Drilling operations to extract natural resources like oil and gas are essential in modern society. However, these activities involve huge risks and dangers if not properly controlled. Control of well insurance coverage provides specialized protection against the massive financial impacts that can result when drilling operations become uncontrolled.
What Is Control of Well Insurance Coverage?
Control of well insurance covers the costs and liabilities associated with regaining control of a well out of control. For oil and gas operators and drilling contractors, adequate well coverage control is vital for limiting financial exposure if a major incident occurs at a well site. This type of insurance helps manage the potentially catastrophic losses from an uncontrolled well event.
How Does Control of Well Insurance Work?
The basic purpose of control of well insurance coverage is protecting the insured against expenses and legal responsibilities that follow from an uncontrolled flow from a well. These uncontrolled flows, called blowouts, involve the unintended release of oil, gas, or fluids from a well. Blowouts can lead to explosions, loss of life, environmental pollution, and massive cleanup costs. They are often caused by equipment failures, human errors, or unexpected pressure surges during drilling.
What Does Control of Well Insurance Cover?
The main coverages of control of well insurance are costs to regain control of a well and resultant liabilities. This includes covering the extra expenses of specialized response teams brought in to help control the well. Policies typically insure:
- Redrilling costs to restore well control
- Expenses to contain and stop uncontrolled flows
- Pollution and seepage cleanup costs
- Personnel evacuation expenses
- Third-party legal liabilities
- Business interruption losses
Policies may also cover damage to operators’ equipment and extra costs incurred during an incident. The exact scope of coverage can vary between policies.
The Importance of Control of Well Insurance Coverage
Control of well insurance coverage is critical for oil and gas operators for several reasons:
- It protects against potentially enormous expenses to regain control and redrill a well after a blowout.
- It provides access to capital and credit to survive a financial crisis.
- It prevents potential bankruptcy from a catastrophic well control event.
- It preserves jobs for workers by ensuring the company’s financial viability after an incident.
Given the high costs and liabilities associated with loss of well control, this insurance is an essential risk management strategy for operators. Inadequate coverage could lead to bankruptcy from a single incident.
Key Coverages in Control of Well Insurance
Control of well insurance policies contain important coverages that provide protection in the event of a loss of well control. These key coverages work together to deliver comprehensive protection when regaining well control.
Redrilling and Restoring the Well
A primary aspect of control of well policies is covering costs to redrill, restore, or replace damaged downhole equipment and materials. This can include:
- Expenses to extract or replace equipment lost downhole
- Costs for casing, tubing, wellhead, and tools damaged or lost in the well
- Labor and rental costs for fishing operations
Pollution and Seepage Liability
Another major component is covering liability and costs from seepage or pollution resulting from an uncontrolled well. The scope of covered pollution depends on policy terms and may be limited by location or time. This can cover:
- Containment and cleanup costs for seepage or pollution from the well
- Third-party liability claims for property damage from seepage or pollution
- Testing and monitoring related to seepage or pollution
- Evacuation if pollution creates hazardous conditions
Evacuation Expense Coverage
Control of well policies also typically include necessary evacuation expenses, such as:
- Costs to evacuate personnel/property due to hazardous conditions
- Expenses incurred during the evacuation of personnel, equipment, or property
- Evacuation costs from seepage, pollution, or other hazardous conditions
When disaster strikes at your oil and gas site, inadequate insurance can lead to financial ruin. InSource Insurance Group can help you evaluate risks, find coverage gaps, and secure comprehensive, affordable control of well insurance coverage tailored to your business.
The Unique Coverage of Control of Well Insurance
Control of well insurance coverage is a specialized oil and gas industry policy. Unlike other common policies, it directly covers the costs and losses of controlling a well.
Control of Well vs. General Liability
General liability insurance covers third-party bodily injury and property damage claims. It does not cover first-party costs for controlling a well. General liability policies also commonly exclude pollution events related to operations. Control of well insurance coverage fills this gap by covering these first-party costs and pollution events.
Control of Well vs. Environmental Liability
Environmental impairment liability insurance covers third-party claims for environmental damage. Like general liability, it does not cover first-party expenses. It also excludes sudden well incidents like blowouts. Control of well insurance coverage is different because it covers first-party costs for events excluded by environmental policies, such as underground blowouts, cratering, or frac hits.
The Benefits of a Dedicated Well Control Insurance Policy
A dedicated well control insurance policy offers great advantages compared to more general policies. Here are a few of the key benefits:
- It provides protection wherever you operate, with worldwide coverage. Some policies only cover certain basins.
- The limits focus specifically on well control expenses, with no need to share limits with other coverages.
- You can customize the policy limits and terms to match your needs and risk exposure.
- Experienced claims specialists can provide loss adjustment services if an incident occurs. Their expertise helps ensure smooth claims resolution.
InSource Is Your Control of Well Insurance Expert
InSource Insurance Group is your control of well insurance coverage expert. With offices across Texas and Oklahoma, including in the Permian Basin, we understand the unique risks of the oil and gas industry. Our knowledgeable team provides tailored recommendations and affordable, comprehensive insurance policies to protect your business.
Contact us today for a control of well insurance quote from one of the nation’s top oil and gas insurance specialists.