Warren Drilling Co., Inc. v. ACE American Ins. Co., No. 2:12-cv-425 (S.D. Ohio 2012) is one of the first "fracking" cases to be heard in our nation's courts and the first to determine how insurance coverage applies to claims made against companies who engage in this practice. Fracking is a process used by natural gas drillers to break up rock and release surrounding natural gas deposits. It is very cost-effective but can lead to environmental issues if the fluids used in the process leach into the surrounding earth.
What Happened To Lead To This Lawsuit?
The case began in 2006 when Warren Drilling began operations in West Virginia. The company purchased a general liability police from ACE American Insurance. This police included specific riders for energy pollution liability and underground resources and equipment coverage.
The company discovered in 2010 that a local homeowner's well had been contaminated by fracking fluids, although the insurance company had been notified of the problem in 2008. Ultimately Warren Drilling spend $100,000 defending the claim and settled privately with the homeowner. The company is now suing the insurers for failure to cover this claim under its policy.
Why Is The Insurance Company Refusing To Pay?
The insurers claim that the policy does not cover this incident because the EPLE riders were only meant to cover incidents in which pollutants were released unintentionally into the surrounding environment. The insurers also state that the discharge of pollutants must have been abrupt and instantaneous--in other words, a one-time accident, and not part of a pattern of operation. Warren Drilling argues that the problem of the fracking fluids leading into ground water meets both of these conditions.
Warren Drilling also refutes the company's refusal to pay under the UREC rider, stating that the contamination of groundwater meets the test of the insurance policy's specific language, which states that the policy covers, "property damage to... oil, gas, water and other mineral substances which have not been reduced to physical possession above the surface of the earth."
How Will This Case Affect Consumers?
If the company wins its argument against the insurer, consumers and homeowners affected by fracking pollution will be able to file claims against the drilling companies with the expectation that they will be paid by the company's insurers. If the company loses, consumers' ability to collect damages from drilling companies will hinge on the companies' financial solvency.
If you are experiencing pollution problems with any company, contact a personal injury attorney today to discuss your rights and options to collect damages.
Source: Insurance News, "Natural Gas Driller and Insurer Dispute Coverage for Fracking Claim," Burke Coleman, September 5, 2012.
Chris Heavens is a West Virginia and Pennsylvania personal injury lawyer who has many years of experience in industrial accident law and has written blog posts about several mining accident cases. Talk to Chris about your industrial or mining accident to get sound legal advice about how you can recover compensation for your injuries.