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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

“Fracking” Lawsuit Leads to New Suit Against ACE American

June 6, 2012 - After a natural gas driller advised a West Virginia couple to stop drinking from the water on their property that was near a well that was working, they sued. Hydraulic fracturing - injecting fluids into an energy well in hopes of forcing out more gas - had in the process allegedly put contaminants and hazardous chemicals into the water the family used for bathing, cooking and drinking.

That 2010 suit has been settled. Now, one of the defendants is suing ACE American Insurance Co. in an effort to recover legal fees and settlement costs tied to that family’s suit.

Warren Drilling Co., of Dexter, Ohio, had hired Cleveland-based Equitable Production Co. in 2006 to drill a number of wells for it. Equitable agreed to assume responsibility for any pollution claims and toward that end secured commercial general liability insurance from ACE American Insurance Co. The policy issued by the ACE Group unit contained both an energy pollution liability extension endorsement.

The property owners, Dennis and Tamera Hagy, sued Warren and Equitable in October, 2010, and on April 15, 2011, ACE denied coverage and refused to defend Warren.  

Yet, Warren argued, ACE had a duty to defend as the Hagys claim “arguably or potentially could have been covered by the insurance policy.”

In its denial letter, ACE said that the energy pollution endorsement provides coverage only for certain “pollution incidents,” provided the insured satisfies five conditions precedent. ACE said Warren failed to clear those hurdles, which included showing that the discharge was unexpected and unintended and that Warren had knowledge of it within 30 days of the commencement.

In its suit, which includes Equitable as a defendant, Warren asked the court to award it legal fees and expenses for expert witness that it estimated will be $150,825. And it requested another $40,000 from ACE to cover settlement of the underlying lawsuit.

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