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Legal Proceedings and Other Contingencies
9 Months Ended
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Legal Proceedings and Other Contingencies
Legal Proceedings and Other Contingencies
Various legal actions, claims, assessments, and other contingencies arise in the ordinary course of our business and are pending against us. Legal matters are subject to numerous uncertainties and they may be resolved adversely. For a full discussion of our material pending legal matters, please refer to "Note 22. Legal Proceedings and Other Contingencies" of our consolidated financial statements in our Annual Report on Form 10-K/A for the year ended December 31, 2012. Except as noted below, there have been no material changes in our legal matters.
Viareggio Derailment
In June 2009, a train consisting of fourteen liquefied petroleum gas (“LPG”) tank cars owned by GATX Rail Austria GmbH (an indirect subsidiary of the Company, "GATX Rail Austria") and its subsidiaries derailed while passing through Viareggio, Italy. Five tank cars overturned and one of the overturned cars was punctured by a peg or obstacle along the side of the track, resulting in a release of LPG, which subsequently ignited. Thirty-two people died and others were injured in the fire, which also resulted in property damage. The LPG tank cars were leased to FS Logistica S.p.A., a subsidiary of the Italian state-owned railway, Ferrovie dello Stato S.p.A (the “Italian Railway”).
On December 14, 2012, the Public Prosecutors of Lucca ("Public Prosecutors") formally charged GATX Rail Austria and two of its subsidiaries (collectively, "GRA"), as well as several maintenance and supervisory employees (the "Employees"), with various negligence-based crimes related to the accident, all of which are punishable under Italian law by incarceration, damages and fines. Similar charges were brought against four Italian Railway companies and eighteen of their employees, among others. During a preliminary hearing before the Court of Lucca, the Public Prosecutors argued that one of the tank car’s axles broke causing the derailment and resulted in a tank car rupture and release of LPG, after the car hit an obstacle placed on the side of the track by the Italian Railway. The Public Prosecutors further alleged that a crack in the axle was detectable at the time of final inspection but was overlooked by the Employees at the Jungenthal Waggon GmbH workshop (a subsidiary of GATX Rail Austria). On July 17, 2013, the Court of Lucca committed all defendants to trial, (the “Lucca Trial”), which will begin on November 13, 2013. With respect to civil claimants, GRA’s insurers continue to work cooperatively with the insurer for the Italian Railway to adjust and settle personal injury and property damage claims. These joint settlement efforts have so far settled the majority of asserted civil damage claims related to the accident, but approximately 110 civil claimants, who have not settled their claims, have joined as parties to the Lucca Trial, and the court will determine both the civil and criminal liability of the defendants in the one proceeding.
The Company believes that GRA and its Employees acted diligently and properly with respect to applicable legal and industry standards and will present numerous scientific and technical defenses to the Public Prosecutors' charges and civil claimants’ claims at the Lucca Trial. Since May 2012, the excess insurer providing coverage at the current layer, Liberty Mutual Insurance Europe Limited (“Liberty”), while settling civil claims, has refused to reimburse GRA for its ongoing legal defense fees and costs, taking a position contrary to insurers in the prior underlying layers who had provided coverage for such expenses. To date, GRA has incurred approximately $4.0 million of unreimbursed defense fees and costs in the current coverage layer and continues to incur costs in connection with the Lucca Trial. Consequently, GRA recently filed an arbitration proceeding against Liberty seeking to recoup its defense fees and costs. The Company currently is not in a position to predict the outcome of this arbitration, the amount of defense fees and costs that ultimately may not be reimbursed by Liberty, when Liberty’s layer will fully exhaust, and the position other excess insurers may take in the future regarding reimbursement of legal defense fees and costs. Notwithstanding Liberty’s refusal to reimburse GRA for defense fees and costs, GRA’s insurance carriers, including Liberty, have continued to cover civil claims arising from the accident, and the Company expects that they will continue to do so, including any civil damage awards.
The Company cannot predict the outcome of the Lucca Trial or what other legal proceedings, if any, may be initiated against GRA or its personnel, and, therefore, cannot reasonably estimate the amount or range of loss that may ultimately be incurred in connection with this accident. Accordingly, the Company has not established any accruals with respect to this matter.