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The Philly crash: Why Amtrak faces limited liability

Amtrak's liability for the accident in Philadelphia that has so far left seven dead and injured dozens would seem to be a monumental sum. But it's capped at $200 million, which one of the attorneys representing railroad accident victims says is inadequate to compensate all the injured parties.

The cap applies to all passenger railroads, and it includes punitive damages, which may come into play if the train was indeed traveling at excessive speed before Tuesday night's derailment. Congress instituted the caps in 1997 to protect the financial interests of Amtrak and the nation's public transportation systems, and efforts to get them lifted have failed to get any traction.

"It's something that should not have been done," said George Cahill, a New Haven, Connecticut-based attorney representing a victim of the Philadelphia accident. "The damages will exceed $200 million, especially with seven fatalities."

Explaining the Amtrak train's speed and preliminary wreck data

Though $200 million seems like a lot of money, that amount can be exhausted pretty quickly. Actuarial tables developed by the U.S. Department of Transportation have pegged the value of a life ended in an accident at about $7 million, according to Larry Mann, an attorney in Bethesda, Maryland, who specializes in railroad safety.

However, "serious injuries can, depending on the facts of the case, exceed the wrongful death damages," he said in an interview with CBS MoneyWatch. Mann didn't think the damages in the Philadelphia accident would hit the threshold. "It could easily hit $100 million. ... Two hundred million sounds like a lot, but when you get a major disaster, it's not that much."

The cap became an issue in a 2008 crash in Southern California killing 25 and injuring more than 100 that was blamed on an engineer who was distracted because he was texting while operating the train. He ran a red light and collided with a freight train. The amount of damages was estimated at $600 million.

Any payments to victims of the Philadelphia derailment likely will take years to get through the courts.

Philadelphia Amtrak crash survivors describe chaos

Mark Hiepler, who represented victims of the California accident, lobbied lawmakers to raise the liability limits but was thwarted by what he considers to be anti-trial-lawyer sentiment among some members of Congress.

"They failed to see that it's a train company that's underinsuring and hiding its true liability," he said in an interview. "Could the Philadelphia accident exceed $200 million? Absolutely."

According to the National Transportation Safety Board, the engineer on the Amtrak train was traveling 106 miles per hour, twice the speed limit, before it jumped the tracks at about 9:30 p.m., hurling the New York-bound train's 238 passengers in all directions before most of the cars landed on their sides.

Amtrak's Northeast Corridor, which runs between Boston and New York, is the service's busiest and most profitable line, but Amtrak officials have long argued for increased funding to upgrade the railroad's aging infrastructure and rolling stock.

Ironically, the House Appropriations Committee instead voted along party lines on Wednesday to slash Amtrak's budget by about 20 percent. Democratic amendments to restore funding failed to get enough votes. The Republicans countered that the cuts were needed because of the automatic spending cuts that the Obama administration agreed to with Congress several years ago. Officials from Amtrak couldn't immediately be reached for comment.

The service's finances have been a sore point for some members of Congress because it has lost money for decades in spite of receiving federal subsidies. Lately, though, things have been getting better for Amtrak. In fiscal 2014, it lost $227 million, the least red ink in more than four decades, thanks to increased ridership in the Northeast corridor among other areas.

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