The Chehalis-Centralia Railroad and Museum (CCRM) successfully obtained premises-liability insurance last Friday, April 8, allowing railroad workers to return to work at the site.
The move marks the first step in the organization opening back up for revenue-generating rail passenger service after it closed down all operations on March 6.
CCRM lost its liability insurance in totality in March after its insurance broker could not obtain a new policy.
To resume rail operations, CCRM must secure rail liability insurance. With all four major rail insurers on the market refusing to quote CCRM for coverage, the organization was faced with limited options.
A factor in the loss of liability insurance was CCRM’s loss runs, which amounted to $1.064 million over six years. Two crashes involving CCRM’s trains contributed to that amount. There is currently an active lawsuit against CCRM addressing one of the incidents.
With that said, CCRM never lost the property insurance on the facility itself to protect against damage to the property, though it had been without any form of liability insurance until April 8.
“We have property insurance on our facility, and as of Friday, we have liability insurance,” CCRM president May Kay Nelson told The Chronicle earlier this week. “The property insurance would only cover if something would happen, like a fire or whatever to the engine. But liability will protect it with people working on it. And that’s what we put into place Friday.”
The stop-gap measure amounts to $1 million in occurrence coverage and $2 million in aggregate coverage.
Occurrence-based insurance covers losses that happen during the time an entity has a given policy, regardless of when a claim is filed, and aggregate insurance represents a limit in an insurance policy stipulating the most an insurer will pay for all covered losses reported during a specified period — usually a year.
“This amount of insurance is normal and customary for property and for liability on that property,” Nelson said. “It is not adequate for passenger, revenue-generating rides. We are not doing that until we can get our track repaired.”
Indeed, Nelson said the primary reason the organization has not sought a new rail liability plan is that the rail itself is in a state that needs considerable repair.
The January flooding washed out about a mile and a half of track. According to the minutes from Wednesday’s CCRM board meeting, work on track repairs could begin as soon as June.
With workers back on site, CCRM is in a flurry of activity, Nelson said. The organization is renovating one of its coaches, replacing the carpet.
“We’ve torn up the complete interior,” Nelson said. “And (we) are replacing the interior of one of the passenger cars.”
Next up is what Nelson called CCRM’s “maintenance of way,” which is brush-cutting and track repair work.
“So we have tie-replacement work that we need to do that we’ve been waiting this month on. So that’s a project that’s ongoing,” she said. “We continually replace ties.”
And to repair the washed-out track, the organization is looking to FEMA for help.
The premises liability insurance allows for all of this work to take place, but Nelson said there is no current timeline for when the liability insurance for revenue-generating passenger rail passage will be obtained.
“We don’t know (the timeline) because we don’t know when we’ll be able to get the track repaired,” Nelson said. “So until the track is repaired, we can’t do that.”
The topic of CCRM’s insurance situation came up during Monday’s Chehalis City Council meeting, as CCRM leases out its steam engine from the city and also some land.
Decades ago, Chehalis had the steam engine parked at a local park, and when CCRM needed the engine to begin operations, the city leased it to them in the 1980s with the requirement of $1 million liability insurance for rail passage, which has since escaped being updated.
Councilor Daryl Lund raised concerns during Monday’s meeting over the original amount of liability insurance the city required of CCRM for its use of the steam engine for passenger rides.
“One million dollars is not enough money to protect the city,” Lund told his fellow councilors. “I hope my fellow council members, since (CCRM) breached their contract by not having insurance, we consider raising it to at least $5 (million) or $10 million liability, required on everything we have over there.”
In an interview with The Chronicle, Lund explained himself on the matter.
“When they leased that engine to the group, $1 million was a lot of money. That’s not a lot of money today. A million bucks don’t get you much anymore. And to protect the city, I think it should be raised to at least $5 million,” he said.
During the council meeting, Chehalis City Manager Jill Anderson signaled agreement with Lund, citing the last time the lease agreement for the engine was extended.
“With the agreements that were extended in 2017, it was identified at that time that the (liability) amounts were low,” Anderson said. “There was a funding opportunity from the state, so time was of the essence, but it was recognized that our insurance requirements are quite low. They should be updated, and this does provide an opportunity to do that.”
Anderson told The Chronicle that the brokerage of a new lease agreement with increased requirements for liability on the passenger service of the engine could be completed within six weeks, depending on the city’s bandwidth.
When asked about Lund’s asking price for an increase in liability requirements, Nelson told The Chronicle, “He’s correct in that we want to be looking at a $5 (million) to $10 million policy when we resume ridership.”
Ultimately, Lund told The Chronicle it does no one any good for CCRM to be shut down.
“The train brings a lot of people here. It’s kind of an institution now,” he said. “But, you’ve gotta run things like a business. You can’t have the city hanging out there liable for something because the city’s the one with the deep pockets, and if anything happens, they’ll go after the train and the city and whoever else they can grab. It’s good business to protect everybody.”
Former CCRM President James Folk resigned from the organization last month, citing conflict within the organization’s board of directors that he claimed is impeding CCRM’s ability to recover from its current crisis.
“This organization is doomed to fail and I will not be a part of that failure,” wrote Folk in the email, which was provided to The Chronicle.
