RAILWAY CLAIM SERVICES, INC.                     Our 17th Year of Service

BACKGROUND CHECKS

STUDY FINDS WIDE VARIATION IN RISK MANAGER PAY

“NEW” GENERAL CODE OF OPERATING RULES

RATE OF WORKPLACE DEATHS STABLE

TRANSPORTATION FATALITIES ON A DECLINE

THIS AND THAT ACROSS THE COUNTRY

ASBESTOS REFORM NEGOTIATIONS COLLAPSE        

UPCOMING MEETINGS

POINTS OF LEGAL INTEREST

RCSI INFORMATION

BACKGROUND CHECKS

 Railway Claim Services, Inc. (RCSI) can perform background checks for potential job applicants.  RCSI can also check injury histories for employees.  For further information contact Elizabeth Vineyard of RCSI at 731-967-1796, or via email at evineyard@railway-claim-services.com.

STUDY FINDS WIDE VARIATION IN RISK MANAGER PAY

On September 23, 2004 Business Insurance reported on a study performed that Risk Managers’ salaries vary considerably depending upon their position and geographic location, a survey concludes.  The “2004 Risk Management Compensation Survey,” a joint project of Mercer Human Resource Consulting and the Risk & Insurance Management Society Inc., contains detailed information on pay levels and compensation practices for risk management personnel. Survey data was derived from information submitted by 582 organizations in the United States and Canada .

Among the survey’s findings were that safety and claims managers’ median combined base pay and annual incentives total approximately $70,000, which is $10,000 higher than risk management analysts’ median total cash compensation.  In addition, pay levels for risk management professionals in Pacific states, such as California and Oregon , are more than $13,000 higher on average than those for risk managers in New Jersey , New York and Pennsylvania , the survey found.  Copies of the survey are available for purchase from Mercer at www.imercer.com/rims

“NEW” GENERAL CODE OF OPERATING RULES

The fifth edition of the "General Code of Operating Rules" will go into effect on the first Sunday of April 2005.  The by-laws of the GCOR committee state "To retain General Membership status, a railroad must adopt the current edition of the GCOR on the effective date of that edition."  Contact the ASLRRA for further information.  The Website for ASLRRA is http://www.aslrra.org/

RATE OF WORKPLACE DEATHS STABLE

According to a report released by the Bureau of Labor Statistics on September 22, 2004 the rate of workplace fatalities remained steady at 4 deaths per 100,000 workers between 2002 and 2003.  The Bureau of Labor Statistics said that 5,559 workplace deaths were reported in 2003, a slight increase from the 5,534 in 2002.  Although fatal highway incidents fell in 2003, they still accounted for the highest number of fatal work injuries at 1,350, according to the BLS. Work-related deaths resulting from falls and electrocution also fell, but the number of deaths attributable to non-highway transportation accidents and aircraft-related accidents rose.  The number of homicides and suicides also rose.

TRANSPORTATION FATALITIES ON A DECLINE

In 2003, U.S. transportation fatalities fell slightly to 44,888 from 45,311 in 2002, according to preliminary figures recently released by the National Transportation Safety Board.  Rail fatalities, which account for 1.7% of the 2003 transportation total, dropped to 767 from 861 in 2002.  Every rail category showed improvement: Two passengers were killed in 2003 compared to seven in 2002; grade crossing fatalities decreased to 329 from 357 in 2002; and light rail, heavy rail, and commuter rail fatalities dropped to 173 from 220 in 2002.

Accounting for about 95% of the fatality totals, highway transportation saw the largest decline in 2003, falling to 42,643, compared with 43,005 in 2002.

Aviation was the only transportation mode that showed no decrease in any subcategory, according to the NTSB. The total number of people killed in aviation accidents climbed to 707 in 2003 from 625 in 2002.  General aviation accidents showed the largest increase in the aviation area, rising to 626 from 581 in 2002. Also showing an increase in fatalities were air taxi operations and scheduled passenger carriers.

