This is related to the recent entry in the web comic xkcd: http://xkcd.com/945/
I never say, "I'm sorry," because people interpret that as if I feel at fault, when I don't.
I've been simply saying, "that sucks," or, "that is very unfortunate".
If someone dies you can say, "my condolences," and it's perfect; however, that obviously can't be used in a situation not involving death, like in the comic.
Preferably I'd like something like, "I'm [x]," or, "I give you my [x]."
I suppose sympathetic/sympathies would work, but is there any other word or phrase, perhaps something less aggressive so as to be unlikely to be considered sarcastic?
I personally find myself feeling awkward every time this comes up.
EDIT: Keep in mind, I very much dislike adding unnecessary bias to my reply. So saying things like, "that's terrible," is not something I'm a fan of doing. What if it was an icy day and the bus came 20 minutes late? I wouldn't say that's terrible, because I'm implying the bus did a terrible job, when it probably did a great job keeping it's passengers safe.