Understand down hole items and how they’re covered

Whether it’s mining, drilling, or construction, there are some common claims that regularly come through from our customers; one of which involves down hole items. 

Down hole items can be tricky to navigate when it comes to insurance, however,  NTI’s National Strategic Underwriter for Mobile Plant and Equipment, Gary Woodhams has provided some guidance on the activities they are used for and the risks that are attached. 

What are Down Hole Items?

“Down hole items are specifically used for construction, production, and exploration activities, and are commonly attached to insured items such as Drill Rigs, Directional Drilling Rigs (HDD) or Drilling Platforms,” says Gary. 

The most common down hole items used in these industry's consist of:

• Drill Heads such Reamers, Pilot Heads, Diamond Cutting Heads and Hammers   
• Rods, Pipes and Casing 
• Collars and Sleeves 
• Floats and Stabilisers 
• Pumps, Mud Motors and Gyros

Applications

These items are utilised across a vast range of industries and applications. These include:

• Core sampling
• Seismic and environmental surveying
• Water well drilling 
• Blasting 
• Oil and gas drilling 
• Piling, peering and foundations
• Ventilations shafts 
• Directional drilling

Risks

Each item and application presents a unique set of risks but when down hole items are connected and in operation (i.e. Drill String) these risks and exposures can become easily overlooked.

“Loss of equipment by detaching or falling down hole is one of the most common claims we encounter and although Down Hole Cover may have been selected on the policy, if no down hole items are noted on the schedule, it’s extremely difficult to pay a claim for items that are not insured,” notes Gary. 

“When accumulated the total sum insured of these down hole items can be quite expensive, so we must have the details on the policy schedule, not just for down hole events but for other events such as theft, rollover, and malicious damage, which could leave you out of pocket.”

Exclusions

Standard policy wordings will automatically exclude cover for down hole events, i.e. We will not cover a drill shaft/Bit for loss or damage to the drill shaft or bit of any drilling rig or machine, whilst in use drilling:

1. into or below ground; or
2. below the surface level.  

However, this cover can be reinstated if requested at policy inception, therefore if you are going to be using down hole items and wish to have them covered as part of your insured property the items need to be endorsed and noted in the insurance schedule. 

Our standard Down Hole Endorsement provides an automatic exposure offering of $50,000, noting that this standard offering can be increased to suit all exposures on request. 

“By requesting Down Hole Cover, we are able to capture an exposure limit that is suitable to the application and ensuring you are covered should an incident occur,” adds Gary. 

If there is one takeout from this blog please remember - if the items have not been disclosed, issues may arise in determining what the loss actually is, making it difficult for both you and the insured when making a claim. 

No matter the scale of your project, our tailored coverage is designed to keep your equipment protected. If you want to find out more about our comprehensive Yellow Cover policy or wish to discuss Down Hole Cover or lodge a claim, get in contact with one of our mobile plant and equipment specialists today on 1800  827 747