Paying the price
Page 11
Page 12
If you've noticed an error in this article please click here to report it so we can fix it.
Hitting a railway bridge with a truck could cost operators a lot more than they think, our exclusive investigation reveals
Words: Derren Hayes
OPERATORS FACE the prospect of higher insurance premiums following a landmark decision by the Court of Appeal to pursue hauliers for costs relating to trucks striking bridges.
These premiums would ensure hauliers are covered against claims, which could run into millions of pounds, for delays to train services caused by such strikes.
As reported in CM last week, the ruling in Conarken Group Ltd & Farrell Transport Ltd v Network Rail Infrastructure Ltd (2011) (see box) confirms that Network Rail (NR) is allowed to reclaim from hauliers whose vehicles strike bridges the compensation it pays to train operating companies after sections of track are closed and delays in rail services occur. Although this has been the case for some time, the legal judgment has forced some insurers, which up until then were reluctant to recognise, accept or pay the cost of such delays, into line.
Philip Thrower, insurance claims specialist at NR, says: “The ruling confirms [the legal position] for those who believed it to be correct and influences those who did not. Some insurers have shifted their position: they don’t write you a letter saying that; they just make you an offer when you wouldn’t have seen that before, or make proposals that are better than an earlier offer.”
Premium rise
The result of a more compliant insurance industry to settling such claims from NR has prompted some to speculate that operators’ insurance premiums will rise to reflect a perceived extra risk and potential cost to insurers.
Graeme Trudgill, head of corporate affairs at the British Insurance Brokers’ Association, says delays to rail services caused by incidents such as bridge strikes could get more costly in the future. “The effect on hauliers is going to be an increase in claims costs and ultimately a potential increase in premium. Striking a bridge, depending on the severity, could result in possible road closures, repairs, and inspection from road engineers. These delays could be expensive for the insurer.” Chris North, affinities manager at Towergate Insurance, which manages the Freight Transport Association’s insurance scheme, says: “The test case makes it apparent that transport operators are responsible for these costs.” He adds: “While it doesn’t seem to have caused any significant trends from the insurers we deal with, it will sharpen operators’ minds about the extent of costs for big strikes.
“Operators need to ensure their third-party cover is going to meet something like this. The industry norm is for £5m of cover, so this judgment might be a reason to think about reappraisal and whether that is adequate. A maximum bill [for delay costs] could drive many operators out of business, but you have to draw a line somewhere.” Although only 3% of bridge strikes are classified as ‘serious’ or ‘potentially serious’ (thus requiring engineer examination to determine the remedial work necessary, and either a line closure or a temporary reduction in use), the costs associated with service delays and bridge repairs can be significant, says Keith Ross, NR engineer and national bridge strike ‘champion’.
Ross and Thrower outlined to CM the extent of delays caused by bridge strikes, the costs to NR, the numbers of bridge strike incidents and what is being done to tackle the problem. In 2011-12, there were 1,541 reported strikes, of these 1,039 (67%) were by trucks.
Bridge strikes resulted in 141,000 minutes of delays, costing NR £5m in reimbursement to train operators for the detrimental effect these delays have on punctuality targets. Payments will vary depending on factors such as the time of day, the stretch of track in question and number of passengers using it, says Thrower. “If you were to close the track for 24 hours,” he says, gesturing at Kings Cross station opposite NR’s head office, “it would cost £4m.” With such high stakes, it is perhaps unsurprising that NR sees the test case ruling as significantly strengthening its hand in recouping costs from delays caused by bridge strikes. “It is rare that the costs are as big as in the test case,” says Thrower, “but once we identify the vehicle and that there is a cost to NR, then we will pursue them [for payment]. We don’t want vehicles to hit our bridges, but if we suffer a loss then we will recover some of that money.”
Recovering losses
NR says it is successful in recovering a “significant percentage” of its losses caused by bridge strikes. However, with more than one-third of strikes being hit and runs and others not having blame apportioned to any party, Thrower emphasises that it doesn’t recoup all of its costs. “If bridge strikes stopped we’d be happy and financially better off. There’s a perception that this is a money-making scheme for NR, but we will pay the operators for delays arising from bridge strikes while some of the vehicles are unidentified.” NR has produced several booklets that offer guidance on how to prevent bridge strikes. It also has updated guides for transport managers and professional drivers, covering such areas as vehicle height measurement, road signs and route planning. They have been produced in seven languages because about 10% of bridge strikes involve vehicles registered overseas. The work seems to be paying off – Ross says that nine of the 11 frequently struck bridges in 201011 were struck less often in 2011-12. n ● The guides can be read at: networkrail. co.uk/aspx/12822.aspx
COURT OF APPEAL RULING
Conarken Group Ltd & Farrell Transport Ltd v Network Rail Infrastructure Ltd (2011) A bridge strike involving a vehicle operated by Conarken resulted in a five-day line closure. In a separate incident, a Farrell Transport vehicle damaged overhead traction cables, which led to the closure of the East Coast Main line for a few hours. Both firms accepted they were liable for the damages but disputed their liability for the compensation payments made by NR to the train operating companies. Lord Justice Moore-Bick, who heard the case, dismissed the appeal on the basis that while any assessment of damages must be fair and reasonable, and future loss of business may not be recoverable, physical damage to property that leads directly and foreseeably to economic loss may be recoverable, particularly as recovery of economic loss resulting from damage to revenue-generating property is already a recognised principle. When dismissing the appeal, Lord Moore-Bick said: “That some financial loss would be likely to result from a suspension of services, whoever was operating them is, I think, obvious.” The firms were ordered to pay a combined award of £1.31m.