Short answer
Not always the same limits, but they need insurance that protects you and the operator for the work they do. Some MSAs put your subcontractors in "Contractor Group," which means injuries to their people can fall on your side of the indemnity. If a sub has thin coverage, your policies can end up paying.
- The practical answer is to flow the MSA’s insurance requirements down to your subs in a written subcontract, get them to name you and the operator group as additional insureds, and collect certificates and endorsements before they start.
- Texas comp law has an oilfield-specific rule: under Labor Code Section 406.123(h), an independent contractor with no employees working for an oil or gas well operator is not covered under your comp policy unless you have a written agreement under that section.
Why your subs’ insurance becomes your problem
Look at your MSA's definition of Contractor Group. If it includes your subcontractors and their employees, then when one of your sub's employees is hurt and sues the operator, the operator will look to you for indemnity. That is what happened in a 2022 Fifth Circuit case under the Texas statute: the injured worker was employed by a subcontractor of the well testing contractor, and the operator sought indemnity from the contractor under the MSA's mutual indemnity clause.
There is also a direct-suit problem. Your GL's employer's liability exclusion applies to injury to "an 'employee' of the insured." Your sub's employee is not your employee, so if that worker sues you directly, your GL is the policy that answers. If the sub carries its own liability insurance with you as an additional insured, there is another policy in front of yours.
How MSA insurance requirements flow down
What to require from subcontractors
The usual approach is to flow down the same categories the operator requires of you. Limits can differ by the sub's scope, but the structure should match.
| Requirement | Why |
|---|---|
| General liability with you and the operator group as additional insureds, ongoing and completed operations | Puts the sub’s policy in front of yours for claims from its work |
| Primary and non-contributory wording | So the sub’s policy pays before yours |
| Waiver of subrogation in favor of you and the operator group | Keeps the sub’s insurers from suing you after a claim |
| Workers comp and employers liability | Keeps injuries to the sub’s people within the sub’s comp program |
| Commercial auto | Subs drive lease roads too |
| Pollution, where the work warrants it | GL pollution exclusions apply to subs as well |
| Umbrella where your MSA limits are high | So a large loss does not fall through to your umbrella first |
Texas workers comp and subcontractors
Texas Labor Code Chapter 406, Subchapter F governs contractors and subcontractors for comp purposes.
- A person who works for a general contractor that carries comp is treated as that contractor's employee for comp purposes unless the person is an independent contractor or works for one (Section 406.122(a)).
- A subcontractor and its employees are not your employees for comp purposes if the sub operates as an independent contractor and has a written agreement with you in which it assumes the responsibilities of an employer (Section 406.122(b)).
- You and a subcontractor may sign a written agreement under which you provide comp coverage to the sub and its employees (Section 406.123(a)). You must file a copy with your comp insurer within 10 days of signing (Section 406.123(f)).
- For oilfield work specifically, Section 406.123(h) says an independent contractor with no employees who works for an oil or gas well operator is treated like an independent contractor with employees and "is not entitled to coverage under the general contractor's workers' compensation insurance policy" unless you have an agreement under that section.
These rules affect who is covered when someone is hurt. Talk to your agent before you bring on a one-person sub without coverage. See whether oilfield contractors need workers comp in Texas.
Making the flow-down stick
- Use a written subcontract. Blanket additional insured forms such as CG 20 38 apply when the parties "have agreed in writing in a contract or agreement." No signed subcontract, no automatic status.
- Pass through the whole group. CG 20 38 also covers "any other person or organization you are required to add" under that written contract. Require the sub to add the operator group, not just you.
- Collect the endorsements, not just the certificate. In Texas, a certificate cannot change coverage (Insurance Code Section 1811.152).
- Track renewals. A sub's policy that lapses mid-job puts you back in front.
- Check your MSA's subcontracting clause. Some MSAs require operator approval before you sub out work, or set specific sub insurance terms.
Read your own policy too
Ask your agent to walk through any wording in your own liability policy that mentions subcontractors, so you know whether anything in your coverage depends on what your subs carry.
Common questions
Do my subs need the same limits I carry?
Not necessarily. Many contractors scale sub limits to the sub’s scope. What matters is that the structure, meaning additional insured, primary, waiver, and comp, protects you and the operator group.
Can my one-person sub just be covered under my comp policy?
In oilfield work for a well operator, Texas Labor Code Section 406.123(h) says not unless you have a written agreement under that section, which must be filed with your comp insurer within 10 days.
Is a certificate from my sub enough?
No. Ask for the additional insured and waiver endorsements. Under Texas Insurance Code Section 1811.152, a certificate does not change the policy.
What if my sub’s employee is hurt on the operator’s lease?
Look at whether your MSA puts your subs in Contractor Group. If it does, the operator may seek indemnity from you, and your contractual liability coverage and the sub’s coverage both come into play.
Sources
- Texas Labor Code, Chapter 406. Subchapter F: definitions (406.121), employee status (406.122), coverage agreements, 10-day filing and oil and gas well operator rule (406.123).
- U.S. Court of Appeals for the Fifth Circuit, No. 20-50892 (Feb. 14, 2022). Injured worker employed by a contractor’s subcontractor; indemnity sought under contractor group clause.
- ISO CG 20 38 12 19, Additional Insured: Automatic Status When Required in Written Construction Agreement (copy published by IIAT). Written agreement requirement and extension to other parties the contract requires.
- ISO CG 00 01 04 13, Commercial General Liability Coverage Form (sample copy published by Sonoma County). Employer’s liability exclusion limited to employees of the insured.
- Texas Insurance Code, Chapter 1811. Certificate does not amend, extend or alter coverage (1811.152).
This page explains insurance, not law. Have your attorney review indemnity and contract language; our job is making the insurance match it.
Keep reading
Questions
What does "Company Group" mean in an MSA?
Questions
Do oilfield contractors need workers comp in Texas?
Questions
What is a blanket additional insured endorsement for oilfield work?
Questions
What is a waiver of subrogation, and why does every oilfield MSA ask for one?
Contract requirements
The operator sent me an MSA. What insurance does it actually require?