Insurance companies raise questions about fracking | NCPR News

Nov 06, 2012 ? Nationwide Insurance announced earlier this year that damage from hydraulic fracturing won't be covered under its homeowner policies.

That announcement has brought to light some new questions about how fracking will be regulated in New York.

To people in the insurance business, Nationwide?s announcement wasn?t a big surprise. Homeowner policies have never covered damage from a business people run on their property.

Robert Hartwig of the Insurance Information Institute says a homeowner with a gas lease should make sure they are covered by the driller?s insurance. And if a neighbor?s property without a gas lease is polluted by fracking, then they can sue the driller for damages. That, says Hartwig, is how it works everywhere.

?So there are no new legal issues that are likely to arise here. I mean, again, New York is the last one to the fracking party.?

Hartwig says landowners will be open to lawsuits if drilling on their land results in pollution. Even though they weren?t directly responsible.

?Yes, it?s possible, in America, people will sue everybody and will stop at nothing in a lawsuit.?

That potential gap in insurance is one of the many open questions as New York considers whether to allow high-volume hydraulic fracturing.

This kind of drilling is something different than what?s been in New York for 100 years. The newer mineral leases include a clause that covers the landowner. The older ones, the kind that landmen have brought to people?s doors for years, do not include that clause, known as the 'hold harmless.'

So how will that second group of landowners be covered? That?s the question some New Yorkers are looking into now. Tim Dodge is from the Independent Insurance Agents and Brokers of New York. He says his agency has formed a task force to explore the gaps in coverage.

?So the task force may say we need to, the industry needs to create a product to fill that hole and this is what the product should include.?

Dodge says it could take until May to produce a recommendation. Meanwhile, the state assembly is also planning to explore the insurance issue. Joe Morrelle is the chairman of the assembly?s insurance committee.

He says there is a long list of unanswered questions. Do landowners have to notify their insurance company if they sign a lease? Would an accident caused by drilling nullify their insurance? What happens when they try to sell their property? ?

?There are a number of issues here that I?m not sure have been fully vetted.?

Morrelle says New York will consider what other states with hydrofracking have done. But those examples might not apply to New York.

?Insurance is the largest industry in the country, still regulated by the various states so we have different statutes, we have a different body of law, we approach things differently perhaps than other states.?

He says if they decide that offering a new kind of coverage for fracking is the best option, approving that product would take time.

Environmental Advocates of New York has called on the Department of Financial Services to start its own investigation.

Katherine Nadeau is the group?s water and natural resources program director.

?I think this is the type of question that an investigation by the Department of Financial Services could definitely get into because there are possibilities for different types of insurance coverage, there?s possibilities to change our state regulations and state laws to clearly spell out who is liable for damages if something goes wrong.?

Nadeau, whose group is one of New York?s most visible fracking opponents, says the state should delay hydrofracking at least until all these questions are answered.

Source: http://www.northcountrypublicradio.org/news/story/20814/20121106/insurance-companies-raise-questions-about-fracking

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