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Monday, July 16, 2012

Insurance memo on fracking rankles drilling industry

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Posted on July 13, 2012 at 7:30 PM

FORT WORTH - Nationwide might be on your side, but it might not pay off if you think you've been harmed by gas well fracking.

That's not new. It never has.

What is new, is that someone posted an internal Nationwide Insurance underwriting document on Facebook.

It said, "After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore."

That hit a nerve in the pro-drilling camp.

"The first people who pick up on it are anti-drilling activists," said Steve Everley with Energy In Depth, a drilling industry education association. "It's not the public. Not the press releases. Not anything like that. It's anti-drilling activists that come up with it. So did they send that to them? We don't really know."

Nationwide responded that it's not changing coverage or canceling policies.

Bob Hartwig with the Insurance Information Institute told us via Skype that few homeowner insurance policies cover damages from drilling.

"Call your insurer and ask them what the policy is for that circumstance," he said.

But he said drillers themselves will have no trouble getting insurance.

"There are plenty of insurers willing to offer that coverage," Hartwig said.

So what's the big deal?

Well, fracking supports hundreds of thousands of jobs and pumps billions into the economy. An estimated 110,000 jobs in North Texas alone.

Some in the drilling industry say Nationwide just made it harder to convince people it's safe.

Friday afternoon, the Ohio-based company issued a statement (shown below) saying it will investigate fracking damage claims, but that it doesn't have a comfort level with the risks involved.


The entire Nationwide statement:

"Gas and oil drilling has been going on in this country for many years in the west and southwest. Fracking is another variation of the gas and oil business. In recent years, oil and gas exploration has come to New York, Pennsylvania and Ohio.

Nationwide has not changed our policies or guidelines, nor are we cancelling policies. Fracking-related losses have never been a covered loss under personal or commercial lines policies.

Nationwide's personal and commercial lines insurance policies were not designed to provide coverage for any fracking-related risks.

Insurance works when a carrier can accurately price the coverage to match the risks. When information and claims experience are not available to fully understand the scope of a given risk, carriers aren’t able to price protection that would be fair to both the customer and the company.

However, Nationwide will investigate all claims submitted by our customers that they believe are the result of damage from fracking. Every Nationwide claim is reviewed on a case-by-case basis.

From an underwriting standpoint, we do not have a comfort level with the unique risks associated with the fracking process to provide coverage at a reasonable price.

Insurance is a contract and it is designed to cover certain risks. Risks like natural gas and oil drilling are not part of our contracts, and this is common across the industry.

Our longstanding underwriting guideline is that we do not insure the oil and gas business.

We encourage consumers to be knowledgeable about any risks to their property and assets. For advice, seek the help of financial and legal specialists who can discuss the unique nature of the risks associated with oil and gas exploration. We also advise consumers to talk to their insurance agent to understand what coverage is provided in their personal or commercial lines policies."

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