Oil And Gas Well Drilling Contractors Insurance Policy Information
Oil And Gas Well Drilling Contractors Insurance. Oil and gas wells are impressive structures constructed with the help of boring operations deeply into the Earth, at carefully-chosen locations, to extract petroleum and natural gas.
Well drilling contractors dig, drill, or repair wells to provide gas or oil. Prior to drilling, a geological study is done to verify the presence of fuels and potential impact to surrounding areas.
Once a site has been granted the necessary permits, the land must be cleared and leveled, access roads must be built, lined pits must be dug to dispose of rock cuttings and mud resulting from drilling, and adequate electrical and water supplies must be located to support the drilling operations.
The drilling contractors will excavate a rectangular area in the ground where the drilling rig is set up. Then they set up the derrick (tower used to give leverage), open a shaft for the pumping equipment and piping, and secure the opening.
The basic process involves a large-diameter bit attached to a drilling pipe. Heavy metal tubes called collars are attached around the drilling pipe to add weight and force the bit deeper. Moist clay-based drilling mud is pumped through the pipe to cool the bit and carry the rock cuttings and samples to the surface for testing.
At pre-set depths, the segments of the piping are removed, and the contractor installs and seals the casing. Casing piping is thick, precast concrete set in sections to prevent collapse in the drilling line. This process is repeated until the samples from the drilling mud show that the oil reservoir has been reached.
If the contractor is involved with offshore drilling rigs, the significant and unique exposures that exist can be handled by specialty carriers. The contractor may remove tubing and other parts from abandoned wells and seal off those that are no longer productive.
The use of hydraulic fracturing, or fracking, to access oil and gas is very controversial due to the use of high-pressure water or other liquid to force cracks into underground rock beds, which may release methane or other pollutants or increase seismic activity. Fracking has been prohibited in several states.
With much of modern society relying on oil and gas, the companies that drill these oil and gas wells - oil and gas well drilling contractors - undoubtedly play a vital role in the global supply chain and economy.
The activities of oil and gas well drilling contractors are both highly specialized and skilled, and it will surprise nobody that this branch of commerce carries a significant amount of risk with it as well.
While proactive measures designed to improve health and safety certainly help mitigate risks, well diggers always need to be prepared for unexpected circumstances. What kinds of oil and gas well drilling contractors might be needed to protect their business interests? Discover more in this brief guide.
Oil and gas well drilling contractors insurance protects well diggers from lawsuits with rates as low as $97/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked gas and oil well drilling insurance questions:
- What Is Oil And Gas Well Drilling Contractors Insurance?
- How Much Does Oil And Gas Well Drilling Contractors Insurance Cost?
- Why Do Oil And Gas Well Drilling Contractors Need Insurance?
- What Type Of Insurance Do Oil And Gas Well Drilling Contractors Need?
- What Does Oil And Gas Well Drilling Contractors Insurance Cover & Pay For?
What Is Oil And Gas Well Drilling Contractors Insurance?
Oil and gas well drilling contractors insurance is a type of insurance coverage specifically designed for companies that specialize in drilling for oil and gas. This coverage provides protection for the contractors and their employees against the financial losses that can result from accidents, injuries, or damage to equipment and property that may occur while drilling.
This insurance typically includes general liability coverage, workers' compensation coverage, commercial property coverage, and coverage for damage to third-party property. The coverage also may include protection against environmental liabilities, such as pollution caused by spills or leaks during the drilling process.
How Much Does Oil And Gas Well Drilling Contractors Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small well drillers ranges from $97 to $139 per month based on location, size, revenue, claims history and more.
Why Do Oil And Gas Well Drilling Contractors Need Insurance?
Regardless of its branch of commerce, all commercial ventures are constantly exposed to a wide variety of risks. Some are minor, while others are associated with such exorbitant costs that they could easily deal a fatal blow to the future of the business.
Not only do oil and gas well drilling contractors face some of the same hazards common to nearly all businesses, they also have to consider a substantial number of risks unique to this industry.
Employees in this line of work may, for instance, fall victim to a large number of occupational injuries and illnesses, ranging from falls to injuries associated with operating heavy machinery, and then hold the company liable. Oil and gas well drilling companies can be faced with lawsuits resulting from concerns about damage to the environment.
