Media Coverage Derails Insurance Outlook- Philadelphia Insurance Companies

Media Coverage Derails Insurance Outlook

Examining the Insurance Impact of the East Palestine Train Derailment

On Friday, February 3, 2023, at about 47 miles per hour, the Norfolk Southern Railway (NS) train 32N chugs along its tracks traveling east along the Fort Wayne Line and nearing the outskirts of East Palestine, Ohio. The engine is pulling 149 cars laden with various typical general merchandise and goods, including 20 cars transporting hazardous materials. At approximately 8:54 p.m. local time, a wheel bearing on the 23rd car overheats and seizes, and the resulting friction of the tracks from the forward motion of the car against the static wheel emits sparks. In moments, the mechanical malfunction catastrophically derails 38 cars, 11 of which contain hazardous materials that ignite with a glow that quickly becomes a bright light as heat and flames billow.

Emergency responders, firefighters, hazardous materials workers, and Federal and State environmental regulatory authorities are dispatched to the scene. Hundreds of residents are ordered to evacuate due to the potential for explosions or exposure to harmful gases as the chemicals burn.

Three Days after the Derailment: While the initial fires were contained in the emergency activities, on February 6, officials decided additional measures were necessary to mitigate the increasing concern that the chemical vinyl chloride in several railcars could explode. The decision was made to proceed with an intentional venting procedure where the chemical was directed away from the railcar into a trough to conduct a controlled burn of the vinyl chloride.

Five Days after the Derailment: Throughout the immediate aftermath, regulatory agencies oversaw the collection of soil, water, and air samples to assess the environmental impact and monitor the area for harmful conditions. Even though regulated chemicals were detected in the soil, surface water, and air during the emergency response actions, by February 8, the evacuation orders were lifted. The United States Environmental Protection Agency (U.S. EPA) declared that the surface water and air samples outside the immediate vicinity of the derailment were safe. Environmental investigation work to fully delineate and define the impacted areas began in earnest.

Seven Weeks after the Derailment: By March 17, over 6.8 million gallons of liquid waste and over 5,400 tons of solid waste were removed from the crash site for disposal into waste facilities, according to the U.S EPA. The Ohio Department of Natural Resources (ODNR) estimated that 3,500 aquatic animals had been killed in the area impacted by the derailment due to the release of vinyl chloride.

While long-term human effects will be difficult to predict due to the number of variables involved, the immediate disruption to the lives of the residents has been significant. At this time, nearly 30 lawsuits have been filed by East Palestine residents, business owners, and others affected by this disaster. The U.S. Environmental Protection Agencyv and Ohio environmental regulatory authorities will continue to monitor groundwater and surface water sources, air, and food sources such as livestock, eggs, vegetates, and other crops to quantify the long-term potential effects of the chemicals released by the derailment.

Vinyl Chloride

While multiple chemicals were associated with the derailment, both directly from the chemicals within the railcars themselves and those created due to the fires' reactions, the primary concern for regulators was vinyl chloride (VC). Vinyl chloride is a federally-regulated chemical that is a known carcinogen (cancer-causing) and has other potential more acute effects, according to the United States Agency for Toxic Substances and Disease Registry (ATSDR). Vinyl chloride is used in a variety of industrial and chemical applications, but it is most common in the manufacture of polyvinyl chloride (PVC) products such as pipes, wire coatings, furniture, and automotive parts and accessories. Exposure routes for VC include inhalation of vapors, skin absorption by coming into contact with contaminated soil or surface water, ingesting VC-contaminated drinking water from groundwater wells or water reservoirs, or consuming food contaminated with VC.

Uncovering Liability

The question of liability is paramount; who is responsible, and what will be done to correct what has happened or prevent a similar circumstance in the future? However, that question has a very complex and complicated answer, especially within the context of liability as it relates to financial vehicles of operations such as insurance.

The easiest answer would be the railroad and train operator themselves. However, railroads often push liability down to third parties, such as the individual car owners and lessees, and the owners of the product being transported. In addition, the liability chain is often cascaded down multiple levels to various enterprises, via contractual language. So, while public outcry targets the railroad operator, a significant portion of their ultimate liability will likely be passed down to the product owners transporting the chemicals in the derailment.

