There is a war that is currently raging, a war pitting the desire to increase our nation’s energy independence against concerns for the environment. So what started this war? Hydraulic Fracturing, better known as “Fracking,” a controversial method used to harvest natural gas. According to the Associated Press, over 3,000 new natural gas wells utilizing fracking, have cropped up across rural Pennsylvania in the Marcellus Shale since 2005, with tens of thousands of additional wells planned. And with escalating estimates of the amount of recoverable natural gas in shale formations across Pennsylvania, Maryland, West Virginia, Virginia, Ohio, New York, and New Jersey, the war on fracking could soon be at your doorstep.
Perhaps the only thing more certain than the controversy fracking stirs will be the claims and lawsuits that result. In fact, despite almost constant assurances that the process of fracking is clean and safe, countless lawsuits seeking personal injury and property damage have already been filed throughout the Marcellus Shale Region.
Companies who either lease land for fracking or provide goods, services, or workers to the gas companies in the Marcellus Shale Region should carefully examine their risk management strategies. And municipalities, property owners, and mineral rights owners should evaluate how to best protect themselves from fracking-related claims and litigation.
Surprisingly, throughout this whole process, there has been very little discussion as to the role of insurance and contractual risk transfer contractual risk transfer. Are you adequately protected?
- Contractual Indemnity Provisions: In order to effectively manage your company’s exposure, you need to first understand how risk is allocated in your current contract with the gas company. Most contractor agreements include “knock for knock” indemnity provisions, which require each party to assume complete responsibility for its own personnel and property, regardless of fault. Many leases, meanwhile, contain boilerplate indemnity provisions in which the gas company promises to indemnify and hold harmless the property owner in the event of a claim. 1) An indemnification provision is only as good as the party agreeing to provide the indemnification. 2) In order to ensure that you have adequate protection in the event you are personally tied to allegations of negligence or wrongdoing, the indemnification provision should be as broad as allowable under applicable law.
- Additional Insurance Provisions: Property owners should insist that they be named as an additional insured on all insurance policies of the oil and gas company, as well as on the insurance policies of any contractor that comes onto the property for any purpose related to the drilling. Furthermore, the additional insured provision in the oil and gas lease should specify the scope of the coverage for the additional insured.
- Claims Handling: Property owners and municipalities must ensure timely notice of a claim or potential claim is provided to under every potentially applicable insurance policy. Even if you do not have all the particulars of your claim, remember you can supplement the notice later. You should never rely on the gas company to give notice on their behalf.
If you have any questions about our blog, “Hydraulic Fracturing (Fracking) Issues in Maryland, Pennsylvania & More,” please contact Offit Kurman insurance litigation and recovery attorney and Chair of the firm’s Insurance Recovery practice Michael Conley at 267.338.1317 or firstname.lastname@example.org. Michael is a frequent speaker on insurance recovery and fracking issues.
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