In addition, the office premises of these companies remain vulnerable to universal risks such as acts of nature (wildfires, earthquakes, and so on), theft, and vandalism, and essential equipment, such as drilling rigs, may malfunction and require urgent repair or replacement.
These perils - and countless others well diggers could be faced with - are all associated with massive expenses that could, without oil and gas well drilling contractors insurance coverage, prove to be overwhelming. In addition to meeting legal requirements, this is the most pressing reason to carefully evaluate insurance needs.
What Type Of Insurance Do Oil And Gas Well Drilling Contractors Need?
Unfortunately, there is no straightforward answer to this question - each company engaged in oil and gas well drilling will have unique requirements that depend, among other factors, on the jurisdiction in which they are based, the size and scope of their operation, the value of their equipment, and their number of employees.
That is why it is always crucial for companies to consult a reputable commercial insurance broker. Among the core kinds of oil and gas well drilling contractors insurance needed are, meanwhile:
- Commercial Property - In the event that commercial premises fall victim to perils like acts of nature, vandalism, and theft, the resulting damage to the building and smaller assets within will be covered, making repair and replacement costs easier to manage.
- Commercial General Liability - To protect against the legal costs, such as attorney fees and medical bills, associated with third party bodily injury and property damage claims resulting from general circumstances (of such a nature that they could have happened anywhere), commercial general liability insurance is vital.
- Environmental Liability - This type of oil and gas well drilling contractors insurance will help well diggers manage the legal and settlement costs arising from lawsuits alleges that the company caused environmental damage.
- Equipment Breakdown - This kind of coverage is designed to help companies cover the, often massive, costs arising from the sudden breakdown of important and large equipment.
- Workers Compensation - Employees within the oil and gas drilling industry face significant risks. If an employee sustains a work-related injury or illness, this form of insurance covers their medical costs along with any income they lose due to related absences from work. Should the worst come to pass, workers comp further covers death benefits.
Because well drilling companies are likely to have further insurance needs, whether in the form of excess liability or commercial auto coverage, it is vital for these companies to carefully consider their oil and gas well drilling contractors options with the help of a commercial insurance broker who understands their industry.
Oil And Gas Well Drilling Contractors' Risks & Exposures
Premises liability exposures at the contractor's office are generally limited due to lack of public access. Outdoor storage may present vandalism and attractive nuisance hazards.
At the job site, drilling and construction of derricks pose numerous hazards. The area of operation should be restricted by barriers and proper signage to protect the public against trips and falls over debris, equipment, or uneven ground. Construction sites create an attractive nuisance hazard, especially if work is close to residential areas.
Drilling can result in cutting utility cables, damaging property of the utility company and disrupting service to neighboring residences or businesses. Absence of detailed procedures to determine utility locations and to research prior uses of the land before drilling may indicate a morale hazard.
Drilling may strike and ignite gas pockets that can explode unless controls are in place. Upfront geological research and knowledge of the site history is imperative.
Personal injury exposures include assault and battery and invasion of privacy. Background checks should be conducted for any employee who will have regular contact with customers. The use of subcontractors as well as any contractual liability exposures should be examined.
Completed operations exposures may arise from faulty workmanship or improper installation if the well does not supply oil as expected. Improperly installed wells may result in contamination, leaks, property or water damage. Submersible pumps are expensive to replace.
Environmental impairment liability exposures are very high. Drilling may impair groundwater, the dust generated may affect persons and livestock, and disposal of rock cuttings may contaminate water and soil. Hydraulic fracking may pollute air, cause corrosion to metal objects, or be a contributing factor for earthquakes or climate change.
Spillage or leakage of oil or pollutants can result in high cleanup costs and fines. Special permits and approvals must be obtained prior to drilling. The oil digger must adhere to all federal, state and municipal regulations.
Proper written procedures and documentation of both the transportation and disposal process is important. Lack of contingency and containment plans may indicate a morale hazard.
Workers compensation exposures are severe. Back injuries, hernias, sprains and strains can occur from lifting, material handling, or working from awkward positions. Overturn of equipment can result in severe injury or death from crushing or suffocation.
