Why More Energy Contractors Are Being Asked for Higher Liability Limits

Many energy contractors are discovering that the insurance requirements they were accustomed to a few years ago no longer meet client expectations.

Projects that once required $2 million or $5 million in liability coverage may now require $10 million, $15 million, or even more. For some contractors, these requirements can come as a surprise during the bidding process, creating challenges when work is already being pursued.

The question is: why are liability requirements increasing?

Contract Risk Is Shifting

Over the last decade, project owners and energy companies have placed greater emphasis on contractual risk transfer.

Rather than retaining risk themselves, many organizations are looking for ways to transfer potential liabilities to contractors and service providers through contracts, indemnity agreements, and insurance requirements.

As a result, contractors are increasingly being asked to carry higher insurance limits and to provide evidence that those limits are in place before work begins.

For many companies, insurance has become a prerequisite for winning work rather than simply a tool for protecting the business.

While serious liability claims remain relatively uncommon, the financial consequences can be significant when they occur.

Property damage, environmental incidents, vehicle accidents, and bodily injury claims can all result in substantial costs. Legal expenses alone can be significant, even when liability is disputed.

As claim costs increase, project owners often respond by requiring contractors to carry higher liability limits to help protect all parties involved in the project.

From their perspective, larger limits provide an additional layer of protection against increasingly expensive losses.

It’s not just the liability limit itself that is changing.

Many energy contracts now include requirements such as:

• Additional insured provisions
• Waivers of subrogation
• Primary and non-contributory wording
• Specific umbrella liability requirements
• Detailed evidence of coverage

These requirements are often accepted during contract negotiations but only reviewed later when insurance documentation is requested.

By that point, satisfying the requirements may be more difficult, time-consuming, or expensive than anticipated.

One common misconception is that a request for higher liability limits indicates a company is viewed as unsafe or high-risk. In many cases, that isn’t true. Requirements are frequently driven by the project owner’s risk management standards rather than the individual contractor’s loss history.

A contractor with an excellent safety record may still be required to carry the same limits as every other company working on a project.

Many insurance challenges occur because coverage requirements are reviewed after a contract has already been signed. A better approach is to review insurance obligations before committing to a project.

This helps identify:

• Whether existing limits are sufficient
• Whether umbrella liability coverage may be needed
• Any unusual contract wording
• Potential cost implications
• Documentation requirements

Addressing these issues early can help prevent delays and reduce the likelihood of unexpected expenses.

For energy contractors, insurance is increasingly influencing the ability to pursue opportunities.

Companies that understand their contractual obligations, maintain appropriate limits, and prepare for changing requirements are often in a stronger position when opportunities arise.

Insurance is no longer just a compliance exercise completed after a project is awarded. In many cases, it has become part of the qualification process itself.

If your company is being asked to carry higher liability limits than in the past, you’re not alone.

Across the energy sector, project owners, operators, and contractors are placing greater emphasis on contractual risk transfer and insurance requirements. The key is understanding these requirements before they become a barrier to winning work.

By reviewing contracts early, evaluating liability exposures, and ensuring your insurance program aligns with the projects you pursue, you can position your business to respond more effectively when new opportunities arise.