Railway operator faces insurance lawsuit over 2023 Ohio train derailment

A group of insurance companies has filed a subrogation lawsuit against Norfolk Southern to recover claims paid for damages resulting from a February 2023 train derailment and subsequent release of toxic chemicals in East Palestine, Ohio.

Filed in the US District Court for the Northern District of Ohio, the civil suit comes from Erie Insurance Co, Erie Insurance Exchange, Homesite Insurance Co of the Midwest, and American Family Insurance Co. It includes counts of negligence, strict liability, and trespass.

According to AM Best, the insurers also claim that the railroad operator violated state laws against creating statutory, public, and private nuisances. The group is seeking a jury trial.

The insurers covered damages related 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 stated that it paid at least 19 claims, while Homesite-American Family paid at least three claims. Each insurer reported that the claims paid exceed $75,000 in aggregate, with additional claims anticipated.

The February 2023 accident involved the derailment of approximately 38 train cars and damage to an additional 20 cars. Several of the damaged railcars were carrying hazardous chemicals.

On the day of the accident, video cameras near Salem, Ohio, showed a wheel bearing in the final stage of overheating, about 45 minutes before the accident and 20 miles west of the derailment site.

A “hotbox detector,” which monitors wheel bearing temperature, alerted the crew to stop and inspect a hot axle. The insurers claim that the malfunctioning axle was consistent with an overheated wheel bearing, which caused the derailment and triggered the application of emergency brakes as the train moved through East Palestine.

The suit alleges that Norfolk Southern failed to properly maintain, service, and inspect their trains and cars, used a car with overheated roller bearings, and failed to maintain vigilant lookout during the train’s operation, among other claims of negligence.

Following the derailment, hazardous chemicals being transported ignited, resulting in an explosion and the release of “fire, smoke, chemicals, contaminants, and debris” onto covered properties.

The insurers stated that the defendants engaged in an abnormally dangerous activity by dumping and igniting vinyl chloride in a residential community, making them strictly liable for any resulting damages.

This lawsuit is among several that Norfolk Southern has faced over the accident. Within 19 days of 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 per occurrence and/or policy year, according to its annual report. The company also had insurance covering damage to property it owns or has in its custody or control, covering roughly 82% of potential losses above $75 million and below $275 million per occurrence and/or policy year.

What are your thoughts on this story? Please feel free to share your comments below.