Tuesday, July 2, 2013
Sunday, February 24, 2013
Federal Watchdog Issues Report on Gas Pipeline Safety
Federal regulators must account for response times in the data they collect from transmission operators on natural gas pipeline incidents, a congressional watchdog agency said this week.
The U.S. Government Accountability Office said in a report that the Pipeline and Hazardous Materials Safety Administration, which oversees natural gas, oil and hazardous liquids pipelines in the U.S., doesn’t require operators to fill out certain time-related fields when reporting incidents. Operators also have indicated they interpret the data fields in different ways.
“Reliable data would improve PHMSA’s ability to measure incident response and assist the agency in exploring the feasibility of developing a performance-based approach for improving operator response to pipeline incidents,” the report said.
The report comes a month after a 20-inch line owned by Columbia Gas Transmission ruptured in West Virginia, triggering a massive fire. The Dec. 11 inferno destroyed four homes and charred a section of Interstate 77 near Sissonville, about 15 miles north of Charleston. No one was seriously injured.
Federal investigators say it took Columbia Gas Transmission, a subsidiary of Texas-based NiSource Gas Transmission & Storage, more than an hour to manually shut off the gas that fueled the fire, which sent flames as high as nearby hilltops.
And in September 2010, gas continued to escape for nearly 90 minutes after a ruptured pipeline exploded in a suburb of San Francisco. The explosion, which was blamed on an inferior pipeline weld, killed eight people and destroyed dozens of homes. Investigators said the damage would have been less severe had automatic valves been in place.
The National Transportation Safety Board has long advocated requiring automated valves that could shut off gas in such situations within minutes. Currently, manual valves are required at intervals
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U.S. Issues Mine Safety Rule on Patterns of Violations
Labor Secretary of Labor Hilda L. Solis announced a final rule to strengthen safety in the nation’s most dangerous mines.
Solis said that the rule, which revises the Mine Safety and Health Administration’s pattern of violations regulation, seeks to ensure that mine address the most hazardous safety problems in their mines. It also strengthens MSHA’s hand to respond to dangerous mining conditions.
“The tragedy at the Upper Big Branch Mine should not be forgotten. It exacted a terrible toll on the nation, coal miners’ families and coal companies. Over the last three years, the Labor Department has undergone a serious and comprehensive evaluation of mine safety practices, and that has led to reforms to protect America’s miners. The rule we are announcing today will hold mine operators accountable when they disregard life-saving safety measures,” Solis said.
The rule has been submitted to the Federal Register for publication.
Joseph A. Main, assistant secretary of labor for mine safety and health, said the final rule “will help prevent another tragedy such as occurred at the Upper Big Branch Mine” in West Virginia where 29 people were killed.
Main said the rule promotes consistency in applying the pattern of violations (POV) notice as an enforcement tool, provides for a more transparent process and emphasizes operators’ responsibility to comply with safety and health standards and monitor their own compliance.
Under the Federal Mine Safety and Health Act of 1977, MSHA is required to issue a POV notice to any mine operator that demonstrates a disregard for the health and safety of miners through a pattern of significant and substantial violations. An S&S violation is one that contributes to a safety or health hazard that is reasonably likely to result in a reasonably serious injury or illness.
The POV final rule places the MSHA in a better position to identify operators that demonstrate a disregard for the health and safety of miners and have not responded to other enforcement measures.
“There has been recognition by many that the system has been broken, with no mine being placed on POV status until 2011
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Tuesday, August 28, 2012
The Next New Thing: Coverage Issues from Fracking Claims
Every few years it seems that there are predictions a new type of claim that threatens to engulf carriers. In the 1980s and 1990s it was environmental clean up claims and SuperFund, followed shortly by asbestos, the fear of Y2K claims, MTBE and any number of other potential mass torts.
In most cases, these highly touted risks fail to become the massive tidal wave projected by commentators. Unfortunately, some of these problems, such as hazardous waste and asbestos claims, did grow into large numbers of claims that continue to fill the courts with liability and coverage litigation.
Over the last six months, we have heard increasing rumblings about the expected flood of litigation created by the energy industry’s increasing use of “fracking” in the production and recovery of oil and gas. While very few suits have been filed at this point, and litigation is being much more talked about than actually filed, this risk is one that should be carefully considered by the insurance industry.
What Is Fracking?Fracking is a technology developed by the energy industry that allows energy producers to extract oil from places where in the past it was either too expensive or too difficult to otherwise retrieve.
In the fracking process water, chemicals and drilling materials are forced into underground shale formations to break-up and release hydrocarbons such as oil or gas. The process usually entails drilling a vertical well to the top of a shale formation and then the well bore is angled through the target formation and the drilling continues horizontally. Using sophisticated technology, millions of gallons of “frack fluid” are pumped under high pressure to fracture the target reservoir and release the encased oil and gas.