Overall, marine fatalities fell to 759 from 809 in 2002, with every area except commercial passengers showing a decrease.

Pipeline fatalities increased slightly overall to 12 in 2003 from 11 in 2002--all in the gas pipeline category. There were no fatalities in the liquid pipeline category.

THIS AND THAT ACROSS THE COUNTRY

Kankakee , Illinois – On September 28, 2004 the truck driver involved in a 1999 Amtrak derailment that killed 11 people and injured 122 others near Bourbonnais , Illinois was sentenced to two years in prison.  In August 2004 John R. Stokes, 63, was convicted of violating a law limiting how much time truckers can drive without rest and not keeping an accurate logbook - the only two criminal charges he faced in the case.  Stokes was driving a truck loaded with steel the night of March 15, 1999, when Amtrak's “City of New Orleans” hit his truck about 50 miles south of Chicago.  The impact derailed the train, sending it smashing into other rail cars loaded with steel on an adjacent track.  The National Transportation Safety Board said the crossing gates, bells and warning lights were working and that Stokes' failure to heed those warnings caused the accident.  Federal investigators also said Stokes had had just three to five hours of sleep in the 38 hours before the accident; federal rules at the time required an eight-hour break after 10 hours of driving.

Washington , D.C. - The American National Standards Institute and the National Fire Protection Association have recommended to the National Commission on Terrorist Attacks upon the United States that the NFPA 1600 Standard on Disaster/Emergency Management and Business Continuity Programs be recognized as the national preparedness standard. In addition to examining the circumstances surrounding the 2001 terrorist attacks in New York and Washington , D.C. , the commission is charged with making recommendations designed to guard against future attacks.  NFPA 1600 establishes a common set of criteria for disaster management, emergency management, and business continuity programs.  In addition, it identifies methodologies for exercising those plans and provides a list of resources within the fields of disaster recovery, emergency management, and business continuity planning.  The standard also outlines planning guidelines that address stabilizing the restoration of the physical infrastructure, protecting the health and safety of personnel, crisis communication procedures, and management structures for both short-term recovery and long-term continuity of operations.  NFPA 1600 is available online at:  www.nfpa.org/PDF/nfpa1600.pdf?src=nfpa.

Mountainburg , Arkansas – On September 12, 2004 , the Arkansas and Missouri Railroad sponsored a full-scale anti-terrorism exercise.  The exercise featured an intermodal scenario that involved a hostage situation on an excursion train, and the interception of a truck carrying a dangerous cargo.  Local, state, federal agencies and first responders participated.  Arkansas and Missouri Railroad Chief of Police said “The Arkansas and Missouri Railroad is now able to identify gaps in its security planning process and take the remedial steps necessary to make its operations more secure for passengers and freight cargo activities.”

All Across the United States – On July 11 and 12, 2004, The New York Times ran front-page articles highly critical of railroad grade crossing safety, with liberal quotes from ATLA lawyers and their expert witnesses.  These articles have been reprinted in some other newspapers, and were the subject of a half-hour program on NPR's "All Things Considered."  Since then, there have been responses to these articles.  The predominate defense legal association defending railroads throughout the United States, The National Association of Railroad Trial Counsel (NARTC) and its members are aware of this and are making concerted effort make sure that this does not become an issue with judges and jurors in future railroad litigation.

The FRA Response notes "Approximately 95% of all grade crossing accidents and 87% of fatalities involve motor vehicle driver behavior as a principal factor."  Although these numbers are significant, the reader should not read into this that the remaining 5% and 13% are related to railroad negligence, but could be some other intervening negligence.

The Inspector General's Audit shows that "51% of the public grade crossing accidents occurred at crossings where automatic or active warning devices are present."

