Loading LiveCycle Banners.
  1. News Articles
  2. Related News Articles
News Article Details

Insurers May Face $100 Million in Claims from Washington, DC Crash

Back | A- | A+
 Email This     Print     Subscribe

Posted on 15 Jul 2009

Insurers at Lloyd's of London and AIG are among firms that may face a combined total of more than $100 million in claims tied to the Washington Metro crash that killed nine people last month.

The costs to the pool of insurers, which also includes Bermuda-based XL Capital Ltd. and Warren Buffett's Berkshire Hathaway Inc., will depend on estimates of medical care, loss of expected lifetime earnings and the degree of negligence by the Washington Metropolitan Area Transit Authority.

The cost “will easily exceed $100 million,” said Peter Grenier, a lawyer at Washington-based Bode & Grenier LLP, who negotiated a $2.3 million settlement for a man who lost his wife when she was struck by a Metro bus in 2007.

The train accident may weigh on results at insurers after investment declines and falling rates pressured the firms. U.S. property and casualty carriers posted a record $1.3 billion first-quarter loss, compared with profit of $8.5 billion a year earlier, according to Insurance Services Office Inc.

The June 22 Metro accident, the deadliest in the city’s history, occurred when one train, operated by a computerized system, collided into another, National Transportation Safety Board member Debbie Hersman said June 23 in a press conference.

It was the worst U.S. commuter crash since an incident last September in Southern California involving a Metrolink commuter train and a Union Pacific Corp. freight train. The Metrolink operator and 24 passengers died.


Washington Mayor Adrian Fenty said 76 injured people were taken to area hospitals, in a press conference on June 23. Of the injured, 14 had serious but non-life threatening injuries while two were in critical condition, said Pete Piringer, spokesman for the Washington Fire and Emergency Medical Services, in an interview yesterday.

Insurers may raise rates for train coverage, as well as aviation insurance after the Air France crash off the cost of Brazil and the Yemeni Airbus accident in the Indian Ocean. Those disasters will make June the most expensive month for aviation coverage in eight years, according to broker Aon Corp.

“Underwriting criteria will get more strict” for train coverage, said Mark Langer, managing director and transportation practice leader at New York-based broker Marsh & McLennan Cos. Insurers’ concerns about accidents may also encourage transit systems to buy new, safer equipment.

The safety board this week issued an “urgent” recommendation that Metro install a backup safety technology because the automated train-control system is susceptible to failure. The system, when working properly, should have slowed the moving train.

Rail Cars

After an accident in 1996, when two trains crashed and killed a train operator, the safety board had recommended the Metro improve the crashworthiness of its cars. The Metro failed to replace old train cars and didn’t follow recommendations to install data recorders on all trains to monitor speed, braking and other information, Hersman said.

“We simply don’t have the funds to replace one-fourth of our fleet,” said Cathy Asato, a spokeswoman for the Metro, in an interview yesterday. Older cars, which would cost more than $800 million to replace, have been placed into the middle of train lines, Asato said.

The Washington Metro is covered under a “layered program” in which insurers including AIG, Berkshire, XL and Lloyd’s accept risk for liabilities, said Candace Smith, a spokeswoman for the Metro, in an e-mail. She didn’t elaborate.

Lexington Insurance Co., an AIG insurer, is facing claims, said Marie Ali, spokeswoman for the company’s property-casualty business. Lloyd’s spokeswoman Louise Shield said that the London-based market is one of the Metro insurers. XL also provided coverage, said Christine Weirsky, spokeswoman for the insurer. A message left for Buffett at Omaha, Nebraska-based Berkshire wasn’t returned.

Washington’s Metro is the second-busiest heavy-rail transit system in the U.S, in number of passenger trips, after New York City’s subway, according to the American Public Transportation Association.


Post a Comment
If you are a Storefront / Tradingfloor user, click here to login.
Note: As a guest user, please fill out the form below to post a comment.
Post your comments here.
Name :
Email Address :
Captcha :
Comments :
Character left : 2000