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The Importance of Excess Liability Coverage in the Oil and Gas Industry

Sep 11, 2024

Business Insurance

excess liability coverage excess liability coverage

The oil and gas industry is known for its complex operations, high-risk environments, and potentially significant financial losses. Each stage comes with its own set of risks, from drilling and refining to transportation. Because of this, standard insurance policies may not fully protect oil and gas companies from large-scale claims. Excess liability coverage provides an extra layer of financial protection, ensuring your business is shielded from potentially catastrophic liabilities.

What is Excess Liability Coverage?

Excess liability coverage, sometimes referred to as umbrella insurance, is a type of policy that kicks in when the limits of your primary liability policies have been exhausted. For example, suppose your company faces a lawsuit that exceeds the coverage limits of your general liability policy. In that case, excess liability coverage will cover the remaining amount up to its limit. This type of coverage is especially useful in high-risk industries like oil and gas, where accidents, environmental damages, and legal disputes can result in multimillion-dollar claims.

The Risks and Liabilities in the Oil and Gas Industry

The oil and gas industry is fraught with risks that can lead to massive financial consequences. The potential liabilities are immense, from environmental damage and pollution to employee injuries and equipment failure. Companies face risks such as:

  • Accidents and injuries: The dangerous nature of oil extraction and transportation can lead to injuries or fatalities, which can result in expensive workers’ compensation claims or lawsuits.
  • Environmental damage: Spills, leaks, or other environmental incidents can lead to extensive cleanup costs, penalties, and legal action.
  • Third-party damages: If equipment malfunctions or operations cause harm to third-party property or individuals, your business could be held liable.

Given these risks, having sufficient liability protection is essential. Standard liability policies often have insufficient coverage limits for handling such large-scale claims.

How Excess Liability Coverage Protects Oil and Gas Companies

Excess liability coverage ensures that your company is protected from financial losses that exceed the limits of your existing insurance policies. Excess liability serves as a safety net in the oil and gas industry, where a single accident could lead to millions of dollars in damages or lawsuits. Without it, your business may be forced to cover the costs out of pocket, potentially risking the company’s financial stability. Excess liability coverage applies to several types of liability insurance, including:

  • General liability
  • Employer’s liability
  • Pollution liability
  • Auto liability

By adding excess liability, you effectively increase the protection available across these policies.

Benefits of Excess Liability Coverage for Risk Management

The benefits are:

  1. Enhanced Financial Protection

    Excess liability coverage protects against large claims that could otherwise bankrupt your company. Knowing you have coverage for worst-case scenarios lets your business operate with peace of mind.

  2. Safeguards Against Unpredictable Events

    Excess liability coverage offers a buffer against unexpected, high-cost incidents in an industry where accidents are often unpredictable. Whether it’s an environmental catastrophe or a major lawsuit, you’ll have the financial support you need.

  3. Compliance with Industry Contracts

    Many oil and gas contracts require companies to carry a certain level of liability coverage. Having excess liability coverage can help your company meet contractual obligations and remain competitive.

Protect Your Oil and Gas Company with Anderson Insurance Affiliates

Ensure your oil and gas company is fully protected with excess liability coverage from Anderson Insurance Affiliates. Our team of experts understands the industry’s unique challenges and can help you find the right coverage to manage risk effectively. Contact us today to learn more about how we can safeguard your business from costly liabilities. Call us at (936) 362-7841 for further assistance.

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