In 2014, Oklahoma experienced 567 earthquakes measuring a magnitude of 3.0 or greater and 209 in 2013. This is a rapid increase in quakes for Oklahoma and while some homeowners have responded by making sure they had coverage in their home and business policies, more building owners need to make sure this coverage is purchased since the claims for earthquake damages are now more prevalent in the Sooner state. A typical Oklahoma homeowner will likely pay $100 to $150 per year for earthquake coverage. Earthquake policies usually cover structure repairs, damage to personal property, and debris removal.1

Why so many earthquakes?

Insurance Journal reported,

Some studies have connected earthquake activity in Oklahoma and other parts of the country to water injection wells used to dispose of water produced along with oil and natural gas. The average oil well in Oklahoma produces about 10 barrels of saltwater for every barrel of oil. For at least 70 years, the oil and natural gas industry has pumped the produced water deep below ground through water disposal wells.

This week, it was reported that Oklahoma Insurance Commissioner John D. Doak wants insurance companies to make sure they are not abusing the “man-made” earthquake and preexisting damage exclusions in earthquake policies to deny claims. Doak really calls out carriers and tells them directly that he knows claims are being improperly denied. It is refreshing that the commissioner is not blind to the bad acts. Doak doesn’t want the carriers to take advantage and improperly evaluate these claims and by putting the companies on written notice he knows specifically what is going on with policy exclusions, it should be a little easier for homeowners and business owners to have a claim handled fairly in Oklahoma.

Commissioner Doak sent Earthquake Insurance Bulletin No. PC 2015-02 to all insurance companies to address the important issues and call them out about denying claims. The Bulletin addressed three important issues.

1. "Man-Made" Earthquake Exclusion
2. Preexisting Damage exclusion, and
3. Specialized Training of Earthquake Adjusters.

When it comes to the “man made damage” exclusion, Doak’s bulletin explained that one carrier only paid 8 claims out 100 for earthquake damage. This is ridiculous and it appears Doak agrees:

I am concerned that insurers could be denying claims based on the unsupported belief that these earthquakes were the result of fracking or injection well activity. If that were the case, companies could expect the Department to take appropriate action to enforce the law. I am considering market conduct examinations to ascertain the facts surrounding the extraordinary denial rate of earthquake claims that the preliminary data seems to indicate.

Doak also called out claims adjusters for not having enough training. Policyholders are much better served when the adjusters have detailed and comprehensive training. Doak thinks specific earthquake training is needed and warns companies from just denying claims and taking the position that the damages were pre-existing:

If an insurer intends to deny a claim, asserting ‘pre-existing’ damage, I expect that the insurer has inspected the property prior to inception of the coverage and maintained reasonably current information as to the condition of the insured property, prior to loss.

Seems to me that Doak has caught on that carries often raise the pre-existing damage exclusion when they want to avoid a valid claim.

Doak not only wants the adjusters, but also the agents, to be better trained on earthquake coverage, and this year agents will be required to have additional continuing education specifically on earthquake coverage.

Since Oklahoma’s own commissioner recognizes the improper evaluations, policyholders who have been denied or improperly paid claims should promptly consult a policyholder advocate to protect their legal rights.

1 Policies vary but the costs were provided by Insurance Commissioner Doak who reported to StateImpact Oklahoma—a partnership among Oklahoma’s public radio stations relying on contributions from readers and listeners to fulfill its mission of public service to Oklahoma and beyond.