Refinery Insurance Policy Information
Refinery Insurance. Oil refineries, also called petroleum refineries, are industrial plants in which crude oil is processed to create byproducts such as petroleum, gasoline, kerosene, and asphalt. In addition to complex processing plants, oil refineries will also feature large-scale storage facilities and a piping systems.
Refineries take unprocessed petroleum, fossil fuel or crude oil, add or treat it with chemicals, remove the natural gas, and then heat it to remove the excess water, moisture, waste solids, and contaminants.
Refineries may operate 24 hours a day, 7 days a week. Once the refining process is complete, the petroleum and natural gas usually are stored in large tanks in the yard until ready for transport. Some refineries use pipelines as a distribution method.
Since so much of the world economy depends on petroleum products, there is no question that oil refineries play a vital role in modern society. These operations also, however, face a wide variety of serious risks - and each mishap an oil refinery falls victim to may result in devastating financial consequences.
What types of refinery insurance coverage might these industrial operations require to protect themselves? For answers, keep reading.
Why is insurance important for refinery? What type of coverage do you need? Below, you'll find the answers to these questions and more so that you can make sure that you, your employees, the people that you serve - and your business as a whole - are properly protected.
Refinery insurance protects your petroleum refining business from lawsuits with rates as low as $747/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked oil refining insurance questions:
- What Is Refinery Insurance?
- How Much Does Refinery Insurance Cost?
- Why Do Refineries Need Insurance?
- What Type Of Insurance Do Refineries Need?
- What Does Refinery Insurance Cover & Pay For?
What Is Refinery Insurance?
Refinery insurance is a type of insurance policy that provides coverage to oil refineries and petrochemical plants for various risks such as property damage, business interruption, environmental damage, and liability for harm to third parties.
This insurance protects the facility, its employees, and the surrounding community from potential losses arising from accidents, natural disasters, or other unexpected events. The coverage can also include protection for storage tanks, pipelines, and equipment used in the refining process.
The purpose of refinery insurance is to minimize the financial impact of any unexpected events, allowing the refinery to continue operating with minimal disruption.
How Much Does Refinery Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small petroleum refiners ranges from $747 to $1079 per month based on location, size, revenue, claims history and more.
Why Do Refineries Need Insurance?
Given the value of the assets owned by oil refineries, this question answers itself loudly and clearly. Commercial ventures, generally speaking, require insurance for a variety of key reasons - to meet legal requirements, to secure lender cooperation, to protect themselves from the costs of property damage and loss, and to safeguard themselves against lawsuits.
Although oil refineries operate on a grander scale than many other businesses, they are, in this regard, no different.
Oil refineries could be impacted by serious accidents that lead to extensive property damage and environmental harm. They could be hard-hit by acts of nature like earthquakes and wildfires, which are difficult to predict and even harder to protect against. Various kinds of theft and vandalism, such as employee theft or digital data breaches, are other threats. Essential equipment may malfunction and require urgent repair or replacement.
Then, there are numerous liability risks. These may range from situations in which employees suffer work-related injuries or illnesses related to exposure to hazardous substances to third parties becoming hurt on the premises and alleging that the refinery's negligence was the cause.
Insurance plays an absolutely essential role in reducing the costs associated with all these, and other, perils that refineries may encounter, and as such, it is clear that petroleum refining operations need to consider their refinery insurance coverage options extremely carefully.
What Type Of Insurance Do Refineries Need?
Navigating the process of obtaining adequate commercial insurance is always a difficult task, but for a branch of industry as fraught with risk and uncertainty as the oil industry, the complexity increases.
Numerous factors, ranging from the location of the refinery to the shipping methods, and from the volumes processed to the value of a refinery's equipment and its number of employees, determine an oil refinery's insurance needs.
While commercial insurance brokers who specialize in the oil industry ultimately help an oil refining businesses craft the refinery insurance plan that will best serve them, these core types of insurance are usually always needed:
- Commercial Property - This form of insurance covers the costs of property damage and loss following perils such as acts of nature, accidents, theft, and fire. Because these policies are extremely diverse in what they cover, special attention should always be paid when selecting the best plan.
- Commercial General & Excess Liability - Commercial general liability coverage helps companies manage the legal costs associated with third party bodily injury and property damage claims. Companies engaged in activities with high risk profiles, such as oil refineries, will further require excess liability insurance. This additional insurance essentially picks up where general liability coverage runs out.
- Inland Marine - Designed to safeguard valuable goods, including crude oil and specialized equipment, as it they are transit, this form of refinery insurance will likewise be essential to oil refineries in case of collisions, other accidents, theft, and vandalism.
- Environmental Liability - To protect themselves from the exorbitant costs associated with lawsuits in which it is alleged that the company was responsible for inflicting damage to the environment, environmental liability insurance has an important function in managing the financial aftermath of potential spills and other incidents.
