Penn. Nixes Fracking Exclusions in Earthquake Endorsements

The Pennsylvania Insurance Department issued a notice telling insurance companies that earthquake endorsements to homeowners insurance policies in Pennsylvania cannot exclude coverage for earthquakes that may be caused by “human activity” such as hydraulic fracturing (“fracking”).

According to the Pennsylvania Insurance Department’s notice issued on April 11, some insurers have asserted that because of an increase in natural gas extraction in Pennsylvania by means of a process commonly referred to as fracking, endorsements should exclude coverage on homeowners policies for earthquakes that are not “naturally occurring.”

But Pennsylvania’s Acting Insurance Commissioner Teresa D. Miller wrote in the notice that determining with certainty that human activity caused an earthquake is very difficult. Insurance claims by homeowners should not go unpaid during a long and arduous investigative process that will likely uncover no definitive proof linking the earthquake to human activity, Miller said.

“Insurers and rating organizations are therefore instructed that earthquake endorsements that attach to homeowners insurance policies in this Commonwealth should cover all earthquakes, whether believed to be ‘naturally occurring’ or caused by ‘human activity,'” the notice stated.

The notice stated that insurers with earthquake endorsements already in the marketplace which exclude coverage for earthquakes that are not naturally occurring should not enforce these exclusions, and that new endorsements without the exclusionary language should be filed with the Insurance Department by no later than July 1, 2015.