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Q3 2021

Demystifying Common Clauses

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10/26/2021

Making wells safe

A “making wells safe” endorsement is usually contained within an operators extra expense (OEE) policy, or energy exploration and development (EED) policy (named after the standard market form EED 8/86). In recent changes proposed to the standard EED form by the Joint Rig Committee, the making wells safe endorsement may be retitled “named perils loss prevention.”

The standard OEE wording usually has three sections:

  • Section A - Control of well expenses
  • Section B - Redrilling and restoration expenses
  • Section C - Seepage and pollution

The usual making wells safe endorsement is an extension of coverage under Section A.

The coverage is extended by reimbursing the insured for costs and expenses incurred in preventing the occurrence of a loss when the surface equipment has been lost or damaged by certain named perils. The standard named perils typically include:

  • Lightning
  • Fire, explosion, or implosion above the surface of the ground or water bottom
  • Windstorm, collapse of derrick or mast
  • Flood
  • Collision with land, sea, or air conveyance or vehicle
  • Collision or impact of anchors, chains, trawl boards, or fishing nets
  • Strikes, riots, civil commotions, or malicious damage. 

To be consistent with perils usually granted elsewhere in the EED form, this list is commonly expanded to include earthquake, volcanic eruption, tidal wave (or tsunami), mudslide, or landslide.

For coverage to be triggered by this endorsement the insured must also show it was necessary to re-enter the well in order to continue operations or restore production, or to plug and abandon the well in accordance with all regulations, requirements, and normal and customary industry practices.

Underwriters' liability under this endorsement ceases at the time that operations or production can be safely resumed, or the well is, or can be, safely plugged and abandoned (whichever occurs first).

This information is a general overview of some of the coverage often provided by the aforementioned clauses. This is not intended to be an extensive and exhaustive analysis of the insurance coverage provided by such clauses. The comments are the opinion of Marsh Specialty only and should not be relied on as a definitive or legal interpretation. We would encourage you to read the terms and conditions of your particular policy and seek professional advice if in any doubt.

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“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”