Memo to Gas Guys: Nationwide's Not On Your Side
This is big. When Nationwide Casualty Insurance Company, a large US commercial and personal insurer said the risk involved in underwriting fracking operations is “too great to ignore,” the gas industry’s fangs came out.
Industry lobby firm, Energy-In-Depth's spokesperson, Simon Lomax, emailed Associated Press reporter Rik Stevens, snarking, “Practical implications aside, the fact that the company would send out a statement this reckless, and this uninformed, should tell us a lot. For starters, it tells me that I won’t be buying home and car insurance from this company.”
Nationwide‘s “recklessness” does say a lot, but not what Lomax would have us believe. The insurer simply can't afford to clean up the gas industry’s toxic messes. And no doubt they get spooked by headlines like this: Chesapeake to Pay $1.6 Million for Contaminating Water Wells in Bradford County, which appeared in StateImpact.npr.org in June.
When The River Reporter article Nationwide Insurance: No Fracking Way first appeared, I forwarded it to my husband David, an attorney who practices Personal Injury Law in Philadelphia. The next day, I sent him the Washington Post/AP piece, US Insurance Company Nixes Coverage For Damage Related to Hydraulic Fracturing For Oil And Gas and The HuffPo Green post Nationwide Insurance: Fracking Damage Won’t Be Covered by Mary Esch. I asked him what he thought of this latest, wild turn in the shale gas saga.
“It’s good news,” he points out. “They’re shifting the risk back to the gas companies. The insurance company is most likely saying that not only is it a big risk, but an unknown risk they are unable to quantify and therefore provide coverage.” I ask what it means to the average Pennsylvanian, he says, “It means if a gas company is sued and loses, they will have to pay damages out-of-pocket.”
Maybe if gas producers are forced to self-insure, in the same way they are encouraged to self-regulate, they’ll be more careful.
I understand that US shale gas production is already the most regulated in the world, but when our air, land, water and health are routinely damaged by a single industry, and DEP enforcement is feeble at best, you certainly can’t blame Nationwide for doubting that gas industry assurances will cover it. Insuring fracking operations is too great an unknown.
Leaky Valves and Memos
The official statement from Nationwide, which is published on River Reporter says: “The exposures presented by hydraulic fracturing are too great to ignore. Risks involved with hydraulic fracturing are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto (insurance) coverage.”
The Associated Press, however, reports how the new policy “first came to light when an internal memo detailing underwriting guidelines was posted on websites of upstate New York anti-fracking groups and landowner coalitions seeking gas leases.”
I Google the topic once more before posting. The story of Nationwide’s damaging demur has been picked up by everyone from ABC News to The Youngstown Vindicator. Fellow fractivista and inspiration to all, Judy Morrash Muskauski, shared this interesting page, Fracking in the Marcellus Shale: Contractual Risk Transfer and Insurance Issues for Property Owners and Municipalities from Offit/Kurman.com. Nationwide has also reponded to the furor.
Statement from Nationwide
via The River Reporter, Submitted by Joe Case on July 12, 2012
Here’s is Nationwide’s official response to this issue:
Nationwide has not changed our policies or guidelines. Fracking related losses have never been a covered loss under a personal or commercial lines policy.
Nationwide’s personal and commercial lines insurance policies were not designed to provide coverage for any fracking-related risks. However, Nationwide will investigate all claims submitted by our customers that they believe are the result of damage from fracking. Every Nationwide claim is reviewed on a case-by-case basis.
Insurance works when a carrier can accurately price the coverage to match the risks. When information and claims experience are not available to fully understand the scope of a given risk, carriers aren’t able to price protection that would be fair to both the customer and the company. From an underwriting standpoint, we do not have a comfort level with the unique risks associated with the fracking process to provide coverage at a reasonable price.
Insurance is a contract and it is designed to cover certain risks. Risks like flooding and mining or drilling are not part of our contracts, and the customer should seek out an insurer that handles these customized types of insurance.
-Joe Case, Nationwide Mutual Insurance Company
Gas Guys Deny, Deny
Shale gas extraction isn’t merely dangerous, it’s toxic. Uninsurable. And it’s not just Nationwide who denies rig operators commercial coverage. Fraccidents and industrial workplace accidents related to fracking have spiked.
There’s been plenty of editorial coverage in Pennsylvania on the variety of legal issues in recent months, from truck accidents and property damage to real estate values and contracts. Shale gas extraction is a method of “extreme fossil fuel extraction.” We’ve used up all the mineral deposits that are easy to get, now we’re tapping the arth in ways are more technologically advanced, like mountaintop removal, splitting atoms, and fracking. Big Philly firms like Duane Morris and Pepper Hamilton are humming with the legal business of gas, while many more attorneys are working across seven counties of the state to mount to a legal challange to The Marcellus Shale Act.
This brief bibliography details the story of tragic losses, personal, financial, and rapidly multiplying. Is there any legal recourse for Pennsylvanians? As fraccidents keep happening, and these sorts of cases seep though our courts like so much acid mine drainage, we can only wait and see if Lady Justice is truly blind.
The Capitol Pressroom for July 13, 2012 Attorney Elisabeth Radow is interviewed.
Marcellus Shale Gas Leads To Widespread Litigation, Insurance Claims by Jaime L. Brockway in Insurance and Financial Adviser on November 10, 2011.
Deadliest Danger Isn’t At The Rig But On The Road by Ian Urbina, The New York Times, May 14, 2012
For Oil Workers, The Deadliest Danger Is Driving by Susan Phillips, StateImpact.npr.org, May 15, 2012
Fracking Fatalities: Organized Labor Implores Federal Agencies to Stop the Killings by Mike Elk on InTheseTimes.com on May 31, 2012
Lawsuit Filed Over Water Exports to Gas Industry by Stacey Minchin on WETM, Elmira-Corning, NY on July 5, 2012
Fracking Concerns Turn To Worker Health Hazards And Potential Silica Exposure by Claire Wilkinson in Forbes.com on June 22, 2012