Demystifying common clauses Q1 2022

In the offshore oil and gas sector, an operator of an offshore facility will often route its own production through a third-party-owned platform.

These ‘tie-ins’ allow the operator of a remote well(s) to use the third party’s production facilities (such as compression) without the need to build its own platform. The third-party platforms are referred to as “host platforms”.

Many first-party physical damage policies contain a host platform endorsement that indemnifies the insured for costs contributed to the repair or replacement of the structure, or for rerouting production (to the same capacity) via another location in the event of a total or constructive loss if the owner does not replace the platform. Typically, a host platform endorsement will exclude “sue and labour” and/or “removal of wreck” costs, and will be limited to the lessor of an agreed limit, and cost of the least expensive practical alternative available to the insured.

Often there is a clause that requires the insured to not disclose this coverage to the operator of the host platform, to avoid the potential of the host platform owner relying on the insured’s policy to cover repair or replacement of the facility.

The above is a general overview of some of the coverage often provided by the aforementioned clause. It is not intended to be an extensive and exhaustive analysis of the insurance coverage provided by such clauses. The comments above are the opinion of the Marsh only and should not be relied on as a definitive or legal interpretation. We encourage you to read the terms and conditions of your particular policy, and seek professional advice if in any doubt.

If readers have particular clauses they would like us to consider including in this feature in the future, or have any comments on the above please contact John.Cooper@Marsh.com

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Demystifying common clauses

In the offshore oil and gas sector, an operator of an offshore facility will often route its own production through a third-party-owned platform.