Earthquake insurance is not automatically included in a standard homeowners policy. However, insurance companies may provide coverage for earthquakes for an additional charge. Earthquake coverage may be purchased as either an endorsement to a homeowners insurance policy or it may be purchased as a separate policy of its own. Over the past few years earthquake coverage has become more relevant in Oklahoma. Since the 5.6 magnitude earthquake of 2011 the number of Oklahomans with earthquake insurance has increased from 2 percent to about 15 percent, surpassing California’s 10 percent. This increase in earthquake coverage is most likely related to the increase in earthquakes that Oklahoma has witnessed over the past few years. One question presently under discussion is whether “earthquake insurance” includes man-made situations such as waste water disposal or injection wells.
The fact of the matter is, Oklahoma earthquakes are being blamed on waste water disposal wells, or injection wells. Geologists believe that the injection well sites are causing seismic movement leading to earthquakes; however, this is not a 100 percent scientific fact. Many earthquake coverage policies or endorsements will specifically exclude man-made earthquakes. Therefore, insurance companies might exclude earthquakes if caused by injection wells if the scientific and legal community view the earthquakes as caused by the injection wells.
Some insurance companies are already taking the stance that the recent Oklahoma earthquakes are man-made and therefore excluded. In 2014, roughly 100 insurance claims due to earthquakes were made, however, only eight of those claims were paid. In light of this situation, Oklahoma Insurance Commissioner John Doak released a bulletin stating that insurance companies cannot deny earthquake claims based on the “unsettled belief these earthquakes were the result of fracking or injection well activity.” Commissioner Doak further stated that if insurance companies were denying claims on the reasoning that injection wells are the cause, the Insurance Department might take appropriate action. Commissioner Doak also felt that until there is legal precedent to the contrary the earthquakes are to be presumed natural earthquakes.
The denial of some of these claims may be attributed to other situations, such as preexisting conditions or the damages sustained to the home do not meet the deductible threshold. Earthquake insurance is designed to cover a total loss on the home. A number of earthquake policies will have deductibles ranging from 5 to 10 percent of the property value. Therefore, when the damage caused by an earthquake does not break the threshold of the deductible the insurance company is not going to pay on the claim.
Whether Oklahoma earthquakes are assumed natural or man-made is going to be answered by the courts. Specific questions about whether the insurance policy has earthquake coverage requires review by a competent Oklahoma attorney. However, Oklahoma may have an answer on one case soon. It is a pressing concern with great interest by Oklahoma homeowners and insurers alike. Perhaps there will be a definitive answer in the near future, but regardless of the outcome, Oklahoma earthquakes have devastated homeowners.