Insurance Crunch Hits Local Firm

Parkersburg News-Sentinel, July 10, 2004

Lack of liability coverage for oil and gas drilling companies may force a local business out of the state. Denny Harton, owner of GasSearch Corp. in Parkersburg , said his business will lose its employee liability coverage in August because it will no longer be available in West Virginia . GasSearch employs about 30 people.

The insurance is in addition to the state's workers' compensation coverage and is used to protect employers who are sued by employees. "I have been in the same business for 20 years and I have had the same kinds of insurance year after year," he said. "Now this is happening to me, and you know how many claims we've had? Zero."

Harton said the lack of coverage will greatly affect the jobs his business is able to accept. "I have contracts that require I carry at least $1 million in liability coverage," he said. "As of August I will be in violation of those contracts."

Harton said one option is to move his business across the river into Ohio , which still sells the liability insurance. However, such a move would prove costly and time consuming, he said. A second option would be to eliminate as much liability from his company as possible, a move that also would prove costly to both his business and to his employees. "My options are simple. I either move or I start shutting operations down where I feel the risks are and start laying people off," he said. "Neither is something I want to do."

Jim Shriver, president of Chancellor Insurance Agency in Parkersburg , said the cost of offering the supplemental liability insurance has become increasingly prohibitive in recent years. "Companies have restricted coverage and many have just done away with it for most industries," he said. "We just stopped offering the (liability) coverage ourselves and we were one of the last, if not the last, one to do so in the state."

Harton, Shriver and other critics place the blame squarely with the state's judicial system. " West Virginia is a litigious state," Shriver said. "The employee can sue the employer in almost any case and in the event of his death the estate or family can sue. The courts have increasingly shown a willingness to hand out large settlement awards. We end up paying out large settlements for relatively small premiums."

Sen. Frank Deem, R-Wood, who has served on several tort reform committees for the state Legislature, said out of control damage awards coupled with a liberal judicial system have driven insurance costs up and several insurance providers out of the state. "People think they can get something for nothing," he said. "The state has gotten a reputation for handing out these huge settlements, so more people are wanting to bring their cases through the West Virginia courts. The trial lawyers are reaping the benefits."

Deem said insurance carriers often and unfairly take the brunt of the blame for the high cost or low availability of insurance. "There is a lot of criticism of the insurance companies ... but essentially they are only a conduit for the money and they are entitled to make a profit," said Deem. "If this continues and more insurance carriers are driven out of the business or out of the state, what are people going to do when they can't get insurance period?"

Shriver said the state needs to completely reform its workers compensation system and how the courts handle such lawsuits. "Its not just a matter of bringing in more insurance companies," he said. "Even if you could find that coverage, could you afford it?"

State Insurance Commissioner Jane Cline said a variety of businesses in West Virginia have been facing similar insurance problems over the past several years. "There are companies having a difficult time obtaining available and affordable insurance," she said. "It is a problem we have been working on alongside the Legislature and we are trying to look at all the issues involved."

Cline said insurance problems affect more than just oil and gas drillers. Most small businesses as well as those in the manufacturing and transporting industry have faced insurance issues in recent years. "We are working with the legislature to identify the differences in our laws that may be driving up the cost of insurance in West Virginia ," she said. "It is a hugely complex issue."

Cline said recent reforms to the state's medical malpractice insurance and workers compensation plan should also help alleviate some of the insurance burdens currently being felt by West Virginia businesses. "We need to see what the results of those reforms are," she said.

Regardless, critics say the situation will require much more study and action before it can be resolved. "I have had constituents who have called me and said they were trying to start a small business and can't get the insurance," Deem said, "and I don't know what to tell them."

"The biggest detriment to growth in West Virginia is our tort system," Harton said. "Companies are making decisions to come and to leave based on our tort system. This is going to run another industry out of this state."