Quebec accident fallout: Canadian Transportation Agency suspends Montreal, Maine & Atlantic's operating license

The Canadian Transportation Agency (CTA) yesterday announced it suspended the Montreal, Maine & Atlantic Railway's (MMA) and Montreal, Maine & Atlantic Canada's (MMAC) "certificate of fitness" — a license that enables the railroads to operate in Canada — because they haven't demonstrated that their third-party liability insurance is adequate to support ongoing operations.

The suspension takes effect Aug. 20 to provide MMA and MMAC time to arrange an "orderly cessation" of their operations in Canada, CTA officials said in a press release. Adequate third-party liability insurance coverage is a legislative requirement to operate a railroad in Canada.

The suspension follows the MMA's tragic derailment July 6 in Lac-Mégantic, Quebec, that caused 47 fatalities, scores of injuries and significant property damage. On Aug. 7, the MMA announced it filed for protection under Chapter 11 of the United States Bankruptcy Code and MMAC filed for relief under Canada's Companies' Creditors Arrangement Act as a result of claims associated with the accident.

Given the accident's "exceptional circumstances," CTA officials contacted MMA and MMAC executives after the accident seeking confirmation that they continued to hold adequate third-party liability insurance coverage with respect to any continuing operations, agency officials said.

"The agency reviewed the companies' insurance coverage and additional information they provided, and is not satisfied that MMA and MMAC have adequately restored their third-party liability insurance coverage to the same level as prior to the derailment, nor do they have the financial capacity to pay the self-insured portion," CTA officials said. "This was not a decision made lightly, as it affects the economies of communities along the railway, employees of MMA and MMAC, as well as the shippers who depend on rail services. It would not be prudent, given the risks associated with rail operations, to permit MMA and MMAC to continue to operate without adequate insurance coverage."

The derailment has raised concerns about the adequacy of third-party liability insurance coverage to deal with catastrophic events, especially for smaller railroads, CTA officials said. Increasing shipments of crude oil and other hazardous materials by rail also highlight the need to determine how best to ensure that railroads, small and large, have appropriate levels of third-party liability coverage, they said.

In fall, the CTA plans to review the adequacy of insurance coverage requirements for the issuance of certificates of fitness to federally regulated railroads.