oil and gasOil and gas insurance classifications located on the second page of the general liability policy determines the premium for the insured. Classifications identify job descriptions and measure exposures through payroll and receipts. Sometimes these classifications are ambiguous and create challenges for insurance company underwriters. Employees can actually do several jobs within the servicing contracting areas, like truck driving, drillers, pumpers, lease work and roustabout work. Insurance agents need to analyze risk control reports and have in depth discussions with their insureds and insurance company auditors and underwriters to determine the correct payroll classification designations.

Some employees may provide employers with multiple talents and may need their payrolls split between job duties. For example some employees may actually provide roustabout work, as well as truck driving duties, therefore split payrolls actually more accurately measure exposure. Auditors have the final say.

Oil and gas lease operators can also benefit by agent and auditor consultation when operators provide accounting or general administrative services for other unrelated or non-operating oil and gas companies properties. At audit time, these general and administrative non-operating working interest owners (NOWI) must be separately accounted for or over reporting and overpaying can occur. An insurable interest must exist for insurance companies to charge a premium. This means there must be ownership involved, further establishing that non operator charges, can only accrue from operators, not accounting or administration agents. The agent or general and administrative company can bill the non op premium on the JIB, (joint interest billing statement) but it should be returned to the operator, as this is where the premium charge originates and coverage is applied.

Investors or non-operating working interest owners (NOWI) are defined as insureds under the general liability policy of the operator. This coverage is granted by OG 001 (Travelers form or other ISO form) which is part of the policy. These (NOWI) investors are covered under the general liability policy for their respective interest or percentage in the well. However, it is usually recommended from insurance carriers that (NOWI) investors maintain their own general liability policy when dealing with operators who might not have sufficient limits or specific coverages needed to correctly insure all interested parties. Liability limits can be exhausted in certain situations, or coverage limitations can exist, therefore it is extremely important for all (NOWI) investors to review the operator’s policies and coverages, because the operator’s coverage is primary and applies for the NOWI
investor, prior to his excess non operator individual policy.

Typically if the operator is a larger and sophisticated company, they will have the broadest coverage such as pollution, umbrella and buy back coverages included in their respective insurance program. Having an experienced \ agent to navigate and negotiate these coverage and pricing nuances is very important for the oil and gas client. Oil and gas companies make up a large portion of business for Jordan Insurance Group and our expertise in this line of business helps us grow our oil and gas book of business on an annual basis.

Call us to discuss your individual needs. We have the carriers and consultants to make your insurance program an asset for your company.