Sussex has found itself at the centre of the fracking controversy in recent weeks with the village of Balcombe becoming the national hub for anti fracking protesters.
Many protesters are those with environmental concerns, but to the local residents and business of Balcombe (or any area where fracking could occur), it is whether the promised economic benefits outweigh the disruption and fears over health, pollution and damage.
Fracking is a technique to recover gas and oil from shale rock and involves the drilling and then injection of water, sand and chemicals into the rock at high pressure to release the gas or oil. The UK has significant reserves of gas, which the Government (as owners) are keen to exploit, hence Cameron’s recent support for the industry. The Pro lobby say it is safe and will create jobs/revenue etc, whereas those against cite the use of huge amounts of water, chemicals polluting water supplies, the process (for frack read crack) setting off small earthquakes and generally play the ‘messing with nature’ card.
And one very valid question being asked is; will my property be insured against fracking damage?
The good news is I have yet to see a policy with a fracking exclusion, but the bad news is… I have never seen one include fracking, so in insurance jargon, policies are ‘silent’ on fracking and therefore open to interpretation.
For cover to apply the damage needs to be caused by a policy ‘peril’ and in the absence of fracking as a specific peril, this could be earthquake, subsidence or accidental damage.
Earthquake cover is generally included in UK policies, but subsidence and accidental damage can be optional, particularly for business policies, so unless the cause of the damage is earthquake, properties may be uninsured.
But there are numerous potential problems including how do you prove how the damage occurred and is it new or old damage? Also with subsidence there is a high excess (at least £1000), the likes of drives, car parks and boundary walls are only covered if the main structure is also damaged and there is a condition that insurers are informed in advance about groundworks on or near the site. With accidental damage, gradual deterioration and the properties own collapse or cracking are excluded (unless caused by other non-excluded damage).
All this gives insurers loads of wriggle room and claims may be a bit of a nightmare until the insurance industry decides their approach to the new risk.
But if damage occurs, the first thought will be to seek compensation from the drilling company rather than try and claim on your own policy. The Government has given assurances that the regulation of the industry will include provision for compensating any damage caused however; this may not be easy as it will involve proving that the drilling company have acted negligently and they will be the ones with access to data necessary to prove a claim.
There is debate as to whether proof of negligence will be required under the principle of strict liability established in Rylands v Fletcher (1868) relating to the escape of hazardous materials and this may become relevant to fracking, although is more likely to affect water or methane pollution claims, rather than property damage.
At this stage it is important to make sure you have as wide a cover as possible on your property and if possible, include legal expenses cover to pursue a claim against a drilling company. Many policies have legal expenses extensions, although the cover varies widely and there are numerous pitfalls pursuing claims.
Over time, if fracking becomes widespread, insurers will update their policies to include or exclude cover, with those in fracking areas no doubt paying more if they want cover. In the meantime, insurers may issue statements of intent, but if not the lawyers are the likely winners. Although of course we could put our trust in the Government to ignore their own and power company interests and regulate the industry properly to minimise problems. But there again…..