Florida and Alabama – Property owners in Florida and Alabama are sorting out their losses as catastrophe modeling firms try to pin down how many billions of dollars the damages from four hurricanes that struck the US will cost insurers.  There are indications that the damages may be enough to trigger some increases in property reinsurance rates or, at least, arrest any price declines.  For example, EQECAT Inc., an Oakland , California based catastrophe modeler, projects Ivan will cost insurers between $4 billion and $10 billion in payments for losses that are heaviest from Mobile , Alabama , to Pensacola , Florida .  Ivan tore into the coast near Gulf Shores , Alabama , taking at least 33 lives as it moved north.  Risk Management Solutions Inc. of Newark , California , estimates Ivan caused from $2 billion to $7 billion in insured losses, while Boston based AIR Worldwide Corp. put the figure at $3 billion to $6 billion.  Industry sources say damage from the four hurricanes may put enough pressure on property reinsurers to force rate hikes at year-end renewals, although no one is predicting dramatic increases.

Washington, D. C. – On September 13, 2004 The House approved a bill that would impose sanctions on lawyers who file frivolous lawsuits in federal courts.  The 229-174 vote fell largely along party lines, with all but a handful of Republicans supporting the Lawsuit Abuse Reduction Act and most Democratic members opposing it.  The act—H.R. 4571—would reinstate provisions in Rule 11 of the Federal Rules of Civil Procedure that require federal judges to sanction attorneys who file lawsuits determined to be frivolous under the rule’s guidelines. The rule was amended in 1993 to give judges discretion over the imposition of sanctions.  The committee also approved an amendment to the bill that requires a federal court to bar an attorney who files three frivolous suits in that court from appearing before the court for one year.  The Senate appears unlikely to act on the bill before adjourns next month.

ASBESTOS REFORM NEGOTIATIONS COLLAPSE

In early May, negotiations over legislation to establish a national asbestos victim compensation trust fund were suspended. The talks, which were mediated by retired Federal Judge Edward Becker, had been initiated by Senate Republican Leader Bill Frist and Senate Democratic Leader Tom Daschle following the failure of a Republican-sponsored bill that would have create a privately financed fund of up to $124 billion. Democrats and labor groups had argued that the bill did not offer enough compensation for victims and would deny them their rights to sue.  Insurance industry representatives expressed disappointment that no resolution was achieved. “Unfortunately, the failure of these negotiations means that those most in need will remain uncompensated, American businesses will be subject to potentially devastating lawsuits, job creation in many businesses will be stifled, and abuse of the tort system will continue unabated,” said Carl Parks, senior vice president, federal government affairs for the Property Casualty Insurers Association of America.  Issues on which the participants failed to reach a consensus included estimates of future claim volume, variable compensation for different of asbestos-related diseases, and division of the financial burden among asbestos defendant companies and insurers.  “It is now clear to us that a workable trust fund meeting the original goals of the undertaking – an efficient exclusive remedy for victims, and equity, certainty, and finality for all stakeholders – is politically unattainable,” said Robert E. Vagley, president of the American Insurance Association. “In addition, we believe that a trust fund becomes even less economically viable with the passage of time, as more and more of the finite resources available to compensate the true victims of asbestos are siphoned off by the out-of-control litigation system.” The AIA is urging Congress to consider alternatives to the fund approach and to redouble efforts to enact legislation that protects the medical victims of asbestos, as well as the economy at large.

UPCOMING MEETINGS (Check our Website – www.railway-claim-services.com for details.)

Midwest Claims Conference, October 28-29, 2004 , Sheraton Bloomington in South Minneapolis , 7800 Normandale Road

POINTS OF LEGAL INTEREST

State Farm V. Campbell Reaches Final Settlement - The bad-faith case that has ricocheted through the courts for 20 years may finally be nearing resolution.  The Utah State Supreme Court has awarded Inez Campbell more than $9 million in her long-standing dispute against State Farm.  After previously reviewing the case, the United States Supreme Court remanded it to the state court, finding that the original punitive damage award of $145 million was excessive and violated the due process clause of the Fourteenth Amendment to the Constitution of the United States .  In the original case, Curtis Campbell, who has since died, was found responsible for a 1981 automobile accident that disabled Robert Slusher and killed Todd Ospital. At the time, Campbell was insured by State Farm up to $25,000, according to court records.  State Farm chose not to settle the case.  When Campbell was found responsible and a judgment entered against him for $135,000, State Farm refused to pay the amount, suggesting that the Campbells put their house up for sale to pay off the judgment, the court heard.  Although State Farm eventually paid the judgment, the Campbells sued for bad faith. At trial, the Campbells were permitted to introduce evidence that State Farm had a comprehensive nationwide policy of handling certain claims in a like manner.

