Frank N. Darras
Oil and gas companies have all felt the burden of rising insurance premiums in the wake of the Deepwater Horizon explosion and the largest oil spill in American history. According to the Associated Press, the BP oil spill created one of the biggest losses in the energy market and drove energy premiums up between 10-30%. Just as energy underwriting was easing and premiums were going down, the oil spill drove up deep water operations insurance by 25-30% and deep water drilling by more than 100%. New safety measures including timely inspections of deep water operations, certification of equipment to prevent well blowouts will add to the already rising costs companies are facing.
The Deepwater Horizon disaster is a great lesson that your company is never safe, and having enough insurance coverage is vital to your existence. No matter what the disaster, having an emergency insurance action plan in place can save your company, your workers, and even your job. Today’s coverage may include stay-awake premiums, based on the likelihood of disaster, whether caused by your company or not.
What’s even more important than having coverage, is knowing the fine print of your company’s policy. Making sure you understand the ins and outs of your package will allow you to avoid insurers arguments against paying out policyholders claims. The two types of insurance that most often deceive policyholders are Commercial General Liability and Business Interruption.
Commercial General Liability Insurance: This may seem obvious, but picking the right Commercial General Liability (CGL) is the lifeline of your company, especially for smaller oil and gas companies. If BP had been a smaller, less profitable oil and gas company it would most certainly have gone under by now. While this coverage may seem all-inclusive, there are pitfalls that your company should review on its policy before a disaster occurs.
To ensure your company receives adequate compensation, documentation is your best friend. It is easy to forget to update your insurance policy and keep records of all your properties. Without documentation and frequent revisions of your assets, CGL claims will not cover all damages. Make sure you have video footage and photos of your property and structures, even those that are under construction. Regularly inventory every inch of your property to ensure that all items are listed and covered by your policy. This is a simple task that often gets put off and causes policyholders to lose at claim time.
Another such pitfall that is particularly important to oil and gas companies who hold the potential to cause a massive environmental disaster is pollution exclusion. Be aware of this when filing for CGL claims for environmental disasters, such as an oil spill. Review what is classified as a “pollutant” by local and circuit courts and your insurer. Most courts have narrowed the definition of traditional pollutants, but include unrefined oil. You should also focus on the “cause” of the event, rather than just pollutants.
Business Interruption Insurance: While Commercial General Liability might cover the costs of property damage and worker injury, what covers the economic loss of not being able to run a business and earn income? Many people blame BP for the disaster, but what about the workers not involved that are no longer getting paid?
Not only does your company lose revenue while the rig is being repaired and the spill cleaned up, but you must consider the potential losses caused by government regulation post-disaster. The government’s deepwater drilling moratorium, although now repealed, cost many oil and gas companies billions of dollars in lost revenue. Since lifting the ban, it has been hesitant to approve new drilling plans in the Gulf of Mexico. This stall in construction and drilling has caused many companies to incur economic losses from lack of production, not from any actual damages.
To avoid lost income in the case of a drilling moratorium, make sure your business interruption policy includes “civil authority” coverage. Often business interruption policies require that actual damage be done to the policyholder’s property, but don’t cover losses resulting from another companies mishap. Drilling moratoriums typically fall under the category of “civil authority”. Having this extra coverage may secure your company’s balance sheet.
Another pitfall to avoid is a long reimbursement period. Business owners that buy a policy — typically added to a comprehensive business package or property and casualty policy — should make sure there is no waiting period, so reimbursement starts immediately after a disaster.
Knowing how to understand your insurance policy and reviewing it early and often will keep you prepared in the event of a disaster. Your company should invest in a knowledgeable lawyer with plenty of experience in environmental disaster law and oil and gas insurance to avoid the sudden panic you’re going to feel when your insurer denies coverage. Disasters are often accidental and unexpected, but they can be planned for. Planning ahead will ensure that your company continues to run smoothly and suffers minimal loss during and after a disaster.
Frank N. Darras is the nation’s top disability and long-term care insurance lawyer and founding partner at DarrasLaw. See www.DarrasLaw.com or call 800-458-4577 for more information.
For nearly a quarter century, Frank N. Darras has taken on big insurance representing policyholders. Since the beginning, he has leveled the playing field helping those who have experienced insurance bad faith. Big cases or small, rich clients or poor, Darras has recovered more than a half a billion dollars in denied insurance benefits.
In February 2010, Darras founded his national insurance practice, DarrasLaw and handpicked a seasoned team of legal experts. Headquartered in Ontario, California, Darras manages the largest disability and long-term care litigation practice in America.
Recognized across the country as America’s top insurance lawyer, the Darras name means real protection for those disadvantaged and disabled. Nationally known for representing sport figures to business professionals, doctors to television personalities; Darras also goes to bat for clients with more modest means, no matter their occupation or the money at stake.
DarrasLaw reviews 2500 new insurance cases a month from policyholders across America. Offering free insurance advice, claim assistance and comprehensive policy analysis, DarrasLaw gives clients the help they need to fight for the coverage which they have richly paid and deserve.
Recognized by the media as the most highly acclaimed lawyer in the disability and long-term care field, Darras is widely quoted and a frequent guest on radio and television news programs. His track record of media coverage can be found at www.DarrasLaw.com along with high-definition insurance videos that provide insight and tips.
Honored with “Super Lawyer” status since its inception, Darras is also recognized in Outstanding Lawyers in America and Top 100 California Trial Lawyers by the American Association of Justice. Darras is a member of the “Ten Million Dollar Rainmaker” circle. Every year, he is listed in Best Lawyers in America and “Top Lawyers” by Corporate Counsel.
Darras is annually recognized by Lawdragon, as one of the “500 Leading Lawyers in America;” one of the “500 Leading Litigators in America;” and as one of the top “500 Plaintiff Lawyers in America.” He is AV preeminent rated by Martindale-Hubbell.