Man-made quakesOklahoma warns insurers not to deny claims for man-made-earthquake damage
Oklahoma Insurance Commissioner John Doak is warning insurers about the practice by some insurance companies to exclude “man-made” earthquakes from their policies without clear intent. Some companies are marking quakes caused by waste water injection wells — or “fracking” — as “man-made” and therefore outside of the scope of coverage of policies. This denial of coverage follows a dramatic increase of tremors in the state since 2013. The increase in fracking activity in the state has been accompanied by a dramatic increase in the number of earthquakes: Last year, the Oklahoma Geological Survey identified 567 tremors at or above a 3.0 magnitude, the point at which such quakes can be felt by humans and cause property damage.
Oklahoma Insurance (OID) Commissioner John Doak is warning insurers about the practice by some insurance companies to exclude “man-made” earthquakes from their policies without clear intent.
As Insurance Journal reports, some companies are marking quakes caused by waste water injection wells — or the hydraulic “fracking” that occurs in oil and gas drilling — as “man-made” and therefore outside of the scope of coverage of policies.
This denial of coverage follows a dramatic increase of tremors in the state since 2013. Last year, the Oklahoma Geological Survey identified 567 tremors at or above a 3.0 magnitude, the point at which such quakes can be felt by humans and cause property damage.
“We want to make sure everyone is clear on earthquake insurance,” said Doak. “Oklahomans need to know what they are buying. Insurers need to know my expectations regarding the interpretation of policies. And adjusters need to know how to evaluate and earthquake claim.”
He further clarified that “it would be correct to say that earthquake insurance excludes loss due, in whole or part, to any ‘man-made’ cause such as construction, mining, oil and gas exploration and production,” but is wary over whether this is being done. He identified specific examples of previous policy jargon that may be confusing for insurers, such as “natural faulting of land masses,” and “displacement with the earth’s crust through release of strain associated with ‘tectonic processes.”
In addition to this announcement, the department also sent a bulletin to insurance companies that made clear the need for specific training for adjusters so that they can identify the complexities of the policy and the damage to the structure.
“Earthquake insurance may not be well understood by claims adjusters as the provisions differ from traditional property insurance and application of the limits and deductibles is complex,” said Doak.
Doak has also expressed his intent to see that insurers properly inspect properties for damage before approving coverage, in order to better understand the nature of the structure before any complex earthquake destruction, such as damage to a foundation or frame.
“To help protect themselves from fraudulent claims, insurers have a right to inspect the property as often as required to ascertain the condition,” the bulletin stated.
Due to this increase in quakes, the public has become steadily aware of the risk, leading to a significant increase the amount of policy sales within the state. The OID reports that roughly 15 percent of Oklahomans now have the insurance.
According to Doak, one hundred earthquake claims were filed in the state during 2014, with only eight having been paid.
