Seepage, pollution and contamination (SP&C)
Extension of upstream energy policies that repays clean-up and liability for pollution from the well, seepage included, under a causation test that differs from ordinary accidental pollution.
A platform loses crude through a seabed seep, with no blowout and no explosion, for six weeks before anyone sees it. No ordinary property policy responds: the pollution exclusion is standard, and accidental cover needs a sudden event. SP&C closes that hole for the operator of a well: it repays clean-up and third-party liability for pollution that comes from the well, sudden or gradual. Hence the word seepage: a seep is a slow flow, sometimes over months, which the sudden-pollution wording of liability policies excludes. In exchange the market caps the cover at an amount per event, excludes pollution known before inception and makes payment conditional on prompt detection and notice. The limit is often shared with the OEE one: the insured believes it has two limits and sometimes has only one. The coastal state's liability regime counts as much as the contract, since the US Oil Pollution Act of 1990 or OPOL in the North Sea set what the operator owes before the insurer enters the picture.
Textbook case: an undetected crude seep for forty days from a subsea well. Clean-up costs 9 million dollars and fishermen's claims 3 million. With a 20 million SP&C limit and a 500,000 deductible, the insurer pays 11.5 million. Had the seep been known before inception, it would have paid nothing.
SP&C, SPC cover, seepage pollution and contamination, well pollution cover, operator pollution cover
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