What insurance limits do oil and gas operators require from contractors?

Operators write their own insurance exhibits, and two MSAs from the same basin can differ. That said, the same structure shows up again and again. The table below is what we commonly see on Texas oilfield MSAs for service contractors. It is not any specific operator's requirement.

On a certificate, general liability shows several limits. The two that matter most:

• Each occurrence ($1M): the most the policy pays for one incident, all claimants combined.
• General aggregate ($2M): the most the policy pays for all covered claims in the policy year (other than products-completed operations, which has its own aggregate line on the ACORD 25).

So "$1M/$2M" means one bad day can use up to $1M, and the year can use up to $2M. The ACORD 25 also warns that "limits shown may have been reduced by paid claims," which is why some MSAs ask for a per-project or per-location aggregate so one operator's claim does not eat the limit another operator is counting on.

Auto is usually shown as a combined single limit, one number per accident for bodily injury and property damage together. Employers liability is shown as three separate $1M lines.

Operators set limits by how badly a job can go wrong. A two-man inspection crew driving pickups to locations is a different exposure from a well servicing rig on a producing well or a hot oil unit heating lines under pressure. Expect the umbrella requirement in particular to go up as you move from lease maintenance and roustabout work toward well servicing, hot oil and water hauling.

Auto limits also have a regulatory floor that can sit above what an MSA asks for. Federal rules set minimum public liability by cargo and vehicle weight, and Texas sets its own intrastate minimums through TxDMV. For example, TxDMV's guidance lists $500,000 for private or for-hire carriers over 26,000 pounds, with higher amounts for oil and hazardous materials. Our MCS-90 answer covers that in detail.

Primary limits are fairly standardized, so most contractors' GL, auto and EL already meet a $1M requirement. The umbrella is where they fall short, for three reasons:

1. The amount. A contractor carrying a small umbrella signs an MSA asking for more and nobody catches it until the certificate is reviewed.
2. It does not sit over every line. The MSA expects the umbrella over GL, auto and employers liability. Some umbrellas are written over fewer underlying policies, or exclude auto.
3. It does not follow the endorsements. If the umbrella does not extend additional insured status, primary and non-contributory wording, and the waiver of subrogation to the operator, the operator gets the umbrella limit on paper but not in practice.

More on that in oilfield umbrella insurance.

Limits also do legal work in Texas. Chapter 127 of the Civil Practice and Remedies Code voids many oilfield indemnities for the other side's negligence, but carves out indemnities supported by insurance. For a mutual indemnity, the obligation "is limited to the extent of the coverage and dollar limits of insurance" each party agreed to obtain. For a unilateral indemnity, the insurance required "may not exceed $500,000." So the limit you agree to carry can set how far your indemnity reaches. See the Texas Oilfield Anti-Indemnity Act and whether Chapter 127 requires mutual insurance.