Insurer Lloyd’s Wins Right to Fight New Dominion Lawsuit in N.Y. Over Oklahoma Quake Coverage; Lloyds refusing to pay damages claiming water and chemicals injected for fracing doesn’t qualify as pollution

Lloyd’s Wins Right to Fight in N.Y. Over Oklahoma Quake Coverage by Robert Burnson, September 09, 2016, The Washington Post with Bloomberg

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.

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). [Emphasis added]

With assistance from David Wethe and Ryan Sachetta

Fracking Co., Insurer Argue Whether Pollution Caused Quakes by William Gorta, September 9, 2016, Law360

An attorney for Oklahoma fracking company New Dominion LLC told a New York federal judge on Friday that the saltwater it pumps into underground wells may be a pollutant and he didn’t know what else the company was injecting below ground as it battles with insurer Lloyd’s of London over a pollution liability policy.

Lloyd’s is suing New Dominion for a judgment declaring the insurer is not obligated under the policy to defend or indemnify New Dominion in five Oklahoma lawsuits alleging the company’s fracking procedures… [Subscription required]

Lloyd’s scores initial win in legal battle with US firm by Louie Bacani, September 8, 2016, insurancebusinessmag.com

Lloyd’s scores initial win in legal battle with US firm Lloyd’s of London scored an initial win over US oil firm New Dominion LLC after a federal judge ruled where their ongoing dispute should be decided.

The insurer previously filed a case that focuses on whether pollution insurance policies it sold to the oil company in 2014 cover earthquakes. Lloyd’s sought to be released from liability for damage.

Lloyd’s lodged the lawsuit at the Manhattan Federal Court in June while New Dominion had hoped to litigate the insurance question in its home state of Oklahoma, according to reports by Courthouse News Service and Bloomberg.

New Dominion sued Lloyd’s in Oklahoma last June to try to force the insurer to provide coverage for earthquake claims.

But on Wednesday, US District Judge Denise Cote in Manhattan said a clause in the Lloyd’s insurance policies requires disputes to be resolved in New York, Bloomberg reported.

Cote’s decision did not consider the underlying arguments over whether earthquakes were covered by the insurance, the report added.

This year, New Dominion was slapped with five lawsuits seeking compensation for damage caused by earthquakes in Oklahoma.

The cases alleged that the oil company’s hydraulic fracture drilling, or fracking, caused severe tremors and property damage.

Lloyd’s declined to pay for the damages, saying its insurance only covered the company for injuries caused by pollutants.

According to Bloomberg, Lloyd’s argued that the injection of water and chemicals into the wells as part of the fracking process was not qualified as pollution under the policy. [Emphasis added]

Fracking-Quakes Liability Fight Rumbles on in N.Y. by Adam Klasfield, September 8, 2016, courthousenews

MANHATTAN (CN) — Shaken by five lawsuits over fracking-linked earthquakes, an Oklahoma energy company stumbled in its attempt to have its insurance company steady the aftershocks.

New Dominion, an oil and natural gas company based in Tulsa, Okla., has been rocked by lawsuits from the Sierra Club and residents living near its drilling areas blaming it for a sharp spike in seismic activity.

After litigation started early this year, New Dominion demanded that Lloyd’s of London underwrite its legal woes, and each of the companies went to court demanding to be cleared of liability. New Dominion filed its case on its home turf of Tulsa County, and Lloyd’s responded in kind in Manhattan Federal Court.

On Wednesday, U.S. District Judge Denise Cote ruled that the insurance policy made clear that the dispute belonged in New York. Their agreement stipulated that the parties “agree that the laws of the state of New York shall apply and that all litigation, arbitration or other form of dispute resolution shall take place in the state of New York.”

The judge found that New Dominion had no excuse to wiggle out of these ironclad terms.
“The policy is an insurance contract between two sophisticated businesses and New Dominion has not alleged any power imbalance between it and Lloyd’s,” Cote wrote.
Attorneys for the parties did not respond to emailed requests for comment Thursday.
The decision fell one day after the Environmental Protection Agency ordered the shutdown of 17 wastewater wells in northeastern Oklahoma’s Osage County, in the wake of a 5.6 magnitude earthquake days earlier.

Government regulators have increasingly formed a consensus that fracking, short for hydraulic fracturing, is linked to earthquakes, which have been hitting the Sooner State especially hard.

In a report released in March, the U.S. Geological Survey observed a striking statistic about how much shakier Oklahoma fault-lines have been since the period between 1950 and 2005, when the state averaged 1 1/2 earthquakes per year above a 3.0 magnitude.
“Over the past few years, however, Oklahoma has recorded several hundred M3.0+ earthquakes per year, many of which are thought to be related to wastewater injection,” the agency found.

The EPA echoed a similar conclusion months later in August, when the agency — in what was then the first public statement of its kind — told Texas regulators that there was a “significant possibility” that fracking had been causing earthquakes in the Dallas area. [Emphasis added]

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