Settlements Against Uninsured New Mexico Rail Service Reach Nearly $8M

August 20, 2014

New Mexico’s commuter rail service has received a free ride while taxpayers have shelled out nearly $8 million to settle damage claims against the Rail Runner Express, according to state records.

The Rail Runner, until last month, didn’t pay premiums for the state’s self-insurance program that provides liability coverage for settlements of lawsuits against government agencies. The insurance arrangement represented a little-known subsidy for the state-owned passenger train.

The taxpayer-financed liability fund has covered about $7.7 million in settlements involving the Rail Runner, including $4.2 million for wrongful death claims for car-train accidents in Valencia County that killed three people in 2007, according to General Services Department records.

Gov. Susana Martinez’s administration started assessing an annual insurance premium on the Rail Runner in the budget year that began last month.

spitzer era bid rigging case settledThe Rail Runner will pay $2 million to cover liability claims up to $3 million. The Rail Runner buys insurance in the private market for claims over that amount.

State agencies typically pay for coverage based on their history of liability losses. But that didn’t happen for Rail Runner when it started in 2006 during former Gov. Bill Richardson’s administration.

Because the Rail Runner paid nothing into the insurance fund, the rates for other state agencies ended up being higher, according to Risk Management Director A.J. Forte, who discovered the no-premium policy and sought to change it.

He estimates there were uncollected Rail Runner premiums of about $5 million during the past three years. Rail Runner won’t be required to retroactively pay any premiums, but will be charged going forward starting with this budget year.

“We felt that it was appropriate to charge the Rail Runner premiums and not have the pool take the hit,” Forte said in a recent interview.

Terrence Doyle, director of the Rio Metro Regional Transit District, which manages the Rail Runner, said he learned from the Martinez administration earlier this year that the state hadn’t been charging for liability coverage. The rail service had long been paying a private insurer, but it was for coverage beyond what the state provided.

“We were a little bit taken back when this conversation came up because we thought what we were paying covered everything,” said Doyle. “But we were completely happy to say, ‘Hey, that’s something we need to take on.”’

The insurance is for claims such as when the train hits livestock, if a rider is injured and for fatalities. Two bicyclists have died this year after being hit by the train in separate accidents in Santa Fe.

The Rail Runner is financed by rider fares, a voter-approved tax in the rail service area and federal money. With the state no longer paying for insurance, Doyle said, the train’s budget fully covers operational expenses.

“I don’t think there is anything left that I know of on the operation and maintenance side that would be on the burden of the state,” Doyle said.

The rail service has another liability provision unique in state government.

In damage lawsuits, Forte said, the state indemnifies the losses of the private companies and other governmental agencies involved with the train. That includes Herzog Transit Services, a contractor running the trains day-to-day; Burlington Northern Santa Fe Railway, which sold track to the state for the commuter rail service but retains a right to run freight trains over the line; and the Mid-Region Council of Governments, which implemented the rail system for the state and governs the transit district.

The Transportation Department said in a statement that the Richardson administration negotiated the indemnification provisions when Rail Runner was created, and the Legislature approved a law change for the state to provide liability coverage.

About Barry Massey

Associated Press

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