Insurance Coverage Issues in Hydraulic Fracturing

By Walter J. Andrews, Michael S. Levine, and Jennifer E. White, Hunton & Williams LLP

Hydraulic fracturing (“fracking”) continues to be a controversial means of energy production.  Despite refined fracking techniques and successful fracking operations across the country, numerous jurisdictions have banned or severely restricted the gas extraction method. In fact, in December, New York’s Governor Cuomo promised to ban fracking in 2015.  The governor’s concerns for the environment and public health are already familiar to plaintiffs’ lawyers, who have relied on these concerns for years in order to secure large verdicts and settlements against fracking businesses based on an unsettled body of research about fracking and its potential impacts to people and property.

To keep pace with fracking’s rapid evolution and the manner in which governments and courts have analyzed the costs and benefits associated with this controversial production technique, it is critical that shale gas explorers and developers understand their potential risks and liabilities, and how those risks and liabilities might be covered by insurance.  So too must insurers stay current on fracking-related developments and damages, and how the fracking process and its potential liabilities might implicate the various coverages typically carried by constituents of the fracking industry.

This article explores the fracking process and, in particular, the issues likely to affect the availability of insurance coverage for fracking-related liabilities under general liability, directors’ and officers’ liability and first-party property insurance policies.  The article analyzes published fracking-related coverage cases and analogous case law to identify issues and anticipate arguments that are likely to arise when handling and litigating fracking-related coverage claims.

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   Walter J. Andrews is a partner in Hunton & Williams LLP's McLean, Virginia and Miami offices and head of the Insurance Coverage Counseling and Litigation practice. Walter has more than 25 years of experience managing insurance-related issues, including program audits, policy manuscripting, counseling, litigation and arbitration. He litigates insurance coverage and bad faith disputes around the nation, involving business interruption, product liability, construction defect, reinsurance matters, e-commerce issues, and other emerging claims. These matters involve a variety of insurance contracts, including professional liability, first party property, general liability insurance policies, and various reinsurance agreements and works with companies across a wide spectrum of industries, including financial services, consumer products, food and beverages, chemicals, real estate and municipalities to deliver comprehensive, informed solutions.

   Michael S. Levine is counsel in Hunton & Williams LLP's McLean, Virginia and New York offices and a member of the firm's Insurance Coverage Counseling and Litigation practice. Mike represents and counsels commercial clients in complex insurance coverage and business disputes. He advises and litigates coverage and bad faith disputes involving property damage, losses of business income and extra expense; bodily injury; professional negligence; product and construction defects and improper business practices under policies affording coverage for general and excess liability, first-party property, professional errors and omissions and corporate directors and officers' liabilities. He has expansive experience resolving coverage disputes through arbitration and mediation and works closely with corporate clients to provide tailored advice and representation specific to each client's business and legal goals.

   Jennifer E. White is an associate in Hunton & Williams LLP's McLean, Virginia office and member of the firm's Insurance Coverage Counseling and Litigation practice. A former judicial clerk to the Hon. Charles J. Maxfield of the Nineteenth Judicial Circuit of Virginia, Jenn has first-chair and second-chair trial experience in federal and state court, and has represented local governments and clients from a diverse range of industries, including energy, consumer products, and food and beverages.

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