What happens if fracking-caused earthquakes do major damage?

Bob Hartwig says fracking companies need liability insurance and clear processes for filing property damage claims

Insurance News

By

Roughly 20,000 earthquakes strike the US every year. That’s more than two earthquakes every hour of every day. Granted, most are small and cause little economic damage. Still, the fact that only 7% of homeowners opt for earthquake insurance is cause for concern.
 
More troubling is the fact that most policies do not cover human-caused earthquakes, which are on the rise, especially in states where hydraulic fracturing—or fracking—is common and becoming more common. As human activity is responsible for more and more earthquakes, experts wonder how to insure against this new risk.
 
Bob Hartwig, president of the Insurance Information Institute, says first and foremost that as the science around fracking and earthquakes gets better, companies doing fracking should learn how to do it without causing earthquakes, or at least without causing major quakes.
 
Still, a report on III’s website, Earthquakes: Risk and Insurance Issues, published in September, quotes a 2015 report from the US Geological Survey showing that fracking in Oklahoma is reactivating long dormant fault lines.
 
“The new research concludes that the faults could produce quakes with far higher magnitudes than the more than 3,600 small tremors that were recorded in central Oklahoma from 2009 through 2014,” the Institute’s paper says.
 
In other words, the science of fracking may need to get better quickly. Until then, with most property owners not covered for earthquakes and almost no property owners covered for human-caused earthquakes, Hartwig said the only immediate remedy is litigation. Still, he notes it can be very hard to prove that damage to property was caused by a small earthquake, and even more difficult to prove that damage was caused by an earthquake that was caused by a specific act of fracking.
 
One insurance remedy he suggests is liability coverage for fracking companies that outlines a process by which a property owner can submit a claim for damages, which can be reviewed based on objective criteria.
 
“Fracking is here to stay. It is an activity that numerous states promote as an important part of their economic development,” he said.  Among those states, he said, are Oklahoma, Texas, Colorado and North and South Dakota.
 
“Until the issue can be resolved technically (by eliminating or limiting fracking’s role in earthquakes), it needs to be resolved by insurance, probably as liability coverage on the (fracking) companies,” he said.
 
“Energy concerns will have ‘manuscript’ policies that are determined by what that company wants and is required to purchase. Whether or not the liability insurance in place covers fracking-induced earth movement could vary. Irrespective of that fact, were it proven that the fracking concern were liable, that liability is not impacted by the existence or nonexistence of coverage,” Hartwig said.

Keep up with the latest news and events

Join our mailing list, it’s free!