Oil drilling is a high risk, high reward business. Any number of things can go wrong during the delicate process that can sully profits and turn significant investments into liabilities in the blink of an eye. Whether an incident was caused by an employee’s mistake, faulty equipment or just a stroke of bad luck, without proper coverage entire operations or even entire companies can be jeopardized.
Hiring a Drilling Contractor
For this reason, always ensure that the drilling contractor you work with has the coverage they need to protect your assets and prevent liabilities that are all too real in the industry. Any contractor worth their salt will be well aware of such risks, and they should carry adequate insurance as the mark of a true professional. Otherwise, one contract can see millions in profits go down the drain.
The Insurance Coverage Drilling Contractors Need
Before you hire a driller, you will want to not only examine their credentials but also the amount of insurance coverage they have on hand. In order to completely protect against common risks, drilling contractors should carry the following types of policies:
- General Liability to protect against the costs of physical injuries, medical expenses, property damage or losses related to defamation
- Excess liability also known as umbrella coverage to extend payment coverage amounts in extreme incidents and also cover incidents not explicitly declared in a general liability policy
- Errors and Omissions (E&O) or professional liability insurance to protect against mistakes made during the course of work, the planning stages or after production starts
- Workers Compensation so that any injuries or illnesses sustained while on the job will be covered, including employees of the drilling contractor
- Commercial auto insurance to cover heavy equipment and transport equipment, as well as damages caused by employees driving company vehicles
Insuring Against Pollution
While heavy losses can cripple a company, incidents that pollute can make front page news and damage reputations for a lifetime. Errors and Omissions insurance can protect against most forms of professional mishap, but for severe incidents specific coverage is needed.
Cleanup, repairs and litigation costs will all be needed if the incident extends beyond the norms of the industry. Incident-specific coverage can protect businesses from costs such as these that are associated with a major spill or catastrophic failure.
Unique Coverage for a Unique Job
The oil industry is capable of bringing great prosperity to any who are willing to work hard to earn it. Some sites require patient, long-term planning to develop. Surveying, testing and exploring all occur well before the first drill team ever enters the picture. Once drilling is ready to start, setting up the equipment and laying down the pipes needed will take days, weeks or even months depending on the site.
Only after a significant period can drilling start and production begin. Even after that, the payoff does not occur until the crude is safely at the refinery. Transport and storage present their own set of risks.
Ensure that one team will not throw a kink in your supply chain. Drillers are some of the most important workers to the crude production process, so only hire those who can demonstrate financial responsibility and the willingness to never make their own liabilities your problem.