More Fracking Means More Liability

Source: http://www.globest.com, January 28, 2013
By: Antoinette Martin

This is the type of equipment used in “fracking.”

In the wake of several multi-million dollar settlements over pollution caused by hydraulic fracturing, including two in this state, a New York legal specialist has published an article called “Fracking Know-How” for property owners and insurers.

LeClairRyan partner Michael J. Case writes in this month’s issue of Claims Management that insurance companies have major stakes on the table as fracking – and lawsuits – escalate.

Residents of Dimock received a reported $4.1 million as settlement after they sued Cabot Oil & Gas Corp., contending that their drinking water was contaminated by fracking-related methane gas.

Also, Chesapeake Energy has paid $1.6 million to settle allegations of water well pollution in Bradford County.

“Landowners who allow gas exploration or production activity on their property, typically through lease agreements, may be held responsible under common law for ‘dangerous conditions’on their property,” says Case in the article.

Oil and gas leases often contain provisions indemnifying the landowner for claims arising from a gas company’s operations and requiring the developer to obtain liability insurance covering the landowners for claims arising from such operations, he notes.

“This places the lease terms at the forefront in analyzing fracking-related liability,” the lawyer writes.

Case represents insurers and reinsurers in litigation and arbitration as well as businesses and individuals in environmental liability and insurance cases.

“Well operators or landowners whose liability has not been transferred in the lease documents may look to their insurers to assume their retained liability,” he says. However, he says, “the likelihood of payment under such circumstances is far from certain.”

Many insurers had issued policies to landowners, contractors and well-site operators at a time when the volume of fracking activity was more limited. Increased fracking may give rise to increased claims against policyholders, he warns in the article.

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