The jury awarded Curtis and Inez Campbell $2,086.75 in special damages, $2.6 million in compensatory damages, and $145 million in punitive damages.  The trial judge remitted the amounts to $1 million in compensatory damages and $25 million in punitive damages.  On appeal, the Utah Supreme Court reinstated the original jury verdict of $145 million in punitive damages, citing two decades of “egregious and malicious behavior” in State Farm’s claim-handling practices. The insurer appealed that decision to the United States Supreme Court, which reversed the ruling and remanded the case.

The case has brought unequaled clarity to the constitutional limits surrounding punitive damages, according to the National Association of Mutual Insurance Companies (NAMIC), which submitted an amicus curiae. “The U.S. Supreme Court had attempted to place limits on punitive damages for years, but their decisions did not appear to capture the attention of some lower courts,” NAMIC staff wrote in response to the Utah verdict. “In Campbell , the court seemed to finally say enough.”

Although the award was greatly reduced to $9,018,780.75, it was significantly higher than State Farm’s target figure of just more than $1 million.  “Even the Supreme Court's observation that this case ‘likely would justify a punitive damage award at or near the amount of compensatory damages’ does not cause us to retreat from our view that we have been granted discretion to determine the amount of punitive damages,”  Justice Nehring wrote in his opinion.

In addition to suggesting limits for punitive damage awards, the U.S. Supreme Court sought to restrict the scope of evidence that may be presented to jurors. The court chided Utah ’s jurists for the fact that the $145 million punitive damage award was prompted by State Farm's nationwide policies, rather than for its conduct toward the Campbells . “The Supreme Court found impermissible our reliance on State Farm's conduct outside Utah in measuring the reprehensibility of the company's conduct,” wrote Nehring.

 “While some have speculated that this might finally be the end of Campbell , the Utah Supreme Court’s decision raises questions that might merit further review,” NAMIC staff warned. “The Campbell litigation may not yet be over.”

State Farm has not commented on whether it will ask for further review of the case.

St. Louis Jury Awards $1.1 Million for Low Back Injury.  The unreported injury giving rise to this trial allegedly occurred in November of 2001.  The plaintiff, who had 25 years of railroad employment, claimed to have sustained a low back injury while working for Norfolk Southern in Elkhart , Indiana .  The plaintiff was unable to return to work after surgery.  A state court jury found in favor of the plaintiff and awarded $1.1 million in damages. Rick Beldon v. Norfolk Southern Railway Co., St. Louis (MO) City Circuit Court.

Defense Verdict arising from a Crossing Accident at an Unmarked Private Crossing in Texas .  The plaintiff’s decedent, age 66, was working on a ranch to construct a sep­tic tank when he drove his pickup over an unmarked railroad crossing.  There he collided with a three-car passenger train.  The decedent suffered a basilar skull fracture and was pronounced dead at the scene by emergency medical per­sonnel.  His survivors sued both the railroad and its engineer, along with the owner of the ranch, alleging that vegeta­tion obscured the decedent's view and that the crossing should have had a warning sign.  The property owner settled midway through trial (which took ten days over the course of three months).  The defense claimed that the collision was the decedent's fault. The train's conductor and a passenger testified that the decedent was talking on a cell phone at the time of the collision.  The event recorder verified that the train was operating within applicable federal speed limits and that the crew sounded the horn in advance of the crossing.  There was also evidence that the train's brakes were applied some 75 feet before the crossing.  The jury returned a verdict in favor of the railroad and the engi­neer. Garment Garza, Individually and as Executrix of the Estate of Guadalupe R. Garza, Jr., et al v. Bernardo Perez, Texas Mexican Railway and Tony Canales, Duval County (TX) 229th District Court, Case No. DC-01-35.

