Oklahoma Insurance Commissioner John Doak is concerned that the number of earthquakes in Oklahoma has been increasing steadily over the past few years. He is concerned that in 2014, out of about 100 claims filed for earthquake damage, only 8 were paid.
He can’t and won’t tell insurers that they need to provide coverage for human-caused earthquakes. What he can do, and has done, is instruct insurers to clarify for their insureds exactly what is and isn’t covered.
In Bulletin No. PC 2015-04, issued Oct. 9, he writes: “The Department has no authority to direct companies to provide earthquake insurance or to cover certain types of quakes. We are simply requiring companies to clarify the issue of coverage by furnishing written notice to insureds and producers.”
The bulletin continues: “It has become obvious to our Department that earthquake policy language, in certain cases, may be ambiguous as to the coverage afforded.”
The question of whether certain mining practices—especially hydraulic fracturing (or fracking)—cause earthquakes isn’t completely settled, but the Oklahoma Geological Survey has stated fracking “more than likely” has been the cause of many Oklahoma quakes.
In a bulletin issued in March, Doak addresses the fact that the science is unsettled, but said, “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.”
According to Doak, “Companies writing earthquake insurance in Oklahoma have reacted in various ways. Some have amended their policy forms to cover damage resulting from fracking. Others have simply been waiving the man-made exclusion, while a third group, still excludes fracking induced earthquakes.”
Asked outright whether insurance companies have denied claims based on an assertion that the quakes were caused by human activity, Julie Meaders, deputy general counsel with the Department said the Department said the Department has found no evidence that claims have been denied based on the assertion that a quake was caused by human activity.
“The Department reviewed 50% of denied earthquake claims for 2014 and have found none that were denied based on man-made (oil & gas) causation. What causes an earthquake is a question of fact for each earthquake. Determining the cause of an earthquake will be made on a quake by quake basis by insurance companies after consideration of government findings, the scientific evidence and expert opinion. Insurance companies must substantiate claim denials based on acceptable proof,” she said.
What is certain is that the frequency of earthquakes is going up in Oklahoma and other states with high fracking activity, and that insurance companies are still in the process of determining how and whether to cover human-caused quakes, not to mention how to determine whether an earthquake is caused by mining activity or not.
