Category Archives: Governance, Risk & Compliance

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LIRR Misses Critical Juncture for Positive Train Control

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Last week, the Long Island Rail Road (LIRR) confirmed interruptions in its ability to fully install positive train control (PTC) across its system by the end of the year. Newsday reported that the LIRR system, which is a unit of the Metropolitan Transportation Authority’s (MTA) network, failed 16 out of 52 factory tests performed in early March using a computerized simulation of the new technology.

Although its PTC contractor continues to investigate the cause of the failures, MTA officials said they believe it stems from the complexity and density of the LIRR, which is the busiest commuter railroad in the country averaging more than 311,000 daily riders.

PTC is designed to eliminate human error by using four components: GPS satellite data, onboard locomotive equipment, the dispatching office and wayside interface units. The system communicates with the train’s onboard computer, allowing it to audibly warn the engineer and display its safe braking distance based on its speed, length, width and weight, as well as the grade and curvature of the track, according to railroad operator Metrolink.

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If the engineer does not respond to the warning, the onboard computer will activate the brakes and safely stop the train.

An approved PTC System must protect against:

  • Passing a stop signal.
  • Train-to-train collision.
  • Overspeed on curves and other civil restrictions.
  • Unauthorized incursions by a train into a work zone.

The installation began in January as part of a $1 billion safety upgrade, although it had been on the LIRR’s strategic plans for years. So far, substandard testing results are not instilling much confidence that PTC will be complete by the federal deadline of Dec. 31, 2018. If that deadline is missed agencies without properly-installed PTC may face fines of up to $25,000 per day, as enforced by the U.S. Rail Safety Improvement Act of 2008.

MTA Board member Neal Zuckerman told Newsday he is less concerned about meeting a federal deadline than he is about “having a system that works for riders.”

“It is better to have this right than fast,” Zuckerman said. “A nonfunctioning system is not worthwhile. It’s a waste of money and time and ultimately will not serve the needs of the riders.”

The LIRR is not the only major transit system to be missing the mark. Risk Management Monitor reported on Amtrak’s struggle to meet the deadline in February and that by the end of 2017, only 8% of NJ Transit’s locomotives and none of its tracks were updated with PTC.

Efforts to upgrade train technology has been a nationwide priority. There have been a number of accidents in recent years. The most recent was a major derailment occurring on Dec. 18, 2017 when an Amtrak train derailed near Tacoma, Washington, killing three passengers and injuring about 100. That crash was the result of excessive speed in a steep curve, which experts suggested could have been prevented with PTC’s automatic braking technology. Amtrak Train No. 501, on its inaugural run, was traveling 80 miles per hour in an area limited to 30 miles per hour when it derailed on an overpass, sending the train’s 12 coaches and one of its two engines careening onto the highway below.

As previously reported in Risk Management, a similar derailment in Philadelphia in May 2015 that killed eight, was also blamed on excessive speed and could have been avoided if PTC had been in place.

After Congress passed the PTC Enforcement and Implementation Act of 2015 it also authorized the FAST Act, which allocated $199 million in PTC grant funding and specifically prioritized PTC installation projects for Railroad Rehabilitation and Improvement Financing funding. The Association of American Railroads estimates that freight railroads will spend $10.6 billion implementing PTC, with additional hundreds of millions each year to maintain.

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 The American Public Transportation Association has estimated that the commuter and passenger railroads will need to spend nearly $3.6 billion on PTC.

Truck Driver Shortage Impacting Shipping, Retail Prices

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Factors including electronic-logging of driver hours, a growing need for shipment of items by Amazon and a surge in retirement of baby-boomers have meant a shortage of freight truck drivers and rising shipping costs.

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The American Trucking Associations reported a shortfall of 51,000 truck drivers nationwide in 2017, up from 36,500 in 2016 and 20,000 in 2013. The ATA projects the driver gap will increase to nearly 100,000 by 2021.

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“We’ve probably never had a situation like we have today, where the demand is strong and capacity is constrained,” Bob Costello, chief economist of the American Trucking Associations (ATA), a trade group representing trucking companies told USA Today. The ATA also reported that transportation companies are taking steps to attract drivers, such as pay increases and signing bonuses.

