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Insurer Agrees to $25M Settlement Over Oklahoma Earthquake Claims

Farmers Insurance denied over 1,000 damage claims as Oklahoma grapples with a spike in earthquakes the federal government blames on fracking.

OKLAHOMA CITY (CN) — Home insurer Farmers Insurance will pay $25 million to settle allegations it underpaid or denied over 1,000 earthquake damage claims relating to a spike in seismic activity in the wake of fracking in the Woodford Shale.

Oklahoma Attorney General Mike Hunter and Oklahoma Insurance Commissioner Glen Mulready, both Republicans, announced the deal Monday. They say Farmers “overwhelmingly denied” the claims filed after the increase in earthquakes began in 2013.

“In certain cases, Farmers justified denial of coverage based on its claim that the damage to the insureds’ property was not caused by an earthquake and/or predated the seismic activity,” their six-page complaint filed April 1 states. “However, Farmers, in most instances, had not conducted inspections of the property prior to issuing the earthquake policy to support such denial of coverage. In other cases, Farmers utilized inadequately trained claims adjusters to assess the damage to the insureds’ property.”

Farmers agreed to reopen the claims process and have an independent administrator re-evaluate each of the underpaid or denied claims. The insurer also agreed to make additional payments under the settlement if the administrator determines there is not enough money to pay eligible claims.

“Within ten days of receiving such notice, Farmers will provide an additional payment to the state treasury account holding the funds in escrow,” according to the 21-page consent judgment dated Monday.

Hunter said the settlement is a “great win for Oklahomans” who paid Farmers’ earthquake premiums.

“I am happy to announce that after negotiations, Farmers agreed to this settlement,” Hunter said in a statement. “Through an exhaustive process, we will ensure each Oklahoman who sustained legitimate damage from an earthquake and submitted a claim to Farmers will have an opportunity for their claim to be independently reviewed and the damage to their property repaired.”

Farmers emphasized the settlement is not an admission of wrongdoing and it believes it handled the claims correctly and in good faith.

“This settlement was reached in the spirit of resolving these issues fairly and efficiently, and because we did not believe that a drawn-out legal process was in the best interest of anyone involved – including our policyholders in Oklahoma,” Farmers said in an email message Monday afternoon.

It added, “Farmers stands by the work of its claims adjusters in the state, whose work has been reviewed by independent experts. Additionally, all engineers utilized by Farmers have been licensed in Oklahoma and have produced detailed reports evaluating if the damages claimed were proper and consistent based on the location and intensity of earthquake.”

The settlement comes five years after the U.S. Geological Survey first linked the skyrocketing seismic activity in Oklahoma to fracking. The agency said Oklahoma only recorded an average of 1.5 earthquakes a year before 2005 with a magnitude of 3.0 or greater. It found the state recorded “several hundred” earthquakes over 3.0 after 2005, “many of which are thought to be related to wastewater injection.”

Fracking, also known as hydraulic fracturing, is the injection of pressurized fluid to break shale rocks to release natural gas. The practice is popular in the Woodford Shale in Oklahoma and the nearby Barnett Shale in North Texas. Rising energy prices in the wake of the Covid-19 pandemic make the expensive extraction process more profitable.

Several individual property owners and Native American tribes in Oklahoma have sued oil drillers in recent years, blaming earthquake property damage on nearby fracking. One such lawsuit claimed the number of earthquakes in the state have jumped by 300-fold, “from a maximum of 167 before 2009 to 5,838 in 2015.”

The U.S. Environmental Protection Agency has also suspected the role of fracking in increased earthquakes in nearby Texas, concluding in 2016 there is a “significant possibility” that disposal wells caused seismic activity in the Dallas-area within the Barnett Shale.

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