Natural Gas Driller and Insurer Dispute Coverage for Fracking Claim


September 5, 2012:  The most recent article for “Burke’s Law” looks at one of the first lawsuits to implicate insurance coverage for a fracking-related claim.  The controversial drilling technique of hydraulic fracturing (or “fracking”) has headlined the rush to the Appalachian Basin for the region’s vast natural gas reserves.  But while fracking has been vital to upstream gas producers in the Marcellus and Utica Shale Plays, the groundwater pollution risks have put insurers on guard.  The case of Warren Drilling Co., Inc. v. ACE American Ins. Co., No. 2:12-cv-425 (S.D. Ohio 2012), which is currently pending, will set the stage for how courts are going to approach insurance coverage for fracking-related liability.

The case arises from an insurer’s refusal to defend or indemnify its insured, a natural gas drilling company, after drilling activities contaminated a nearby homeowner’s water well.  The court’s treatment of two coverage endorsements, an Energy Pollution Liability Extension and an Underground Resources and Equipment Coverage endorsement, will determine the insurer’s liability.  The driller argues that both endorsements provide coverage for the claim but the insurer contends that the driller failed to satisfy the conditions precedent for the EPLE endorsement and that the UREC endorsement does not apply.  The case is important for insurers, natural gas producers, and drillers as it will shed light on how courts are going to approach insurance coverage issues for fracking-related claims.  The entire article can be read here:    Natural Gas Driller and Insurer Dispute Coverage for Fracking Claim.

“Burke’s Law” is a monthly column featured at www.claimsjournal.com and is authored by Demotech’s Legal Counsel and Compliance Manager, Burke Coleman.  The column provides timely legal analysis on some of the most important state and federal cases impacting the insurance industry.