Source: Business Insurance, February 24, 2013
By: Douglas McLeod
Insurance coverage disputes are bound to follow fracking liability suits, including arguments over the scope of pollution exclusions in general liability policies, lawyers say.
Along with operators extra expense policies, which cover cleanup costs from a well blowout, general liability policies also cover “sudden and accidental” pollution if discharges are discovered and reported within certain time limits — for example, discovery within 30 days and reporting to underwriters within 90 days.
Intended to exclude gradual seepage claims, such limits already have figured in what may be the first fracking-related coverage battle, a case between Ace American Insurance Co. and Warren Drilling Co. Inc. of Dexter City, Ohio, that was settled last month.
Warren alleged that it found out about drinking water contamination at a West Virginia site when it was sued by a property owner in 2010, two years after the property owner had complained to the well’s owner and operator, a unit of Pittsburgh-based EQT Corp., which had hired Warren. Ace denied coverage, saying that Warren missed the 30-day discovery/90-day reporting limits of its GL policy.
Warren paid $40,000 to settle the underlying liability claim last year after incurring $155,091 in defense and expert witness costs, according to its filings in U.S. District Court in Columbus, Ohio.
Ace declined to comment on the terms of its settlement with Warren, and Warren officials could not be reached.
Warren is still suing EQT for indemnity under its drilling contract.