- Workers Compensation - This form of coverage protects both companies and their employees. Whether due to accidents that lead to physical trauma or occupational exposure to hazardous chemicals used in oil processing, workers' comp covers the costs arising from occupational injuries. That may mean medical bills and sick leave, but also, in the most extreme of circumstances, death benefits.
These are merely examples of the kinds of refinery insurance that petroleum refining companies need to carry to protect their financial health.
Commercial insurance brokers specializing in the oil industry are able to offer detailed advice to any individual refinery, based on their unique circumstances.
Refinery's Risks & Exposures
Premises liability exposure is extremely high due to the potential for a catastrophic event such as an explosion. While refineries are generally located away from residential and business areas, toxic chemicals could be dispersed over a wide area, damaging property and causing bodily injury.
Access to the refinery should be restricted by fences and adequate security monitoring as they may be targeted by environmental activists or terrorists.
Products liability exposure could be serious if a contaminant is introduced during the refining processed and passed on to consumers. Contaminated fuel can cause an engine to fail, which could be a problem with vehicles, but even more deadly with airline fuel. Quality control is critical. .
Environmental impairment exposure is severe due to the potential for air, water and ground pollution.
The industry's products are regulated by the Environmental Protection Agency (EPA) and are subject to rigorous standards regarding the composition of finished products, such as gasoline and diesel fuels. Disaster planning is critical to minimize the environmental effects of a chemical leak or an explosion.
Workers compensation exposures are extreme. Employees work with chemicals that can result in burns or eye, skin, or lung irritation. Falls from heights, cuts, burns, lung damage, and lifting injuries are possible.
An explosion could result in a large number of workers being killed. Since refineries may operate 24 hours a day, 7 days a week, adequate supervision is required for all workers.
Training, careful monitoring, use of safety equipment and adherence to strict disciplines are the only way to prevent accidents that can maim or kill.
Property exposure is extremely high because of the flammable gases and liquids that are part of the process. Explosions are the primary cause of refinery fires, and may result in loss of use of the entire facility. Ignition sources should be separated from areas where petroleum is being processed as a fire may result from a vapor leak.
Refining equipment is very expensive, and the value of finished goods continues to increase exponentially. While crude oil is not highly flammable, finished products such as gasoline or diesel fuel are highly combustible. Crude oil may take a while to begin burning but is incredibly difficult to extinguish.
Fire suppression systems and tight controls are part of any refinery. The potential for theft and vandalism can be high due to its value. Alarms, premises controls, and other security measures are needed to prevent unauthorized access.
Business income exposure is severe as the entire facility may be shut down after a loss. Rebuilding could take years, not months, and an alternative production facility is not likely to be available.
Equipment breakdown exposure is severe due to the use of boilers and heavy equipment during the refining process. Operators may be required to be licensed. Safety valves should be in place and tested regularly.
Crime exposure is from employee dishonesty. All ordering, billing and disbursements must be handled as separate job duties and regularly audited. Background checks should be conducted prior to hiring any employee. Physical inventories should be conducted on a regular basis.
Inland marine exposures include accounts receivable, computers, goods in transit, and valuable papers and records. High-valued computers may be used to run the refinery operations. Computers should be regularly inspected and data backed up.
Pipelines may extend over hundreds or thousands of miles of rough terrain. These are subject to weather conditions, vandalism, and natural disasters.
Commercial auto exposure is high if the operation does any pickup or delivery of unprocessed petroleum or finished products. All drivers transporting goods must have appropriate HAZ-MAT licenses, and their MVRs should be reviewed on a regular basis. Vehicles should be regularly maintained, with documentation retained.
An awareness of cleanup techniques should be required. Routes must be laid out to prevent potential overturns, which can result in high cleanup and decontamination costs. Private passenger vehicles may be provided to executives or sales representatives, requiring standards for personal use.
What Does Refinery Insurance Cover & Pay For?
Refineries can be sued for a variety of reasons, including but not limited to environmental damages, workplace accidents, product liability, and contractual disputes. Insurance policies can help protect refineries by providing financial coverage in case of legal actions. Here are some examples of reasons refineries can be sued and how insurance can assist in covering the costs:
Environmental damages: Refineries may be held responsible for pollution or contamination caused by their operations, such as air, water, or soil pollution. Environmental liability insurance can help cover the costs of cleanup, regulatory fines, and legal defense expenses, as well as any compensation awarded to claimants.
Workplace accidents: Employees or contractors may be injured while working at a refinery, leading to lawsuits related to workplace safety or workers' compensation. Workers' compensation insurance can help cover medical expenses, lost wages, and legal fees for employee claims, while general liability insurance can provide coverage for third-party claims, such as those made by contractors.
