Energy service industries have experienced significant growth in the last several years. Due to an increase in domestic energy production and more green energy initiatives, we have seen a major opportunity for agents to make energy-related insureds part of their books. These insureds range anywhere from large oil field operations to contractors focusing more on alternative energy sources. Beacon Hill Associates has experience working with a wide range of energy clients. We are here to help you—we can assist you in explaining the need for environmental coverage to these clients and seek the options that best suit them.
Energy Service and Support Contractors & Consultants
Energy risks include any clients you may have that are involved in the energy service and support industry. While contractors involved in oil field work may be the most often thought of when examining your books for insureds in the energy-related business, there is a broad spectrum of services that would fit into this category. From prep contractors and consultants to the lease cleanup crew, Beacon Hill can access a variety of markets for your clients involved in the following industries:
- Oilfield Consultants – Environmental emphasis, permitting, compliance, health, and safety type work including confined space entry and evacuation. SPCC Plans. Some drill site supervision as project manager but no down hole engineering.
- Loggers – Inspect, monitor, and analyze the data that is generated while drilling a wellbore. This will include looking at cuttings as well as testing for levels of oil or gas in the mud.
- Lease Preparation – Contractors who will clear sites, construct road, dig pits and lay on water lines in order for the drill rig to be brought onto the site and start drilling. They are not involved in the drilling operations.
- Lease Clean up – Once a well site is finished, these contractors will dismantle the site and restore it to almost its original state. May include fencing in equipment and/or regular ongoing maintenance of the site.
- Emergency Response – Spill response contractors who clean up spills and accidents at the site and/or over the road. Would not include blow-out or well control.
- Pipeline – All types of pipeline contractors.
- Tanks – Contractors installing tanks/tank farms or gathering stations.
- Salt Water Disposal – SWD transporting companies.
- Refinery – Turnaround/maintenance contractors.
- Water Supply – Well drillers for fresh water supply at a well site.
- Facilities – Tank Farm Operators, Salt Water Disposal Operators, and Refining Operators.
Additional categories of acceptable energy contractors and consultants would include, but not be limited to:
- Roustabout contractors
- Oilfield cleanup contractors – after the drilling is done – plugging wells, equipment removal, site cleanup
- Salt water haulers
- Solar contractors
- Wind turbine contractors
- Geothermal contractors
- Alternative energy contractors – construction of biodiesel facilities
- Dirt work contractors
- Oil field electricians
- Flow line and pipeline contractors
- Compressor rental & installation
- Welding & tank battery construction
- Energy Auditors/Consultants – includes sustainable development, green building construction, LEEDs certification training
- Health & Safety Consultants – Oilfield
- Pipeline Consultants/Inspectors
- Consultants – Eyes & Ears type no direct control of subs
- Environmental Consultants
- Safety Consultants
- Mud Consultants
- Efficiency Consultants
- Drilling Consultants
- Analytical Laboratories
Coverage for Energy Related Risks
This will vary by class, but Beacon Hill can offer General Liability with Contractors Pollution and E&O where applicable; Stand Alone Contractors Pollution Liability; Fixed Site Pollution Liability for facilities, including GL; Auto with broadened pollution, both on a standalone and package basis; and Excess products.
Contractors Pollution Liability insurance (CPL) is coverage designed to protect from third party claims for damages caused by “Pollution Conditions” arising from the insured’s covered operations. Adding Mold coverage broadens the defined list of covered pollutants to include molds, funguses, etc.
The Contractors Pollution Liability/Professional Policy is a combined Pollution and Professional coverage form. It provides coverage to general contractors, construction managers, and various trade contractors who could potentially have both pollution and professional claims; CPL/Professional provides coverage for E&O exposures for contractors.
Site Pollution Liability insurance, also known as Premises Pollution, Environmental Impairment Liability (EIL insurance), and Pollution Legal Liability (PLL), is designed to cover claims arising from pollution releases at, on, or emanating from a specific scheduled location.
