Marcellus Shale gas leads to widespread litigation, insurance claims

Lawsuits and legislation about natural gas harvesting in the Marcellus Shale region and nationwide is underway and expected to spread, eventually reaching the insurance industry.

About 40 civil suits have been filed in the U.S., alleging personal injury, nuisance and toxic torts involving land, air and water.

Thus far, the litigation produced a wide mix of claims by a range of plaintiffs, according to Ann Arbor, Mich-based ProQuest Information and Learning Co.

Some landowners who entered into leases with drilling companies are suing over the terms of the lease; some landowners who don’t own the oil or gas rights under their property are suing for nuisance; some are suing for physical injuries such as headaches, nosebleeds, nausea and open skin sores; and some claim diminution in the value of their property as a result of damaged water and air.

The Fracturing Responsibility and Awareness of Chemicals Act (S 587), introduced March 15 by Sen. Robert P. Casey Jr. (D-Pa.), would require energy companies to disclose the chemicals used in fracking and close the loophole that exempts drilling companies from federal drinking water laws.

Over the past few years, the use of hydraulic fracturing, or fracking, to drive natural gas out of shale rock increased “dramatically.” Fracking involves drilling a hole deep into the rock, then pumping in vast quantities of water mixed with sand and chemicals at very high pressure to open fissures in the rock through which the trapped gas can escape.

Shale rock can be found in over 36 states, including the Marcellus Shale region in Western Maryland, West Virginia, New York and Pennsylvania.

“[Insurance] agents are trying to make themselves as aware as possible of the situation, because obviously if someone’s signing a contract with one of the energy companies to permit a drill site on their property, then there’s going to have to be a response from an insurance standpoint as far as trying to find the coverage if the current carrier is not willing to provide it,” according to the insurance education organization Sparks Club.

Insurance agents and brokers should tell their clients to “take a close look” at the indemnification agreement with a lawyer, according to Claire Pantaloni, industry affairs director for Insurance Agents & Brokers (IA&B).

Besides performing “careful” underwriting, insurers can identify insured or applicant properties that may be targets for drilling; determine if leases are signed, and how long on- site operations are expected; encourage owner to assure that the lease includes protection provisions; and consider specific exclusionary and coverage endorsements, according to Joel Hopkins, lawyer for Saul Ewing in Harrisburg, Pa.