PF&M at a Glance

Railroad protective liability coverage form

Any contractor working on projects on or near a railroad has a significant coverage gap in their commercial general liability (CGL) coverage form because of an exclusion in the CGL that bars liability for construction or demolition operations on or near railroad property.

These contractors must sign an indemnity contract with the railroad, even if the railroad is not their customer, and they will not have liability protection for this contract under their CGL. For that liability, they must purchase a Railroad Protective (RRP) Liability Coverage Form.

The RRP coverage indemnifies a railroad for bodily injury or property damage arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, road-beds, tunnel, underpass or crossing.

This form is similar to the CGL but it contains many unique features. The first difference is that the named insured is the railroad, not the contractor. The contractor is responsible for paying the premium and is shown on the policy as the designated contractor, but the railroad controls all other aspects of the policy. Only the railroad can cancel the policy.

Another important difference is that coverage is restricted to a specific designated job site and a designated type of work. Losses that occur away from the job site are not covered, and losses that occur at the job site but not within the designated type of work are also not covered.

Coverage parts

The RRP consists of two distinct coverage parts. The first part is third-party coverage and protects the railroad from certain vicarious liability claims for bodily injury and property damage. This coverage is considerably narrower than the coverage provided by the CGL coverage form. As an example, there is no coverage for personal or advertising injury and also no medical payments expense. This restriction is logical because the contractor wants to pay only the premium for the coverage that is required by contract and no more.

The second coverage part is similar to first-party coverage in that it covers damage to the named insured’s property, but it is considered third-party because the designated contractor must cause the damage. The coverage is very limited and specific to a particular set of circumstances. The damage must occur during the policy period, result from acts or omissions at the designated job location and relate to the work described on the declarations. Coverage applies only to property owned by the insured railroad or leased or entrusted to it under a lease or trust agreement.

Underwriting considerations

Underwriting of this coverage begins with estimating the vicarious liability exposure to the named insured from a given project. Because the designated contractor’s acts and omissions will cause any covered loss under this form, all underwriting must concentrate on the contractor.

It is much easier to identify exposures with respect to the RRP coverage form than it is with respect to the CGL coverage form because the coverage provided under the RRP applies only to a specific job location and for the exact work done by a designated contractor until the project is complete. Exposures under the RRP coverage form can be just as catastrophic as they are under the CGL coverage form because any activities performed on or around a railroad operation have the potential to be deadly.

The RRP coverage form is not subject to filed rates. The rates used are based on underwriting judgment because of the unique nature of each job.

Some railroad companies offer the contractor doing work around their properties the option of purchasing coverage through the railroad’s group insurance program instead of arranging for the coverage on its own. This may be a very attractive alternative to the contractor because the railroad negotiates the rates in this type of arrangement. In addition, the underwriter working with the group program is completely aware of the contract terms between the railroad and the contractor, and this simplifies the underwriting process, with a usually correspondingly lower premium charge.

Please note that this is only an overview of this coverage. A thorough discussion of the program may be found in the PF&M Analysis from The Rough Notes Company. Producer Online subscribers, please refer to PF&M Section 272.4-2, CG 00 35-Railroad Protective (RRP) Coverage Form Analysis for more details on this topic.