What insurance does an oilfield inspection or testing company need under an operator MSA?

"Inspection and testing" covers several businesses that operators buy under the same MSA template:

• Nondestructive testing (NDT): ultrasonic, magnetic particle, dye penetrant and industrial radiography on welds, vessels and equipment.
• Tubular inspection: OCTG and drill pipe inspection at yards, on racks and at the well site.
• Well testing: flowback and production testing crews with separators, flare stacks and tanks on location.
• Pipeline and facility inspection: coating, weld and integrity inspection on gathering lines and facilities.

They share one feature that other oilfield trades do not: the customer is paying for a judgment. If the inspector passes a joint that later fails, or a test report is wrong, the loss can be far larger than any injury on location. That is a professional liability exposure, and it changes what the MSA should require and what your program needs.

Many operators use the same MSA for inspection companies as for any other contractor, with or without a professional liability line added. Some include one; some do not, and the contractor carries it anyway because the exposure exists either way. Ranges below are what commonly appears, not any specific operator's requirement. For the general structure, see MSA insurance requirements and what limits operators require.

If an inspector misses a crack and a vessel fails, or a tubular inspection passes a bad joint that parts in the hole, the claim is that your professional judgment was wrong. That is what professional liability (errors and omissions) insurance is for.

The GL problem is specific. IRMI describes the professional services exclusion as an exclusion commonly endorsed onto general liability policies, whose purpose is to separate general liability from professional (E&O) exposures. Inspection and testing GL policies often carry one. When they do, a claim arising from the inspection itself can be excluded from the GL, even though the certificate shows a full GL limit.

Points to check on a professional liability policy for inspection work:

• The definition of professional services. It should describe what you actually do: NDT methods, tubular inspection, well testing, reporting.
• Claims-made terms. The retroactive date should go back to when you started the work. Changing policies without keeping the retro date can leave past jobs uncovered.
• Bodily injury and property damage. Some E&O policies exclude them, assuming the GL handles them, while the GL's professional services exclusion assumes the E&O handles them. That overlap can become a hole.
• Contractual liability. Many E&O forms exclude liability you assume by contract, which matters if the MSA's indemnity reaches inspection errors.

Companies running radiography carry a regulatory and insurance profile of their own. In Texas, the Department of State Health Services Radiation Control Program certifies industrial radiographers under 25 TAC §289.255, with required training, documented on-the-job hours as a trainee, and an exam.

On the insurance side, two points come up on review:

• Radiation exclusions. GL and pollution forms can carry nuclear or radiation exclusions. Some of them can reach the sealed sources used in radiography. Ask how your forms treat radioactive material, and whether the answer depends on the source being in its container.
• Chapter 127 does not apply. §127.004(1) says the Texas Oilfield Anti-Indemnity Act does not apply to personal injury, death or property injury that results from radioactivity. An indemnity for a radiation exposure claim is judged under general Texas contract law, not under the Act's protections.

Put those together and the MSA's indemnity clause, read against your radiation coverage, deserves a separate look before you sign.

Flowback and well testing crews sit on a live well with separators, flare stacks and tanks. Their exposure looks more like well servicing than inspection:

• Fire and explosion at the separator, flare or tanks. OSHA's oil and gas hazard guidance includes a recent alert on flare flashback explosions at tank batteries.
• Pollution from tank overflows and line failures. Under §127.004(2), property injury from pollution is outside Chapter 127.
• Downhole and reservoir. Reservoir damage and loss of the well bore are also outside the Act under §127.004(3). If the MSA puts them on the testing contractor, check whether the GL covers them at all.
• Test results. A wrong flow rate or pressure reading can be a professional liability claim.

Well testing is the inspection category where contractors pollution liability and an underground resources coverage review matter most. See oilfield pollution liability.

For most inspection on a well, Chapter 127 applies. Its definition of well or mine service (§127.001) includes testing, logging and otherwise rendering services in connection with a well. So the usual rules hold: indemnity for the operator's own negligence for injury, death and property injury is void (§127.003) unless supported by insurance agreed in writing (§127.005), and for mutual indemnity the obligation is limited to the coverage and limits each party agreed to obtain.

Two carve-outs matter more for inspectors than for most trades:

• Radioactivity (§127.004(1)), discussed above.
• Pipelines. The Act's definition of well or mine service excludes construction, maintenance or repair of oil, natural gas liquids or gas pipelines and fixed associated facilities, and purchasing, gathering, storing or transporting gas or NGLs by pipeline. Pipeline inspection work may fall outside Chapter 127 altogether. If it does, the indemnity clause in a pipeline MSA is judged without the Act's protections.

See the knock-for-knock page for how reciprocal indemnity usually allocates injuries and property.

Inspection companies are often small, run lean on paperwork and onboard with many operators. The rejections we see most are below. See why was my certificate of insurance rejected and ISNetworld insurance requirements.

Send the MSA insurance and indemnity sections, the ISN or Avetta requirements, and a short description of what you do: which NDT methods, whether you run radiography sources, whether you do well testing or pipeline work. If you carry E&O, include the declarations page so we can see the retroactive date.

We will tell you whether the GL's professional services exclusion leaves your inspection work uninsured, whether the E&O matches the MSA, and where Chapter 127 does and does not apply to your scopes. Basin notes are on the Permian Basin and Haynesville pages.