The purpose of fracking is to vastly increase the flow and volume of oil and gas available from a geological formation. It both enhances the production from current oil and gas wells, as well as allows for the use of fewer wells.
Interestingly, while this process has been used in one form or another for many years, it has only become a subject of public discussion in recent years as environmentalists and property owners have raised concerns that the energy companies’ use of this technology allegedly contaminates groundwater and causes other environmental problems. This has encouraged the plaintiffs’ bar to gear up for a potential litigation onslaught.
Types of Claims Seen and ExpectedWhile many drillers and insurance industry executives suggest that the environmental claims are overblown and that there is presently little evidence of substantial well water pollution from fracking, lawsuits are being filed by plaintiffs in numerous jurisdictions alleging pollution damage (such as groundwater contamination) requiring remediation and attempting to prevent future fracking activities because of potential health and environmental concerns.
There has not been any major settlement or judgment to date, however, this first wave of lawsuits is prompting carriers to consider the type and scope of insurance claims that will be made. For instance, the main concern in the current suits involves groundwater contamination. This litigation focuses on who is liable for the cleanup and remediation costs of polluted groundwater resources. Where the EPA or private citizens have brought these suits alleging property damage or bodily injuries related to hydraulic fracking activities, the primary task for the plaintiff is to obtain a finding of liability establishing a causal connection between the hydraulic fracking and the alleged injury.
In such cases, the defendant’s commercial policies may be implicated, such as those issued to the energy companies employing the fracturing process. As with most liability cases, the policies at issue usually present two different sets of issues. First, though it may never be established that the fracturing process led to the contamination, the issue of the duty to defend under those liability policies is one of significant impact to insurance carriers. As we know from the widespread environmental cleanup cases of the last several decades, defense costs in connection with these type of lawsuits can easily run into the millions of dollars, and are often greater than the actual indemnity risk. Consequently, the initial issue, regardless of the risk of liability, will be the duty to defend those suits. In most states, the issue will be what the plaintiff has pled, instead of the actual facts on the ground. In many cases, the carrier may be forced to defend claims for which its insured will never held liable.
Many energy industry companies who were involved in past environmental claims have purchased environmental impairment coverage to specifically address these types of concerns. Many of these policies have large retentions or manuscripted language that will raise coverage concerns. Other companies, however, will have general liability policies which include various forms of the pollution exclusion that may or may not apply depending upon the specific allegations in the litigation. Depending upon the jurisdiction and sophistication of the plaintiffs bringing these claims, the coverage issues may be very complex and involve considerable expense to litigate.
Likewise, in many cases where a defense obligation may be implicated under either environmental impairment or general liability policies, the development of the litigation will likely raise novel coverage concerns as facts and specific policy provisions are identified as areas of controversy. As we learned from the hazardous waste cleanup case law, each state and jurisdiction will have its own take on the same language, thus creating substantive differences in jurisdictions as to whether defense and indemnity obligations are covered or uncovered, even under the same facts. Therefore, both policyholders and carriers need to carefully evaluate the specific language in their policies as well as to prudently consider the type and scope of policies to purchase where fracking processes are employed.
Another potentially significant area is property insurance claims by homeowners affected by fracking activities. In addition to potential groundwater contamination leading to bodily injury claims, some homeowners may suffer various forms of subsidence or well water contamination.
Most homeowner insurance policies provide coverage for the policyholder’s home and property structures for direct physical loss or damage to the property during the policy period. However, many of these policies exclude events such as contamination of land or water serving residents, as well as settling, cracking, shrinking or other types of harm that may be alleged by homeowners near fracking sites.
While it may turn out that fracking does not lead to this type of problem, it is a subject of current review by environmental and consumer groups that may spur litigation bringing those policies into play. This may become an area of significant coverage litigation.
Mountain or Molehill?Again, the current number of lawsuits are relatively few
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Tuesday, May 8, 2012
ACE Risk Management Launches Portal for Uninsured, Underinsured Motorist Issues
The ability to validly elect or reject uninsured/underinsured (UM/UIM) motorist coverage has a significant economic impact on insureds and insurers. All 50 states and the District of Columbia have requirements regarding the completion of election forms. ACE Risk Management (ARM) has launched ACE Accelerator exclusively for ARM clients to help them complete the forms and associated requirements for each state.
ACE Accelerator is a web-based portal for risk managers that allows them to review, execute, and submit all the forms needed for their coverage elections. Because the portal selects only those documents relevant to each coverage situation
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