Transportation Pollution Liability, or TPL, is “over the road” pollution insurance. It covers insureds who need protection for pollution conditions caused by transportation. This coverage can also include loading/unloading should the insured’s cargo create a pollution condition.
When writing General Liability we may be able to entertain commercial auto or motor carrier insurance coverage. The policy can also insure against over the road spill clean-up exposures and provide any necessary motor carrier federal and state filings.
Our carriers that write GL can also entertain a follow form excess policy. In addition to higher limits on the gl they can attach over pollution, auto liability and employers liability provided the underlying carriers meet their minimum rating and limit requirements.
Below are a few examples of policies that Beacon Hill has been successful in writing for energy related risks.
- $4.5M Gas processing plant construction
Coverage purchased: General Liability and Site Pollution Liability
Policy limit: $1M/$2M
Premium = $28,500
- $8M Oil & gas equipment manufacturing and installation company
Coverage purchased: General Liability, Contractors Pollution Liability, Professional, Products Pollution and Excess
Policy limit: $1M/$2M Primary, $5M Excess
Premium = $48,794
- Oil & gas lease operator with a 1,387 well exposure
Coverage purchased: Site Pollution Liability
Policy limit: $5 mil / $5 mil with a $250k Deductible
Premium = $554,700
Fuel oil from an oil refinery was found to have leaked from below ground sewer hubs that were connected to aboveground storage tank drains. By the time the leak was discovered, contamination was detected in three groundwater plumes and on-site groundwater was also contaminated. The refinery paid nearly $5 million in cleanup costs and attorney fees.
A petroleum distributor was enjoined into a lawsuit involving the neighboring industrial park and adjacent residential communities. The residential communities were concerned over air emissions that caused loss of property value, loss of enjoyment and perceived bodily injury. Although the petroleum distributor was not found liable, the investigation, laboratory and legal costs exceeded $520,000. Because the standard general liability carrier declined the claim based on an absolute pollution exclusion, the petroleum distributor now purchases all coverage lines, including Pollution and Remediation Legal Liability.
A power plant stored baghouse dusts containing heavy metals in an uncovered dumpster behind the facility. Whenever it rained, stormwater mixed with the dusts, forming a slurry that ran off-site. Soil testing of a nearby stream bed showed high levels of lead, cadmium and mercury. The contamination source was determined to be the dumpster run-off. The power plant was responsible for cleanup costs exceeding $250,000.
At a transfer station, vandals littered an area with debris and overturned drums of chemicals and maintenance fluids stored on-site. The vandalism went undetected for more than a week. The contents of the drums seeped into on-site and off-site soils and contaminated area groundwater and residential wells. Costs for property damage claims from nearby residents and for soil and groundwater cleanup exceeded $500,000.
Overcoming Hurdles when discussing Energy Risks with your Clients
I don’t need the coverage/I’m not required to carry it.
Insureds are being required to carry pollution coverage much more commonly now for contracts. Even if the insured does not currently have a project that requires this coverage, there is a high probability that a future job could be requiring this coverage. Having an insurance policy already in place with the proper coverage could also give the insured an advantage when competing on future bids.
I’ve never had a claim before, why do I need this coverage now?
Pollution coverage is most often not purchased for covering frequent, smaller instances but for much larger and unforeseen events. Just because a situation has not occurred yet for the insured to be concerned about having a pollution related claim does not mean there is an unknown incident that could potentially cause a pollution condition in the future. Energy related pollution claims are often not sudden or discovered immediately, they can take time to develop and be noticed.
Energy insurance is too expensive
While it may seem that pollution coverage may be a high-end product with a high-end price tag, the truth is that premiums can start as low as $2,500 and limits and deductibles can be adjusted to help your insured reach a price point that makes sense. Limits often start at $1mil/$1mil with $5,000 deductibles. Pollution related claims could involve years of clean-up with potential property damage, bodily injury and high defense costs.
The required application and underwriting information will vary on the insured and coverage being requested. (example: contractor, premises, and product supplemental) Please contact your Beacon Hill representative to discuss any opportunities.