Fracking Debate Moves into Insurance Realm

The gloves are off in a lawsuit in the Southern District of New York where an insurer and an oil and gas company disagree about whether the company’s insurance policy covers claims that fracking causes earthquakes. On June 27, 2016, insurer Lloyd’s sued New Dominion, arguing that the Lloyd’s pollution liability policies do not provide coverage because fracking is not a “pollution condition.” (See: Complaint for Declaratory Relief.) The Lloyd’s lawsuit relates to five other Oklahoma lawsuits addressing the same issue. (See: Complaints in Oklahoma lawsuits.)

With this lawsuit, the fracking debate moves into a new arena: insurance coverage disputes.

The Earthquake Lawsuits

The underlying Oklahoma cases pit Oklahoma residents and an environmental group against oil and gas companies. These plaintiffs argue that the companies caused significant earthquakes across the state, including in central Oklahoma, by injecting fracking waste water into disposal wells. Some of the lawsuits cite scientific studies or journals, including United States Geological Survey (USGS) studies and Oklahoma Geological Survey presentations, to argue that (1) there is a correlation between increased fracking and increased earthquakes, and (2) waste water injection induces large earthquakes.

The Insurance Action

Cross country to New York:  The parties to the New York insurance dispute disagree about whether the fracking claims in the Earthquake Lawsuits are covered “pollution conditions” in the Lloyd’s insurance policies. The policies specifically require Lloyd’s to defend and indemnify New Dominion for lawsuits that seek damages for injury or property damage that “result from pollution conditions” at New Dominion’s fracking sites. The policies define “pollution condition” as “the discharge, dispersal, seepage, migration, release or escape of pollutants” and “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant.”

Lloyd’s argues the policies do not cover the Earthquake Lawsuits. It argues it doesn’t have insurance obligations to New Dominion because the waste water is not a “pollutant” under the policies, and the lawsuits do not claim there was property damage that “resulted” from a “pollution condition.” New Dominion disagrees, and argued in a recent motion to dismiss that there is insurance coverage because the Earthquake Lawsuits claim a “pollutant”—fracking waste water—caused the earthquakes. So far, the court has not ruled on whether the insurance policies cover fracking-induced earthquakes.

The Science

There is an ongoing debate about whether fracking activities cause significant earthquakes that endanger the public. In February 2015, an EPA workgroup released a report on seismicity and the injection of waste water from oil and gas activities into disposal wells. The study was designed to help EPA program managers address whether disposal wells could impact waste containment and affect drinking water. Although the study did not examine the extent to which oil and gas production causes earthquakes, it acknowledged that disposal wells have the potential to induce earthquakes and briefly noted there was a “low likelihood” fracking could cause significant earthquakes. It then identified approaches to reduce the likelihood of significant seismic events caused by disposal wells.

Similarly, the USGS has recognized that waste water disposal wells for oil and gas operations can cause earthquakes, and is currently conducting studies that evaluate the hazards of human-induced earthquakes.

Those impacted by fracking will need to wait for answers to these scientific and legal questions. Insurers will be waiting too, as they face lawsuits claiming that fracking activities have caused earthquakes.

Made in the USA (For the Most Part)

Newspaper headlines report a new economic trend—manufacturing is returning to the United States. The country’s industrial production grew by 0.7 percent in July, its biggest jump since November 2014. This number represents everything made by factories, mines, and utilities. Before companies start slapping “Made in the USA” labels on their wares, they need to make sure they are familiar with the legal requirements to do so.

The Federal Trade Commission (the FTC) monitors the marketplace and aims to keep businesses from misleading consumers. Within the FTC’s jurisdiction is regulating “Made in the USA” claims. Continue Reading

CPSC Chairman Attempts To Bridge The Divide, Signaling That Higher CPSC Civil Penalties Are Here To Stay

Airing dirty laundry. The CPSC has made public its internal dispute over civil penalties. On July 20, 2016, Consumer Product Safety Commission Chairman Elliot Kaye and Commissioner Robert Adler issued a joint statement addressing the diverging views among the CPSC commissioners over the agency’s recent settlements. The joint statement responded to other commissioners who had criticized CPSC’s higher civil penalty settlements. Continue Reading

Tesla Crash: Don’t Slam the Brakes on Autopilot

After 130 million miles driven without a fatality, Tesla Autopilot’s perfect track record ended tragically on May 7 with the first fatal crash of a car using Autopilot. Given the infrequency of fatal crashes involving autonomous vehicles, why are commentators suggesting that the auto industry “put the brakes” on this technology?

That’s unclear, especially with the facts here. Autopilot has a better safety record than human drivers. Overall, drivers in the United States cause one fatality roughly every 93 million miles. This was Autopilot’s first fatal accident in over 130 million miles driven. Continue Reading

Truly Whole Foods? The FDA Thinks Not

We wrote last month about the challenges facing Chipotle, a favorite restaurant of many Americans. Now another industry leader is facing similar challenges. Whole Foods Market Inc. has had a tough few years. Most recently, the Food and Drug Administration, in a series of crackdowns, told the industry’s leading company to clean up its act.

On June 8, the FDA issued a warning letter to the co-CEOs of Whole Foods, John Mackey and Walter Robb. The letter stated that the health food chain had 15 days to address the “serious violations” the FDA found while inspecting the company’s Massachusetts ready-to-eat food preparation plant in February. Continue Reading

New York Court of Appeals Addresses the Duty to Warn

On June 28, 2016, the Court of Appeals decided the following question: Does a manufacturer have a duty to warn about asbestos-containing parts made by someone else but used with its non-asbestos product? The Court answered, “Sometimes,” under a relatively narrow set of circumstances.

The plaintiff in Dummitt v. Crane Co., a Navy boiler technician from 1960-1977, alleged that he developed mesothelioma from exposure to asbestos insulation used with Crane Co.’s high-temperature steam valves. Crane Co. didn’t make the insulation, and its valves did not contain any asbestos. Continue Reading

GE Salmon: What’s Really at Steak

In April 2016, we posted about the lawsuit brought by environmental food and safety groups, along with fisherman trade associations, to reverse the FDA’s approval of a genetically engineered (GE) salmon. The complaint alleges that the FDA failed to evaluate how the GE salmon will impact the environment and that the farmed salmon will inevitably escape, “interbreed with wild endangered salmon, compete with them for food and space, or pass on infectious disease . . . .” Continue Reading

Toxic Substances Control Act Revised for the 21st Century

On June 22, 2016, President Obama signed the Lautenberg Chemical Safety Act into law.  The Act is the first significant change to the 1976 Toxic Substances Control Act in 40 years and amends the Environmental Protection Agency’s (EPA) methods for reviewing chemical substances before they are marketed and allowed to be used in consumer products.

The Act has several new key features: Continue Reading

Why Autonomous Cars Aren’t Hit by the Trolley Problem

Imagine you are driving down a two-lane mountain road.  As you round a bend, you see five pedestrians in your lane.  You do not have enough space to stop before hitting them, but in the other lane there is only one pedestrian.  Do you stay in your lane, killing five? Do you swerve into the other lane, killing one?  Or do you steer off the road and down the mountain, avoiding the pedestrian fatality but likely killing yourself?  Can you make that decision better than an autonomous car? Continue Reading

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