads effectively manage it. Why? Because, as a three-legged stool will collapse if any of its legs are weak or missing, any attempt to shift risk of loss away from the railroad to the responsible party will collapse if the required essential knowledge needed to do so is weak or missing.
The railroad brings essential professional knowledge of railroad operations. Its attorney brings essential professional knowledge of legal issues, statutes, and contract construction techniques. What’s missing? Essential professional knowledge of risk management principles, insurance coverage, and the insurance marketplace. Weak or missing professional knowledge of risk management principles, insurance coverage and the insurance marketplace almost always results in:
- Failure to shift the loss to a financially stable third-party/insurer.
- Failure to assure collectability – financial viability of the indemnitor is critical.
- Failure of insurance requirements to cover the liability arising after the obligation is triggered under the contract.
- Failure to allocate costs and risks of accidents under the defined circumstances and to the extent of insurance policy language.
- Failure to plan for the standard exclusions and defenses of the other party’s insurance coverage.
- Failure to enforce contract insurance requirements.
The most important and effective thing a railroad can do to protect itself from the industry’s third largest cause of casualty loss is to obtain the missing essential professional knowledge of risk management principles, insurance coverage, and the insurance marketplace. After all, you can’t manage what you don’t know.
CRT Consulting, LLC (CRTC) provides railroads with the professional knowledge of risk management, insurance coverage, and the insurance market place that they otherwise do not have. Resulting in its client railroads repeatedly obtain defense and indemnity from commercial insurers that they would otherwise not have received.