Memo To Gas Guys: Nationwide’s Not On Your Side

This is big. When Nationwide Casualty Insurance Company, a large US commercial and personal insurer said the risk involved in underwriting fracking operations is “too great to ignore,” the gas industry’s fangs came out.

Energy-In-Depth spokesperson, Simon Lomax, emailed Associated Press reporter Rik Stevens, snarking, “Practical implications aside, the fact that the company would send out a statement this reckless, and this uninformed, should tell us a lot. For starters, it tells me that I won’t be buying home and car insurance from this company.

Nationwide‘s “recklessness” does say a lot, but not what Willy Loman, er… Simon Lomax would have us believe. The insurer simply cannot afford to clean up the gas industry’s toxic messes. Maybe if producers are forced to self-insure, in the same way they are encouraged to self-regulate, they’ll be more careful. I understand that US shale gas production is already the most regulated in the world, better than OPEC nations, but when our air, land, water and health are routinely damaged by a single industry, and DEP enforcement is feeble at best, you certainly can’t blame Nationwide for doubting that gas industry assurances will cover it. Insuring fracking operations is too much of an unknown. 

Yesterday, I forwarded The River Reporter article Nationwide Insurance: No Fracking Way to my husband David, an attorney who practices Personal Injury law in Philadelphia. Today, I sent him the Washington Post/AP piece, US Insurance Company Nixes Coverage For Damage Related to Hydraulic Fracturing For Oil And Gas and The HuffPo Green post Nationwide Insurance: Fracking Damage Won’t Be Covered by Mary Esch. I asked him what he thought of this latest, wild turn in the shale gas saga.

It’s good news,” he points out. “They’re shifting the risk back to the gas companies. The insurance company is most likely saying that not only is it a big risk, but an unknown risk they are unable to quantify and therefore provide coverage.” I ask what it means to the average Pennsylvanian, he says, “It means if a gas company is sued and loses, they will have to pay damages out of pocket.

Leaky Valves, and Memos

The official statement from Nationwide, which is published on River Reporter says: “The exposures presented by hydraulic fracturing are too great to ignore. Risks involved with hydraulic fracturing are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto (insurance) coverage.

The Associated Press, however, reports how the new policy “first came to light when an internal memo detailing underwriting guidelines was posted on websites of upstate New York anti-fracking groups and landowner coalitions seeking gas leases.

I Google the topic once more before posting. As of noon today, the story of Nationwide’s damaging demur has been picked up by everyone from ABC News to The Youngstown Vindicator. Fellow fractivista and inspiration to all, Judy Morrash Muskauski, shared this interesting page, Fracking in the Marcellus Shale: Contractual Risk Transfer and Insurance Issues for Property Owners and Municipalities from Offit/Kurman.com, and my husband asked to be kept in the loop.

It’s Friday, July 13th, and I’m glad to know everyone’s on the case.

Statement from Nationwide
via The River Reporter, Submitted by Joe Case on July 12, 2012

Here’s is Nationwide’s official response to this issue:
Nationwide has not changed our policies or guidelines. Fracking related losses have never been a covered loss under a personal or commercial lines policy.
Nationwide’s personal and commercial lines insurance policies were not designed to provide coverage for any fracking-related risks. 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.

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. 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 flooding and mining or drilling are not part of our contracts, and the customer should seek out an insurer that handles these customized types of insurance.
-Joe Case, Nationwide Mutual Insurance Company

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5 Responses to “Memo To Gas Guys: Nationwide’s Not On Your Side”

  1. Debbie Ziegler Lambert Says:

    Claims from pollution events were always excluded. Go ahead and look at your own policy and it will tell you under the exclusion part that Pollution is excluded. Just great that the memo was leaked. Nationwide isn’t alone. They all pretty much exclude it.

    But it gets even more interesting with this article:

    http://www.reuters.com/article/2012/05/11/us-fracking-insurance-idUSBRE84A13R20120511

    Willis said policies for blowouts – called Operator’s Extra Expense – exclude pollution from an underground blowout, which it saw as unlikely to change given the risks tied to fracking.

    So Blowouts are not covered? Who pays then? You have to sue the operator. Good luck with that and the denial tactics they take on every infraction and accident.

    Now, go ahead and call your mortgage bank and tell them you no longer have homeowners insurance because you either have a gas lease and/or you have a well on your property and your carrier dropped you. (Go ahead and pull out those dusty mortgage papers). Guess what? Keeping insurance on your property is a condition of your mortgage. Your loan can be called in! Due and payable now!

  2. Debbie Ziegler Lambert Says:

    Don’t just single out Nationwide. They all have pollution exclusions, or they should.

  3. Liz Rosenbaum Says:

    via WCNY:

    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.”

    — Nancy Smeltzer, Spokesperson, Nationwide Insurance via email to Capitol Pressroom on 7/12/12

    http://blogs.wcny.org/the-capitol-pressroom-for-july-13-2012/

  4. Liz Rosenbaum Says:

    via InsuranceNews.net:

    If Fracking is Too Dangerous for Nationwide Insurance, It’s Too Dangerous for Us All
    http://insurancenewsnet.com/article.aspx?id=350191

  5. Martha Says:

    I would love to get a copy of that memo or the sites that it was originally listed on. Anyone have that? Just curious.

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