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Ben Cubitt, senior vice president of Transplace, a freight management firm noted that 99% of trucks nationwide are in use, up from 92% in October 2015. “Every truck is spoken for every day,” he said, adding that trucking companies have increased rates 6% to 10% in contracts with shippers over the past year to offset higher wages and take advantage of the strong demand. Trucks account for almost two-thirds of all tonnage moved in the U.S., according to the American Trucking Associations.

A new federal mandate for electronic logging devices that took effect in December, limiting the number of hours drivers can work, has had a big impact. These devices now take into account all time spent on the road, even waiting for cargo to be taken off a truck, which can cause hours to add up quickly and push a driver past the legal limit of consecutive work hours.

“There is a lot of uncertainty within the trucking world right now about what the effects of the [electronic logging devices] mandate’s going to be in the long term,” Steve Viscelli, a sociology professor at the University of Pennsylvania told USA Today. He added that E-commerce also has had a “huge effect.”

Price increases passed on to consumers are low so far, but are expected to increase as the driver shortage continues.

Prescription Opioid Risks to the Workplace Explored at RIMS 2018

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SAN ANTONIO – When the White House declared opioid use a national Public Health Emergency under federal law in 2017, businesses began reviewing their policies and making efforts to curb their employees’ abuse of the drug in its prescribed form. This escalating risk to organizations is why the business impact of prescription opioid use was such a hot topic at RIMS 2018, where a session on April 17 focused on the practical and bottom-line costs of workforce use of prescription opioids. In a session the next day, attendees learned how liability policies are responding to government-led lawsuits against opioid manufacturers, and how to prepare for similar suits brought against other industries.

New Insights into the Impact of Opioid Prescribing to Injured Workers
Data displayed on Tuesday explored opioid-related correlations between worker, industry and employer. Presenters John Ruser, president and CEO of the Workers Compensation Research Institute (WCRI) and Michael Fenlon, senior director of corporate risk management for United Parcel Service (UPS) discussed opioid-related claims and suggested evidence-based information that can encourage a return to work without the prescriptions.

The effectiveness of prescription drug monitoring policies (PDMP) was explored, and Ruser explained that a reactive shift among prescribers has meant that states obligated to adhere to these policies have fewer prescriptions written.

“This shows that the more queries there are, the bigger the drop in opioid prescribing,” he said, using Kentucky as an example of a successful PDMP. He added that Kentucky’s HB1 law mandated the use of the PDMP and has set a standard among states since it was enacted in July 2012. Between 2011 and 2013, WCRI information indicated a 10% decline in prescriptions in the state, whereas prescription levels were flat in others that did not have comprehensive opioid reforms.

Fenlon said that when he learned in recent years that opioid overdoses—almost half of which arise from prescriptions—surpassed car accidents as the number one cause of accidental death, he realized the severity of the issue and its impact on the UPS workforce.

“Once someone gets to that third or fourth script, you can see how it leads to a vicious cycle,” he said. “We need to take ownership of this—in the workers comp space as well as the healthcare side.”

He noted that UPS’ overall pharmacy spend is about 7% of its total medical costs per year for lost-time (LT) patients, with opioids comprising about 22% of that amount. UPS employs more than 454,000 workers, and Fenlon said the company continually pays close attention to the LT patients who are the higher-risk group, with three or more scripts. He added that the collaboration of drug formularies, third-party administrators and UPS case supervisors has contributed to the 44% decrease of the higher-risk group between 2013 and 2017.

Both presenters conceded, however, that injured workers will likely get the medication they need, even if it is not in the form of opioids. “Those who are worried about pain management are noticing the trend in the decline of opioid prescriptions in some areas and ask: ‘What’s the alternative?’” Ruser said. “While there was a drop in that drug, there was an increase in the amount of NSAIDs [nonsteroidal anti-inflammatory drugs]. Clearly, that’s what these prescribers are shifting to, so it’s not that these injured workers are not receiving pain meds.”

Members may access this PowerPoint presentation by logging in at the RIMS 2018 session handout page.

Opioid Lawsuits: A Tsunami of Litigation and Associated Coverage Issues
The topic shifted from boardrooms to courtrooms the next day, as current and pending multidistrict litigations filed by various governments (local, city and state) were examined. Covington & Burling LLP Partner Anna Engh and Marsh Managing Director John Denton (pictured below) discussed insurance policies’ responses to lawsuits and provided insight as to how to prepare should similar suits be brought against other industries.
Manufacturers, distributors, retailers, prescription benefit managers, doctors and clinics are all seemingly in the crosshairs of local municipalities and governmental entities, Engh noted.

