A group of insurance companies filed a subrogation lawsuit against Norfolk Southern seeking to recoup on claims paid to cover damages from the February 2023 train derailment and subsequent release of toxic chemicals in East Palestine, Ohio, according to documents filed at the U.S. District Court for the Northern District of Ohio.
The civil suit, filed by Erie Insurance Co., Erie Insurance Exchange, Homesite Insurance Co. of the Midwest and American Family Insurance Co., includes counts of negligence, strict liability and trespass. The companies also claim the railroad operator broke state laws against creating a statutory, public and private nuisance. The group of carriers are seeking a jury trial to settle the matter.
As a result of the incident, the insurers covered damages to “real and personal property, loss of use, loss of income and other damages covered by the respective insurers’ policies of insurance,” according to the complaint. Erie indicated in paid at least 19 claims, while Homesite-American Family has paid at least three claims. Each insurer said the claims paid exceed $75,000 in aggregate and they anticipate paying additional claim in the future.
The February 2023 accident saw approximately 38 train cars derail and an additional 20 cars were damaged. Several of the damaged railcars were carrying “abnormally dangerous and ultrahazardous chemicals,” the complaint alleges.
At around 8:14 p.m. on the date of the accident, video cameras along the rails near Saleem, Ohio, showed a wheel bearing in the final state of overheating. This was approximately 45 minutes prior to the accident and about 20 miles west of the derailment site, the insurers said.
Further, a “hotbox detector,” which monitors wheel bearing temperature, alerted the crew to stop and inspect a hot axle. The malfunctioning axle, according to the insurers, was consistent with an overheated wheel bearing, which was the cause of the derailment and triggered the application of emergency brakes as the train moved through East Palestine.
The suit alleges Norfolk Southern failed to properly maintain, service and inspect their trains and cars; placed in service and continued using a car with overheated roller bearings; and failed to maintain vigilant lookout during the train’s operation, among other claims of negligence and oversight.
Following the derailment, hazardous chemicals being transported ignited, resulting in an explosion and the release of “fire, smoke, chemicals, contaminants and debris” on to covered properties.
“Defendants engaged in an abnormally dangerous and/or ultrahazardous activity when they dumped the vinyl chloride they were transporting and lit it on fire in a residential community, making them strictly liable for any resulting damages,” the insurers said.
This lawsuit is the latest in a slew Norfolk Southern has faced over the accident. Just 19 days after the incident, at least 10 class action lawsuits had already been filed.
At the time of the accident, Norfolk Southern had insurance coverage above $75 million and below $800 million (up to $1.1 billion for specific perils) per occurrence and/or policy year, according to its annual report. In addition, it had insurance covering damage to property it owns or has in its custody, or control, it said, adding the policy covered roughly 82% of potential losses above $75 million and below $275 million per occurrence and/or policy year.
Erie Insurance Co. and Erie Insurance Exchange have AM Best ratings of A+ (Superior), while companies in the American Family Insurance group largely have A (Excellent) ratings. Homesite Insurance of the Midwest, which is an American Family affiliate, is not rated.
https://news.ambest.com/newscontent.aspx?AltSrc=104&RefNum=258740