Cumulative exposure to the high-decibel operations may result in permanent hearing impairment. Work with hand tools can result in injury such as cuts, scrapes, or puncture wounds.
Underground hazards may arise from striking objects or utilities, the collapse of retaining or holding walls, mudslides and landslides, underground water, and sinkholes. Any contact with utilities, specifically electrical cables or gas lines, can cause injury from explosion, electrocution, or inhalation of caustic substances.
Additional sources of injury include foreign objects in the eye, repetitive motion injuries, temperature extremes, and auto accidents during transportation to and from job sites. Special hazards may include work at heights, over water, or in remote locations with limited access to medical facilities.
Fire or explosion can occur at the oil or gas well site affecting inland marine, premises liability, and workers compensation. The absence of good maintenance, proper use of basic safety equipment, such as steel-toed shoes, hearing and eye protection, and strict enforcement of safety practices may indicate a morale hazard.
State and Federal jurisdictional issues may arise in the case of offshore rigs and outer continental locations. It is important to know whether the Longshore and Harbor Workers Act or the Outer Continental Shelf Act applies.
Property exposures at the contractor's own location are usually limited to an office operation and a yard for storage of materials, equipment, and vehicles. There may be extensive computer or laboratory equipment requiring up-to-date electrical wiring.
The equipment and material in the yard is not normally susceptible to damage by fire or weather, but may be subject to vandalism. Scientific devices are subject to breakage and mechanical breakdown.
Welding presents a heavy fire exposure and should be conducted away from flammables. Any flammable chemicals or oxygen tanks must be properly labeled, separated, and stored in approved containers, cabinets, and rooms away from combustibles.
Equipment breakdown exposures are very high. Well digging is dependent on power that is often supplied by generators set up for the project. Breakdown losses may affect the generators as well as electrical control panels and other apparatus.
Breakdown and loss of use to the production machinery could result in severe loss, both direct and under time element.
Inland marine exposures include accounts receivable if the driller offers credit to customers, computers for diagnostic testing and tracking inventory, contractors' equipment taken to job sites, and valuable papers and records for customers' and suppliers' information.
Much of the computerized testing and measuring equipment used is costly and may be susceptible to damage or loss from theft by third parties or employees. Backup copies of all data should be stored off premises.
Drilling equipment can be large and difficult to transport without adequate loading, tie-down, and unloading procedures.
Ground at the drilling site may be uneven. Equipment may strike underground objects, strike utility cables, fall into holes or pits, slip or fall into mud, water, or sinkholes, be damaged in rock, land or mud slides, or burst into fire from overload. Derricks and related equipment may be subject to collapse or damage by high winds or flood surge.
Equipment left at job sites may be targets for theft and vandalism.
Ocean marine exposure will exist if there are offshore oil rigs. Work begins by setting up and operating the drilling rig from a ship or barge, then ends with the erection of the production platform which is used for the actual extraction once oil has been found. Specialty coverages will be needed.
Crime exposures are from employee dishonesty, including theft of customers' goods by the contractor's employee. Background checks, including criminal history, should be obtained on each employee prior to hiring. Ordering, billing, and disbursement should be handled as separate duties with reconciliations occurring regularly.
Commercial auto exposures can be high due to transportation of materials, bulky machinery, and equipment which may require special tie-down procedures. Much of the driving is done on temporary access roads, increasing the risk of collision and overturn.
All drivers must be well trained and have valid licenses for the type of vehicle being driven. MVRs must be run on a regular basis. Random drug and alcohol testing should be conducted. Vehicles must be well maintained with records kept in a central location.
If debris includes hazardous waste, spillage can result in damage to the environment. Drivers should be aware of and be able to perform cleanup procedures in the event of a collision or vehicle overturn.
What Does Oil And Gas Well Drilling Contractors Insurance Cover & Pay For?
Oil and gas well drilling contractors can be sued for various reasons, including:
Personal injury: Workers or third-party individuals may sustain injuries while working on or around the drilling site. Injuries can range from minor cuts and bruises to serious accidents resulting in disability or death. If a worker is injured on the job, the contractor's workers' compensation insurance can cover medical expenses, lost wages, and rehabilitation costs. If a third-party individual is injured, the contractor's liability insurance can cover legal fees, settlement costs, and damages awarded to the plaintiff.
