Fracking and home insurance: your questions answered

fracking drill

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There have been many headlines written of late on the divisive subject of fracking; a hot topic which continues to polarise opinion, especially amongst homeowners here in the UK.

Many see it as a dangerous precedent which could end up having devastating effects on both the health of local communities and property prices. On the other hand there are the fracking champions, who alternatively look at it as a vision of our future energy needs, which is both safe and – contrary to detractors – won’t have significant environmental and house price impacts in the locations where continued exploration is set to be rolled out.

Naturally, from your immediate perspective it’s safe to assume that you wish to know whether or not fracking will have any detrimental effects with regards to your existing and future home insurance policies, particularly if you reside in a geographical area earmarked for future fracking development.

Which is precisely why we’ve compiled this bitesize guide to ‘Fracking and Home Insurance’…

What is fracking?

First things first, we need to establish just what fracking is for those not in the loop.

The process of fracking (or hydraulic fracturing) sees water and chemicals pushed deep down into a vertical and horizontally-drilled well (via high pressure spouts) so as to ‘fracture’ the ground and extract/release gas that is trapped beneath the surface; or rather the shale layer found a certain distance below it.

Understandably there are concerns on the two predominant fronts, notably health implications on account of chemicals forming a core part of the mix which infiltrates the earth and no less important to many homeowners, the potential threat from subsidence, which in itself could have serious medium and long-term ramifications regarding home insurance policies and on-going valuations.

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Why haven’t I heard of fracking?

Maybe you’re unaware of the proposed practice because the concept is relatively new in Britain, despite being commonplace over in America for some while now. Indeed, in the States fracking methodology has been facilitated for a number of years as a means to harvesting fuel from in-land reserves, yet not all Americans welcomed fracking with open arms from the outset, whilst various environmental concerns have been subsequently raised.

One of those issues has surrounded the vast water resources being transported to fracking sites, together with the risk of carcinogenic chemicals being released and escaping into the land as well as potentially contaminating the groundwater sources. And that’s before you even start on the homeowner’s main gripes, those being the small earthquakes which can (and have been) triggered by the fracking process.

Are earthquakes a danger from fracking in the UK?

As it happens, the North of England experienced its own mini quakes in 2011, two in fact (measuring 1.5 and 2.3 in magnitude according to experts), centering on the Blackpool area on the North West coast, which were said to have been instigated by exploratory fracking procedures in the area; so it’s not beyond the realms of the imagination.

Separate research also points to powerful earthquakes with epicentres sighted several thousands of kilometres away being instrumental in causing minor tremors and mini quakes in proximity to fracking sites, so concern is legitimate amongst those worried parties.

Where in the UK would fracking take place?

Up until now, reserves of shale gas have been identified predominantly in the North of England, yet smaller areas of South Wales, along with the South East, Scotland and Northern Ireland have already been earmarked or already been subjected to exploratory testing according to many reliable sources. As it stands though, laws dictate that drilling companies must apply to the Government for a fracking licence if they wish to undertake fracking in an area.

What about home insurance policies? Do I need to arrange specialist fracking cover?

Well, yes and no. Home insurance policies tend to generally cover against damage caused by ground movement out of the home owner’s control, be it natural earthquakes (or other acts of God), subsidence, ground heave or landslip; and essentially the effects and ground shifting caused by the presence of fracking would ostensibly create the same earth movements and therein impact a property situated thereabouts to the same degree and end as that of a more natural cause.

So in principle your property is theoretically already insured against fracking damage and no, there’s no such thing as a fracking exclusion feature applied to home policies as yet, and to the best of our knowledge. However that’s not to say you are extensively covered and to put your worries to one side.

That’s because although there are no fracking policy exclusions present in home insurance policies yet, there’s also no fracking inclusions either – so insurers are currently remaining silent on the whole fracking issue and probably waiting to see the lay of the land (if you’ll pardon the pun) and how everything pans out if/when fracking becomes more widespread in Britain.

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What are the likely future issues with home insurance and fracking?

You see, for cover to apply the damage needs to have been triggered by what’s referred to as a policy ‘peril’ (examples being earthquakes, subsidence or accidental damage), and because fracking isn’t cited as a specific peril as yet, the area is still somewhat grey.

Now, while quake cover is typically included in most household policies (with subsidence and accidental damage often optional), an actual listing for fracking as a cause and effect doesn’t exist at this specific juncture. Meaning, hypothetically speaking, a property may be classed as uninsured for this possible event.

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 driveways, 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). The upshot of this non-committal as such is that insurers are currently afforded a great deal of wriggle room, and subsequently claim processes may well be contentious until the industry decides what its official (and far-reaching) approach is to the conceivable risks to properties posed by fracking.

What options would I have if my house is damaged by fracking?

Your first port of call might be to pursue a claim for compensation with the drilling company if this event plays out, as opposed to attempting to claim on an existing household policy, not least because the Government has made it abundantly clear that the way in which it regulates the fracking industry will henceforth include financially compensatory provisions being in place to cover any damage claims brought against drilling firms.

But having said that the process could well turn out to be a laborious – and ultimately – fruitless one if, as could happen, an individual property owner isn’t in a position to provide circumstantial evidence to support claims that fracking caused the subsequent damage which has since befallen a claimant’s bricks and mortar; and moreover that their actions were considered in some way negligent. And to underline that the odds might be perceived as stacked against the householder in this scenario, it’s worth remembering that the drilling company will be the party with ready and unlimited access to the very data necessary to prove or dispel this claim.

How can I safeguard my property against fracking in the future?

We’d say that ensuring that you possess as extensive an insurance cover as possible in terms of your building and home contents policy would be a minimum requirement to determine that your house is as safe as possible, and above and beyond that seek out a legal expenses feature which would better enable you to file and pursue any future claims against drilling companies, with most household insurance providers promoting such policy extensions.

Given the fullness of time – and as fracking becomes increasingly more common practice here in the UK as is suggested – insurers will be obliged to update and revise their policies accordingly to reflect potentially proliferating situations which will need addressing on a much broader scale (and with more expansive and consequent scope as is the case here and now).

Sadly, yet somewhat predictably, with this would come the inevitability of household insurance policy premiums being ramped up to cover properties located in known fracking areas. For the time being though insurers may issue statements of implied intent, however it’s down to lawyers to acknowledge (and represent) the plight of those affected by fracking disturbances.