Summary Judgment involving a Minor Trespasser Injury, Federal Court, State of Massachusetts .   According to Court documents, on February 27, 1998 , the 15 year-old plaintiff and his older sister attempted to use a shortcut across tracks that ran a block or so from their home.  As they approached the tracks, a train was stopped along their intended route.  They crawled under a standing train freight car, with the sister leading the way.  When the sister emerged she saw an eastbound train approaching.  She dove to the other side of the tracks. The plaintiff emerged a few seconds later and found himself only five feet from the illuminated locomotive of the approaching train, the plaintiff jumped in an attempt to cross the tracks and avoid the train, but was struck by the train. He sustained severe injuries: multiple fractures, internal injuries, a punctured lung, lacerations and a closed head injury, and was subsequently airlifted to a hospital where he fell into a coma.   The plaintiff required four months of hospitalization followed by extensive physical therapy. The plaintiff sought to re­cover on two theories: (1) that as a "child trespasser" he was owed the duty of ordinary care; (2) that even if he were a trespasser he was owed the duty of reasonable care because railroad regulations required train operators to sound a whistle four times when approaching a standing train, and (3) that he was not a trespasser at all because the public's continuous and notorious use of the shortcut created a prescriptive easement across the tracks.  Following extensive discovery, the railroad sought summary judgment on the child trespasser claim.  The de­fense sought summary judgment on the prescriptive easement claim by relying on Mass. G.L. c. 160, §218, which es­tablishes as a crime any unauthorized entry onto property controlled or used by a railroad corporation.  According to the defense, no authority recognizes a prescriptive easement in the face of such a statute.  As to the whistle blowing duty, the defense claimed that it was irrelevant in light of the plaintiffs "tragic misjudgment" to attempt to jump ahead of the oncoming train. The district court granted the defense motion for summary judgment. Raymond Wright, et al v. Consolidated Rail Corp., U.S. District Court, District of Massachusetts, Case No. 01-30076.  Michael B. Flynn and Richard A. Davidson, Jr., Quincy , MA for defendant.

Settlement of CSX Machinist/Engineer Claims Knee Injuries in Georgia for $15,000.  The plaintiff, in his fifties, worked as a machinist for most of his railroad career.  During that time he walked on ballast in the rail yard.  Arthritis developed in plaintiffs knees.  Plaintiff later worked as an engineer. During that work, plaintiff claimed he was forced to stand for extended periods of time. According to plaintiff, he became unable to work as an engineer be­cause of the arthritic pain in his knees.  In his complaint plaintiff alleged that the ballast on which he walked was larger than that called for by industry standards.  Plaintiff theorized that cumu­lative trauma caused damage as the knees and ankles turned while walking over the ballast.  According to Georgia Trial Reporter, the case settled before trial for $15,000 Walter Johnson v. CSX Transportation Inc., Fulton County (GA) State Court, Case No. OOVS005642. Edward Shuff Cook, Atlanta , Georgia for plaintiff.  Glenn C. Tornillo, Atlanta , GA for defendant.

Jury Re­turns Defense Verdict in Louisiana Crossing Accident.  On January 27, 1989 , the plaintiffs' decedent drove into the path of a Southern Pacific train at a crossing in Bossier Parish.  Although he survived the crash, he died later in the day.  Plaintiffs sued both the railroad and the engineer on theories the train failed to sound the whistle and that the crossing was extra-hazardous.   At trial plaintiff presented expert testimony that a motorist needed five seconds of reaction time and that the crossing could not be safely crossed due to a cluster of trees 330 feet from the track. The parties presented conflicting expert testimony on reaction time and train make-up.  The jury deliberated an hour following a two-week trial and then returned a defense verdict.  Vivian Jean Arnold v. Union Pa­cific Railroad, et al, Bossier Parish (LA) Twenty-Sixth Judicial District Court, Case No. 78,910.