Property damage: The drilling process can cause damage to nearby properties, including homes, businesses, and natural resources like water sources. If a drilling accident causes damage to nearby properties, the contractor's property damage insurance can cover repair or replacement costs.
Environmental damage: Oil and gas drilling can have a negative impact on the environment, such as pollution of air, water, and soil. If the drilling process causes environmental damage, the contractor's pollution liability insurance can cover cleanup costs and damages awarded to the plaintiff.
Breach of contract: A contractor may be sued for breach of contract if they fail to deliver services as outlined in the contract. If a contractor is sued for breach of contract, their professional liability insurance can cover legal fees, settlement costs, and damages awarded to the plaintiff.
Negligence: A contractor may be sued for negligence if they fail to take reasonable precautions to prevent accidents or damage. If a contractor is sued for negligence, their general liability insurance can cover legal fees, settlement costs, and damages awarded to the plaintiff.
In summary, insurance can provide valuable protection to oil and gas well drilling contractors by helping to cover the costs of lawsuits and damages. It is essential for contractors to obtain adequate insurance coverage to protect themselves and their businesses from financial losses resulting from lawsuits.
Commercial Insurance And Business Industry Classification
- SIC CODE: 1381 Drilling Oil And Gas Wells
- NAICS CODE: 213111 Drilling Oil and Gas Wells
- Suggested Workers Compensation Code(s): 6235 Drilling or Redrilling of Oil or Gas Wells & Installation of Casing, Drivers
Description for 1381: Drilling Oil And Gas Wells
Division B: Mining | Major Group 13: Oil And Gas Extraction | Industry Group 138: Oil And Gas Field Services
1381 Drilling Oil And Gas Wells: Establishments primarily engaged in drilling wells for oil or gas field operations for others on a contract or fee basis. This industry includes contractors that specialize in spudding in, drilling in, redrilling, and directional drilling.
- Directional drilling of oil and gas wells on a contract basis
- Redrilling oil and gas wells on a contract basis
- Reworking oil and gas wells on a contract basis
- Spudding in oil and gas wells on a contract basis
- Well drilling gas, oil, and water intake: on a contract basis
Oil And Gas Well Drilling Contractors Insurance - The Bottom Line
To discover the exact types of oil and gas well drilling contractors insurance policies you'll need, what coverage limits you should carry and the associated costs - speak with a reputable broker that is experienced in commercial insurance.
Additional Resources For Contractors & Home Improvement Insurance
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The contracting industry is a field that involves a lot of risks, both for the contractor and for the clients they work for. This is why commercial insurance is so important for contractors. Insurance can protect contractors from a variety of potential losses, such as:
Liability: If a contractor causes damage to a client's property or if a client is injured while on a job site, the contractor could be held legally responsible. Liability insurance can cover legal fees and any settlements or judgments that may be awarded.
Property damage: Contractors often use a lot of expensive equipment and tools, and there is always a risk that this equipment could be damaged or stolen. Commercial property insurance can help cover the cost of replacing damaged or stolen equipment.
Business interruption: If a contractor is unable to work due to an unforeseen event, such as a natural disaster, insurance can help cover their lost income during this time.
Workers compensation: If a contractor or one of their employees is injured on the job, worker's comp can help cover medical expenses and lost wages.
Overall, commercial insurance is an important risk management tool for contractors. It can provide financial protection against a wide range of potential losses, helping contractors to stay in business and continue serving their clients.
Minimum recommended small business insurance coverage: Business Personal Property, Employee Dishonesty, Contractors' Equipment and Tools, General Liability, Employee Benefits Liability, Umbrella Liability, Automobile Liability and Physical Damage, Hired and Non-owned Auto & Workers Compensation.
Other commercial insurance policies to consider: Building, Business Income with Extra Expense, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Accounts Receivable, Builders Risk, Computers, Goods in Transit, Installation Floater, Valuable Papers and Records, Cyber Liability, Employment-related Practicesand Stop Gap Liability.