Category: Casual and Artisan Contractors
SIC CODE: 1389 Oil and Gas Field Services, Not Elsewhere Classified
NAICS CODE: 213112 Support Activities for Oil and Gas Operations
Suggested ISO General Liability Codes: 98152, 98153, 98154, 98155, 98156, 98159, 98160, 98161, 98162, 98163, 98164
Suggested Workers Compensation Code: 1322, 6206, 6214, 6216, 6236, 6237
Description of operations: Oil and gas well operations are supported by a number of specialty contractors. While each specialty job or service is unique, many of the exposures are the same because they all take place at the well itself. Services can be provided before, during or after the well is active. Acidizing involves pumping acid into a well in order to break down heavy oil. Casing involves placing a sleeve around the drilled hole to prevent cave in. Cementing involves pouring cement into the casing sleeve as a way to protect against explosion. Perforating is putting holes into the casing so that fluid can flow through it and be pumped in or out. Cleaning or swabbing a well is done to either reopen it or to increase production.
Property exposures at the specialty contractor's premises generally consist of an office and a yard for storage of materials, equipment and vehicles. If the contractor has research and training facilities, the exposure to fire, smoke, water damage, and theft increases. Scientific devices and other specialty equipment may present unique loss exposures including breakage and equipment breakdown. Equipment should be stored in a fenced and secure area to prevent theft. Business income exposures should be examined carefully if certain equipment cannot be replaced easily or quickly.
Crime exposures include employee theft of equipment and funds. 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. Jobsite ordering should be monitored carefully and inventory receipts verified. Audits should be conducted at least annually.
Inland marine exposures include accounts receivable if the contractor offers credit to customers, contractors’ equipment used in operations, goods in transit for materials being transported to and from job sites and storage locations, installation floater, and valuable papers and records for customers' information such as installation specifications and maintenance contracts. Machinery and equipment transported may be large or present unique or difficult transportation exposures. The training provided to drivers and haulers is extremely important and must be evaluated carefully, especially with respect to loading, tie-down and unloading procedures.
Equipment kept at jobsites is subject to potential well blowout and weather conditions such as tornados, hurricanes, ice and snow. Since these sites are usually occupied around-the-clock, theft potential from outsiders is limited. Equipment can be difficult to track when there are numerous jobsites at isolated locations. Inventory controls are critical.
Premises liability exposures at the contractor’s office are generally limited due to lack of public access. Outdoor storage may create vandalism and attractive nuisance hazards. At the job site, exposures can be significant or relatively limited, depending on the service provided. Services such as perforating and cementing have a direct impact on drilling operations and the potential for explosion. Other services are less directly involved and present a lower exposure. It is important to understand the specific service provided and what could happen if the contractor fails to perform its duties properly.
Environmental impairment exposures are comparatively limited for most service contractors because the oil and gas well operator is primarily responsible for environmental impact at the job site. There may be a secondary exposure for any service contractor that cleans and closes a site that is tapped out or was unsuccessful, particularly if they have violated environmental regulations. Work contracts should spell out the responsibilities of the oil and well operator and the service contractor.
Automobile exposures are high due to the transportation of heavy equipment. 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.
Common hazards include back injuries from lifting and material handling, cuts and punctures from hand tools, and slips and falls due to oily and wet conditions at the jobsite. The use, misuse, maintenance and transportation of large, heavy machinery can result in severe injury or death. Work done on ladders and scaffolds can result in falls, being struck by falling objects, sudden gusts of wind, and other adverse weather conditions. The danger is reduced if there is good maintenance of scaffolds and other equipment, proper use of protective equipment, and strict enforcement of safety practices. Work performed in remote locations limits quick access to medical assistance in the event of an injury. Service contractors must often work under time constraints and deadlines that may involve working on equipment while it is operating. These conditions may cause employees to disregard safety procedures in order to accomplish their tasks, which could result in severe injury or death if an explosion or fire results from an error.
Minimum recommended coverage:
Business Personal Property, Employee Dishonesty, Accounts Receivable, Computers, Contractors’ Tool and Equipment Floaters, Valuable Papers and Records, General Liability, Employee Benefits Liability, Umbrella Liability, Automobile Liability and Physical Damage, Hired and Nonownership Auto Liability, Workers Compensation
Other coverages to consider:
Building, Business Income with Extra Expense, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Cyberliability, Employment-related Practices Liability, Environmental Impairment Liability, Stop Gap Liability
