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Q3 2021

Demystifying Clauses Q3 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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