Grand Trunk Pays $725,000 to Settle FELA Claim Then Seeks Indemnity From Side­track Lessee — Michigan Appeals Court Affirms Judgment for Railroad.  A railroad brakeman/conductor allegedly injured his right shoulder and left knee while coupling cars in December of 1997.  After filing a complaint under FELA the brakeman/conductor returned to work in December 1998.  In January 1999 the employee slipped and fell after encounter­ing a problem with snow-covered switches on sidetrack property that Grand Trunk Western had leased to defendant to load autos onto railcars for transport.  In this second incident the brakeman/conductor injured his left shoulder and right knee and was later determined to be permanently disabled.  An amended FELA complaint was filed, seeking recovery for this second incident.  Grand Trunk notified defendant of this claim and tendered its defense pursuant to indemnity pro­visions in the sidetrack agreement.  Defendant denied liability and refused the tender. Grand Trunk filed suit for in­demnity and the action was consolidated with the FELA case. Upon submission to facilitative mediation, the facilitator determined that the brakeman/conductor's case reasonably settled for $725,000 with $625,000 allocated to the 1999 injury.  The railroad notified defendant of its intent to settle.  Defendant declined the settlement.  After the railroad settled, it sought summary disposition of its indemnity claim.  The trial court concluded that defendant breached its duty to defend and therefore could not dispute its negligence or the amount of the settlement.   Defendant appealed, arguing that the trial court erred in holding it to the same standard as an insurance company with regard to the contractual duty to defend.  The appeals court affirmed the judgment, but on different grounds.  While it first agreed with the defense that the duty to defend is not absolute and the contractual duty is not, in and of itself, dispositive of the case, the court concluded that summary disposition was appropriate given the potential liability under FELA and evidence that the settlement was reasonable [citing Consolidated Rail Corp. v. Ford Motor Co., 751 F.Supp. 674 (E.D.Mich. 1990)].  The court pointed out that defendant did not dispute that the potential liability rule applied, only that the railroad had the burden of showing that the claims were covered before the trial court could proceed further.  According to the defense, questions of fact re­mained regarding whose negligence caused the brakeman/conductor's injuries and whether defendant breached its duty under the sidetrack agreement regarding ice and snow removal.  The appeals court found the defense reasoning flawed. It held that defendant's argument raised questions of liability which were properly resolved under the potential liability standard. Here, the court concluded, it was clear that the fact situation of the original claim was covered under the side­track agreement. Such an argument was, the appeals court found, a liability argument to be considered in weighing the reasonableness of the settlement.  In light of the non-delegable FELA duty to provide a safe workplace, the court found that Grand Trunk reasonably settled the claim. Grand Trunk Western Railroad, Inc. v. Auto Warehousing Com­pany, Court of Appeals of Michigan , Case No. 244246.

RCSI welcomes your input.  If you have any questions or comments of interest to our industry, please contact either Dave Gardner or Randal Little at (731) 967-1796 or FAX your message to (731) 967-1788.

Visit the Railway Claim Services, Inc. webpage located at www.railway-claim-services.com.  Railway Claim Services, Inc. is the recognized leader in independent railroad claims management, which includes investigation, negotiations, and all those things in between.  If RCSI is not already a partner in your loss control and claims management program are you accepting too much risk?

For further information contact:

dave_gardner@railway-claim-services.com or randal_little@railway-claim-services.com

Corporate Offices at:   52 South Main Street     Lexington , Tennessee   38351

Phone:  800-786-5204, Fax:  731-967-1788 or visit us on the Web at www.railway-claim-services.com

Railway Claim Services, Inc. has offices THROUGHOUT THE UNITED STATES.