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J. Kent Holland Jr., J.D.

A Wall Street Journal article (Associated Press) states that Nationwide Mutual Insurance Co. has become the first major insurance company to announce that it will not issue policies to cover damage related to hydraulic fracturing.  According to the Wall Street Journal article, the Nationwide policy came to light when an internal memo detailing underwriting guidelines was posted on websites of anti-fracking groups in up-state New York, and the memo reads:

“After months of research and discussion, we have determined that 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.”

It said “prohibited risks” apply to landowners who lease land for shale gas drilling and contractors involved in fracking operations, including those who haul water to and from drill sites; pipe and lumber haulers; and operators of bulldozers, dump trucks and other vehicles used in drill site preparation.

It appears that the insurance carrier is going beyond inserting a pollution exclusion in their policies and is instead deciding not to write policies of any nature for any of the ancillary service providers involved with fracking.

In view of the significant negative press about fracking and the threats by environmental groups to do what they can to stop, or at least slow down, fracking, it seems likely that there could be a litigation explosion against all firms involved, even in an ancillary manner, with fracking.   Since a recurring theme in such claims will likely be property damage and personal injury caused by air and ground water pollution, it is not difficult to see what insurance carriers would exclude environmental or pollution damages asserted against their insureds arising out of hydraulic fracturing.   The solution for those in need to this coverage may well be to purchase a stand-alone environmental policy to specifically provide coverage for such damages or alleged damages.

 

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 14, No. 7 (July 2012).

Copyright 2012, ConstructionRisk.com, LLC