New legislation may force insurers to honor claims associated with man-made quakes
Earthquake insurance is becoming a major issue in Oklahoma. Lawmakers have introduced new legislation that would prevent insurers from denying claims for damage caused by man-made earthquakes. These disasters are becoming increasingly common due to hydraulic fracturing, also called “fracking.” This process is used to harvest natural gas from the earth and has been linked to seismic activity in the state. Lawmakers want to ensure that consumers are adequately protected from such disasters and that their insurance policies will provide benefits appropriately.
Insurers do not typical offer coverage for disasters that are caused by human action
Senator Clark Jolley is the author of the legislation and decided to introduce it after hearing complaints from his constituents. Many had expressed concerns about the availability of earthquake coverage and how this insurance is able to protect them from man-made quakes. At the heart of the issue is how insurers define earthquakes. The vast majority of insurers define these events as “acts of God,” which they provide coverage for. If a quake is caused by human action, such an event is not covered due to liability concerns.
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Legislation would allow insurers to sue companies responsible for earthquakes
If successfully passed into law, the legislation would prevent insurers from excluding man-made earthquakes from their insurance policies. As such, those with properties that have been damaged by these disasters will be able to submit claims and gain benefit from their insurance coverage. The legislation would also allow insurers to sue companies responsible for man-made quakes so that they can recover from the financial losses associated with earthquake insurance claims.
New legislation expected to have limited impact on the insurance industry
Oklahoma Insurance Commissioner John Doak expects that the legislation will have very limited impact on insurers, especially if they have the right to sue parties responsible for earthquakes. State Farm, which is the state’s largest provider of homeowners insurance coverage, is one of the few companies that offers coverage for man-made quakes. This may soon change, as the legislation introduced in the state is gaining significant support among lawmakers.