Rail Company in Lac-Mégantic Incident Loses Operating Certificate

The Canadian Transportation Agency suspended the Certificate of Fitness issued to Montreal, Maine & Atlantic Railway, Ltd. and Montreal, Maine & Atlantic Canada Co., a subsidiary, stating they now lack adequate third-party liability insurance coverage.

The railroad company that owned the train that derailed and caught fire July 6 in Lac-Mégantic, Canada, is no longer allowed to operate in Canada. The Canadian Transportation Agency announced Aug. 13 that it has suspended the Certificate of Fitness issued to Montreal, Maine & Atlantic Railway, Ltd. and Montreal, Maine & Atlantic Canada Co., a subsidiary, because they lack adequate third-party liability insurance coverage as a result of the disaster.

Order No. 2013-R-266 suspends the certificate effective Aug. 20.

According to the agency, MMA and MMAC have filed a petition under the Companies' Creditors Arrangement Act with the Superior Court of Quebec, and the petition, which was granted on Aug. 8, states that "While the Petitioner holds insurance covering certain of the Train Derailment Claims..., as the amount of said Train Derailment Claims is ever increasing, it has become evident that in the event of a determination that the Petitioner ...[is] liable and that the Train Derailment Claims are valid, the amount of insurance coverage will not be sufficient to cover all of the Train Derailment Claims."

MMA also has filed in a U.S. bankruptcy court in Maine for protection under Chapter 11, the agency reported.

"MMA and MMAC were given full and fair opportunity to demonstrate that they have secured adequate third party liability insurance coverage for their ongoing operations, which is a legislative requirement to operate a railway in Canada," said Geoff Hare, chair and CEO of the Canadian Transportation Agency. "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."

Noting the derailment calls into question whether existing third-party liability coverage is adequate for catastrophic events, particularly those involving smaller railways, the agency announced it will review the issue this fall.

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