Product liability: Refineries can be sued if their products, such as gasoline or chemicals, cause harm to consumers or other businesses. Product liability insurance can help cover the costs of legal defense, settlements, or judgments related to claims of defective or hazardous products.
Contractual disputes: Disagreements between refineries and their suppliers, customers, or other business partners may lead to lawsuits over the terms and conditions of contracts. Commercial general liability insurance can help cover legal defense costs, as well as any damages awarded in the event of a breach of contract lawsuit.
Business interruption: Natural disasters, equipment failure, or other unforeseen events can disrupt refinery operations, leading to financial losses and potential legal claims. Business interruption insurance can help cover lost income and additional expenses incurred during the period of disruption, while property insurance can cover the costs of repairing or replacing damaged equipment or facilities.
In each of these cases, insurance can help refineries mitigate the financial risks associated with lawsuits by providing coverage for legal defense costs, settlements, or judgments. It is essential for refineries to work with insurance professionals to understand the specific coverage options available and tailor their policies to address the unique risks associated with their operations.
Commercial Insurance And Business Industry Classification
- SIC CODE: 2911 Petroleum Refining
- NAICS CODE: 324110 Petroleum Refineries
- Suggested Workers Compensation Code(s): 4740 Oil Refining - Petroleum & Drivers
Description for 2911: Petroleum Refining
Division D: Manufacturing | Major Group 29: Petroleum Refining And Related Industries | Industry Group 291: Petroleum Refining
2911 Petroleum Refining: Establishments primarily engaged in producing gasoline, kerosene, distillate fuel oils, residual fuel oils, and lubricants, through fractionation or straight distillation of crude oil, redistillation of unfinished petroleum derivatives, cracking or other processes. Establishments of this industry also produce aliphatic and aromatic chemicals as by-products. Establishments primarily engaged in producing natural gasoline from natural gas are classified in mining industries. Those manufacturing lubricating oils and greases by blending and compounding purchased materials are included in Industry 2992. Establishments primarily re-refining used lubricating oils are classified in Industry 2992. Establishments primarily engaged in manufacturing cyclic and acyclic organic chemicals are classified in Major Group 28.
- Acid oil, produced in petroleum refineries
- Alkylates, produced in petroleum refineries
- Aromatic chemicals, made in petroleum refineries
- Asphalt and asphaltic materials: liquid and solid produced in
- Benzene, produced in petroleum refineries
- Butadiene, produced in petroleum refineries
- Butylene, produced in petroleum refineries
- Coke, petroleum produced in petroleum refineries
- Ethylene, produced in petroleum refineries
- Fractionation products of crude petroleum, produced in petroleum
- Gas, refinery or still oil produced in petroleum refineries
- Gases, liquefied petroleum produced in petroleum refineries
- Gasoline blending plants
- Gasoline, except natural gasoline
- Greases, lubricating: produced in petroleum refineries
- Hydrocarbon fluid, produced in petroleum refineries
- Jet fuels
- Mineral jelly, produced in petroleum refineries
- Mineral oils, natural: produced in petroleum refineries
- Mineral waxes, natural: produced in petroleum refineries
- Naphtha, produced in petroleum refineries
- Naphthenic acids, produced in petroleum refineries
- Oils, partly refined sold for rerunning produced in petroleum
- Oils fuel, lubricating, and illuminating produced in petroleum
- Paraffin wax, produced in petroleum refineries
- Petrolatums, produced in petroleum refineries
- Petroleum refining
- Propylene, produced in petroleum refineries
- Road materials, bituminous: produced in petroleum refineries
- Road oils, produced in petroleum refineries
- Solvents, produced in petroleum refineries
- Tar or residuum, produced in petroleum refineries
Refinery Insurance - The Bottom Line
To learn more about the exact types of refinery insurance policies you'll need, how much coverage you should carry and the costs, consult with a reputable agent that is experienced in commercial insurance.
Additional Resources For Miscellaneous Insurance
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Businesses need insurance for several reasons. Firstly, insurance protects businesses from potential financial losses that may result from unexpected events, such as accidents, natural disasters, or lawsuits. This financial protection can help businesses recover from unexpected events and continue to operate.
Secondly, business insurance can provide businesses with liability protection. This means that if a business is sued for damages or injuries that occurred on their property or as a result of their products or services, the insurance company will cover the legal costs and damages. Without insurance, businesses may have to pay these costs out of pocket, which can be financially devastating.
Thirdly, commercial insurance can also provide businesses with peace of mind. When businesses have insurance, they can focus on running and growing their business without constantly worrying about potential financial losses or legal issues.
Finally, business insurance can also be a requirement for certain businesses. For example, many businesses that work with the government or large corporations may be required to have certain types of insurance in order to do business with them.
In conclusion, businesses need insurance for financial protection, liability protection, peace of mind, and to meet certain requirements. It is an important aspect of running a successful business and can help ensure the long-term stability and growth of the company.