“The main focus against the manufacturers is of alleged misrepresentation of the addictive nature of opioids. With respect to the distributors, it is the failure to report and detect suspicious orders, or failing to have controls in place for their diversions,” Engh said. “You’ll see negligence pled in different ways, like common-law negligence, and also pled as violations of states’ controlled substance acts.” She added that public nuisance and RICO claims (Racketeer Influenced and Corrupt Organizations Act) also appear on the dockets.

With nearly 500 claims against pharmaceutical companies, distributors and pharmacies consolidated in Ohio alone, Denton said that the volume of work involved is daunting for insurance, risk and legal professionals.

“That’s thousands of pages of pleadings coming in every month. It’s a very difficult burden,” he said. “I think a lot of companies are tendering them to as many policies as possible. Hopefully, a lot of insurance carriers will be understanding of this. And a lot of this will be sorted out later, either through discussions with the carriers or litigation.”

Denton added that because there is no federal judicial precedent on insurance suits, the progress on such matters will continue to be slow.

“Insurance coverage issues are typically an issue of state law. And with lawsuits in nearly every state, it would be nice to have a [United States] Supreme Court decision on some of these coverage issues, and that would bind everybody,” he said. “But the reality is that’s not going to happen. There will be decisions in multiple states so it may take some time before these issues get sorted out.”

Black Coffee Blues

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If a new court decision in California is enforced, baristas will have to place another label on cups next to customers’ names—a cancer warning.

Last week, a Los Angeles Superior Court proposed a decision against coffee makers in a lawsuit that has been brewing in courts for years. The Council for Education and Research on Toxics claim that by selling coffee with trace amounts of acrylamide—a chemical classified as a carcinogen, but one that occurs naturally from the roasting process—retailers are exposing consumers to a health hazard. This would ultimately put sellers in violation of California Proposition 65, the Safe Drinking Water and Toxic Enforcement Act, which requires businesses that expose customers to hundreds of chemicals to post warning labels notifying them as such.

In his proposed decision, Los Angeles Superior Court judge Elihu Berle wrote:

“Since defendants failed to prove that coffee confers any human health benefits, defendants have failed to satisfy their burden of proving that sound considerations of public health support an alternate risk level for acrylamide in coffee.”

Should the decision go into effect, businesses that fail to provide the warning notice will be subject to a fine of up to $2,500 a day for each violation.

This news has California’s coffee drinkers, sellers and roasters boiling. After all, people have been imbibing the dark nectar of the gods for hundreds of years and very few, if any, causal connections have been made between it and cancer.

On March 29, the National Coffee Association (NCA) released a statement in response to the ruling and dispelled the notion that coffee can be cancerous:

The industry is currently considering all of its options, including potential appeals and further legal actions. Cancer warning labels on coffee would be misleading. The U.S. government’s own Dietary Guidelines state that coffee can be part of a healthy lifestyle. The World Health Organization (WHO) has said that coffee does not cause cancer. Study after study has provided evidence of the health benefits of drinking coffee, including longevity—coffee drinkers live longer.

Retailers have some options in reaction to the developments. Last year, Bloomberg reported that the “few coffee sellers that have settled rather than keep fighting,” were hopeful that “people in California are so accustomed to seeing the signage that they will tune it out.” In October 2017, Starbucks and some other retailers preemptively placed warnings signs in stores—which may serve as a hedge against fines for millions of cups of coffee sold over several years.

Sellers could create cups specially marked for California sales, which may disrupt its supply chain and increase costs. They could also opt not to sell in California at all, which is unlikely, since the state’s economy is booming with coffee suppliers. With nearly 75% of California’s population being older than age 18, millions of dollars in per-cup sales may hang in the balance.

The decision is not final, however. In the NCA’s statement, president and CEO William “Bill” Murray said: “Coffee has been shown, over and over again, to be a healthy beverage. This lawsuit has made a mockery of Prop 65, has confused consumers, and does nothing to improve public health.”

For further insight into the unintended consequences of Proposition 65 and other well-intentioned regulations visit here.