Fracking is the process of forcing water, chemicals and sand deep into underground shale formations to release natural gas. Fracking has recently become controversial because some allege it causes earthquakes sinkholes, or seepage, and water contamination.
Most articles on fracking discuss insurance coverage issues from the standpoint of liability insurance, i.e., potential liability coverage for the gas company performing fracking. Rather than discuss liability insurance, this post examines potential property insurance coverage for homeowners affected by fracking activities and the possibility that homeowners may be denied insurance coverage for property losses caused by fracking.
Common homeowners insurance policies cover the home and other structures against direct physical loss or damage to property covered during the policy period, except as excluded or limited. Examples of “Losses Not Covered” or excluded under common homeowners policies include numerous events which have been alleged or, in some cases, linked to fracking, such as:
contamination of land or water serving the residence premises; settling, cracking, shrinking, bulging or expansion of pavements, patios, foundation, walls, floors, roofs or ceilings . . .
This common policy exclusion raises serious problems for most homeowners near fracking sites, given the EPA’s link between fracking and groundwater contamination.
Likewise, given the allegations of a connection between fracking and earthquakes, homeowners may experience serious exposure since most policies exclude,
. . . Losses resulting from water or any other substance on or below the surface of the ground, regardless of the source. This includes water or any other substance which exerts pressure on, or flows, seeps or leaks through any party of the residence premises.
. . . Water under the ground surface pressing on, or flowing or seeping through:
Foundations, walls, floors or paved surfaces
. . .
Losses resulting from earth movement of any type, including earthquake, landslide, subsidence, pressure, sinkhole, expanding bulging cracking or settling of the earth, whether or not the earth movement is combined with water.
Most common homeowners policies also exclude losses or damage caused by “any collapse,” except for collapse caused by or resulting from certain perils not relevant to this post.
These earth movement policy exclusions are extremely concerning for residents of Youngstown, Ohio, where homeowners have experience eleven earthquakes in 2011, one of which emanated from within half mile of a 9,000-foot-deep fracking well. According to The Daily Beast, “all of the earthquakes emanated from within five miles of local drilling sites.”
Given the common policy exclusions above, homeowners who experience property losses related to or resulting from fracking may be denied coverage under their policies. Losses resulting from water under the ground surface pressing on, or flowing or seeping through foundations or walls are excluded from coverage. Earth movement and collapse are often excluded perils, and where the loss resulted from perils that are excluded from coverage, coverage is often denied.
Homeowners near current or potential fracking sites should consider their own exposure, and raise insurance coverage concerns with local, state and county officials making decisions on fracking locations and permits.