No matter how much we try to avoid it, people make mistakes. Sometimes an innocent error can be resolved quickly and amicably, but if you make a mistake in a piece of work or overlook something and an accident happens, your client may take legal action against you to recover their costs. Without the protection of Professional Indemnity (PI) and Public Liability (PL) insurance, the financial implications could be huge - particularly for energy sector contractors.
As a contractor in the oil, gas and energy sector, you are relied upon to offer the best advice and service possible to your clients. What happens, then, if you use incorrect measurements in your designs, resulting in significant delays to your client’s project? Or maybe you value a project incorrectly and the client refuses to pay?
PI & PL insurance tailored for the oil, gas and energy sector
Situations like the above have the potential to destroy your business. Thankfully, you can take out two specific types of insurance that will cover you against all eventualities. PI insurance covers you for any claims made against you, as well as legal fees, if you make a mistake when providing professional services, advice or designs to your client. PL insurance covers the costs you need to defend your business if someone is injured or property is damaged as a result of you going about your business or supplying products.
A standard ‘off-the-shelf’ Professional Indemnity and Public Liability policy is unlikely to provide the level of cover contractors in the oil, gas and energy sector need. Insurance requirements for this industry tend to differ from mainstream offerings. Projects are extremely time sensitive and critical decisions are made based on contractors’ expertise. If fine details are overlooked, the consequences of mistakes can be catastrophic, as evidenced by oil spills and similar disasters. You need a policy, then, which covers high-risk projects and takes into account the variety and complexity of work you do.
PI insurance that covers every eventuality
Specialist PI insurance for the oil, gas and energy sector provides full cover for a wide range of scenarios, including:
- Professional negligence, such as giving your client incorrect or wrong advice;
- Loss of data or documents;
- Accidental copyright or confidentiality breaches;
- Unintentional libel or slander.
PI insurance is usually a mandatory requirement for contract engineers and is either requested by the recruitment agency or directly by the client. If you hold this type of insurance, it is also seen by HMRC as a key indicator of genuine self-employment, which will prove critical when IR35 legislation hits the private sector in April 2020 (which you can read more about here).
Full protection with PL insurance
Oil, gas and energy contractors must also consider taking out Public Liability insurance as they tend to work in high-risk environments and are responsible for anyone who may be affected by their actions. If you accidentally damage some equipment or someone is injured as a direct result of something you’ve done, the awards made from a successful claim could sink your business - even the costs of defending claims could cause severe financial hardship.
PL insurance pays any awards that are made against you and covers legal fees, whether you are responsible or not. If you visit client premises or sites as part of your business activity, it’s highly likely you’ll need this type of cover.
Take action and future-proof your business
While serious errors and accidents do happen, the main areas of contention for oil, gas and energy contractors include attempted renegotiation of contracts, early termination of contracts and non-payment.
In one case, contractor John Sisk & Son carried out work for Hitachi Zosen Inova on the construction of a new power plant. The piece of work under dispute was valued by Sisk at just over £1 million, but Hitachi refused to pay, claiming that Sisk had already been overpaid. The contractor initially lost the case when an adjudicator valued their work at nil, but it was later overturned after new evidence was brought to a later adjudication.
Additional notes for oil, gas and energy sector contractors
Unfortunately, disputes in the oil, gas and energy industry are on the rise. It’s up to contractors to reduce their risk by scrutinising contractual requirements and understanding indemnities clearly. Taking out PI and PL insurance will give you peace of mind that if something doesn’t go to plan, you’ll be fully covered.
To find out more about how we can protect your business, contact us by email or call us on 0116 3800 400 and we will discuss your specific contractor insurance requirements and provide a quote. You can also browse the articles in our Knowledge Hub for the latest industry insights.