Lloyd’s Fight Over Coverage for Oklahoma Earthquakes to be Heard by New York Court

By Robert Burnson | September 8, 2016

Lloyd’s of London has kept its lawsuit against New Dominion LLC over fracking out of the state where the ground is shaking.

A federal judge in New York agreed Wednesday to decide the lawsuit by Lloyd’s seeking to be released from liability for earthquake damage in Oklahoma blamed on fracking. U.S. District Judge Denise Cote in Manhattan said a clause in the Lloyd’s insurance policies requires disputes to be resolved in New York.

New Dominion had hoped to litigate the insurance question in its home state of Oklahoma, where it sued in June to try to force Lloyd’s to provide coverage for earthquake claims.

The decision comes as Oklahoma drillers are being ordered to shut more fracking wastewater wells and the U.S. Geological Survey upgraded an earthquake last weekend to 5.8 in magnitude, a record for the state.

Lloyd's insists its pollution insurance policies do not cover earthquakes.

The Environmental Protection Agency said Wednesday it has ordered the closure of 17 additional disposal sites under its jurisdiction in Osage County in Oklahoma. The move follows the suspension of 37 wells by the Oklahoma Corporation Commission.

Oklahoma regulators had already been limiting the disposal of oilfield wastewater, which scientists have linked to seismic activity, before the tremor that was felt from Texas to Illinois on Saturday. The number of earthquakes measuring 3.0 or higher reached at least 890 last year, up from just two in 2008, before the state’s fracking boom started. The USGS hasn’t determined an official cause for the earthquake.

Arguments in the Lloyd’s case focus on whether pollution insurance policies it sold to the oil company in 2014 cover earthquakes. This year, New Dominion was hit with five lawsuits seeking compensation for damage caused by earthquakes in Oklahoma. The suits blamed the earthquakes on the company’s injection well operations.

Injected Chemicals

Lloyd’s declined to pay for the damages, saying its insurance only covered the company for injuries caused by pollutants and that the water and chemicals injected into the wells as part of the fracking process didn’t qualify as pollution under the policy.

Andrew Jayne, a lawyer for New Dominion, didn’t immediately respond to phone and e-mail messages after regular business hours seeking comment on the ruling.

Cote’s decision Wednesday addressed only where the dispute should be decided. It didn’t consider the underlying arguments over whether earthquakes were covered by the insurance.

The case is Certain Underwriters at Lloyd’s London Subscribing to Policy Number PGIARK03959 v. New Dominion LLC, 16-cv-05005, U.S. District Court, Southern District of New York (Manhattan).

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