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Nationwide Will No Longer Cover Damages from Fracking; Risks "too great to ignore"

1 min. read

It's one thing when environmentalists and clean energy advocates raise the red flag about the enormous environmental risks - first and foremost to our nation's water supplies - entailed by hydraulic fracturing ("fracking").  Critics can argue, even if it's not the case, that those groups are biased against them. It's a completely different thing, though, when a major U.S. insurance company decides that fracking is simply too hot to handle, strictly from a dollars-and-cents, bottom-line business perspective.

Nationwide Mutual Insurance Co. has become the first major insurance company to say it won't cover damage related to a gas drilling process that blasts chemical-laden water deep into the ground.

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The [Nationwide] memo reads: "After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore. Risks involved with hydraulic fracturing are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto (insurance) coverage."

It said "prohibited risks" apply to landowners who lease land for shale gas drilling and contractors involved in fracking operations, including those who haul water to and from drill sites; pipe and lumber haulers; and operators of bulldozers, dump trucks and other vehicles used in drill site preparation.

As the first major U.S. insurance company to refuse to cover fracking-related damages, this is most definitely a big you-know-what deal. Without insurance coverage, will landowners, contractors and others involved in fracking be willing to proceed with projects? Ultimately, if other U.S. insurance companies follow Nationwide's lead, will individuals and corporations be willing to assume the numerous - and potentially extremely expensive - risks associated with fracking themselves?

Time will provide answers to these questions. For now, though, the reaction of the Independent Petroleum Association of America -- calling Nationwide's move "reckless" and "uninformed" -  already gives us a good idea regarding the degree to which the fracking industry views Nationwide's decision as a serious threat. It will be fascinating to see how hysterical the frackers get if (when?) more insurance companies join Nationwide in denying them coverage.