From an insurance perspective, this event could impact liability costs for multiple insurers due to the cascading contractual liability for transporting these chemicals. With social pressure to find and hold accountable all parties responsible, costs can escalate for insurers to accommodate legal expenses and defense costs, and remediation values. Another significant cost would be handling bodily injury or property damage claims for potential long-term impacts to human health and the environment resulting from the derailment's release of pollutants. With additional scrutiny being placed on railroads, environmental insurance carriers could also reconsider how they have traditionally approached transportation, and the marketplace could see a modified underwriting approach to avoid similar exposures in the future.

For most people, vinyl chloride is not likely a commonly discussed topic around the dinner table. However, with the nationwide coverage of the East Palestine derailment and the subsequent emergency response measures, mainstream media and social media are pouring into homes with dramatic photographs, videos, and articles about "toxic" vinyl chloride. While vinyl chloride is toxic in certain quantities, the environmental insurance market will likely see increases in both nuisance and real claims for exposure to vinyl chloride now that this chemical has garnered so much media attention.

Modern Media Effects on the Insurance Industry

On March 4, a month after the East Palestine derailment, and while remediation and containment were still ongoing, a second Norfolk Southern Railway (NS) train derailed near Springfield, Ohio. While the second train did not carry hazardous materials, the reminder of what could be possible was enough to reinvigorate the public to pressure lawmakers. Regulatory agency response was also accelerated, prompting additional investigations into rail safety as a whole. Emerging debates on logistical methodologies may lead to further regulation, legislative action, and significant changes in how hazardous materials are handled and transported.

As lawmakers and government officials continue their review of rail industry safety and operations, they are doing so in a direct attempt to respond to concerned citizens. These concerns have been escalated into a public outcry that has circulated amongst media outlets by communities, residents, and environmental action groups. But the question remains; why is the 2023 East Palestine derailment different than historical events of similar circumstances?

The Bureau of Transportation Statistics annually tracks derailments and on average, over 2.67 derailments occur per day in the United States each year (over 1,000 per year). This data shows that train derailments are fairly commonplace, yet the East Palestine derailment has captured public attention like none before. With access to more information sources (traditional media, the internet, and social media) and the public's ability to comment through those channels, public influence as a part of media is changing the social dynamic in the United States; especially surrounding catastrophic and impactful events such as the East Palestine derailment.

Conclusions: Train transit of chemicals, petroleum, coal, and other resources, which may be hazardous or detrimental to human health and the environment, is conducted daily via our national rail system. While by truck is by far the most frequent mode of transportation of hazardous materials, rail remains our most common mode of long-haul hazardous material transportation, with an average trip more than 10 times longer than by truck, according to the Bureau of Transportation Statistics.

The frequency and duration of hauling these materials via train and the regulations surrounding this type of transit mode may be changing. However, public awareness of events like the East Palestine derailment has evolved through modern media attention because of this event in particular. Through access to information and media outlet conversations, this derailment may be a catalyst for modifying how Americans perceive our most utilized long-haul logistical system in the U.S. for chemicals, petroleum, and other natural resources.

With events like this, potentially supported by insurance, insurance carriers will face new landscapes in the ability to provide future coverage solutions. Certainly, carriers' determinations on how they deploy their capacity will be affected by the social inflation that inevitably has encroached upon litigation in the United States.

Modern media channels can (and are expected to continue to) elevate public consciousness toward the dangers of pollution and its short and long-term effects across the general population. Because of its reach, breadth, and increasing power to serve as a constant news source for the public, it is also expected that our social constructs for sharing information will continue to shape the modern insurance industry and influence our approaches to insurability for risks accordingly.


- Kalen Kramer, Vice President of Environmental Underwriting at Philadelphia Insurance Companies

- Jamie Langes, Vice President of Environmental Underwriting at Philadelphia Insurance Companies




NTSB - NTSB Preliminary Report RRD23MR005 dated February 23, 2003

US Department of Transportation, Bureau of Transportation Statistics website and Transportation Statistics Annual Report, 2022

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