New Wording released by LMA as added to Lloyd's Wording Repository

JR2020-025 JRC Loss of Production Income (LOPI)

JR2020-025 JRC Loss of Production Income (LOPI)

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JR2020-025 JRC Loss of Production Income (LOPI)

Declarations to JR2020-025

Item 1. Insured’s Premises, Daily Unit Volume, Volume Measure and Unit Price:

Cover under this LOPI Section shall only be given to the Insured’s Premises as declared in Appendix 1.

Item 2. Waiting Period (days):

60 (unless a different number of days is stated below)

{Insert}

Item 3. Qualifying Volume Percentage

5% (unless a different percentage is stated below)

{Insert}

Item 4. Recovery Period Limit (days):

{Insert}

Item 5. Occurrence Limit:

{Insert}

Item 6. Preceding Period (days):

180 (unless a different number of days is stated below)

{Insert}

Item 7. Scheduled Dependency Premises:

{Insert}

Item 8. Sub-limit for Unscheduled Dependency Premises:

USD250,000 any one Occurrence (unless a different sub-limit is stated below)

{Insert}

LOSS OF PRODUCTION INCOME (LOPI)

Bolded terms are defined terms which have a special meaning as set forth in the Definitions section and elsewhere.

1. INSURING CLAUSES:

A. COVERAGE
Subject to the EXCLUSIONS, CONDITIONS and DEFINITIONS of the Policy, and also in addition to the DECLARATIONS, EXCLUSIONS, CONDITIONS AND DEFINITIONS applicable hereto, this LOPI Section shall, following necessary interruption of the business, indemnify the Insured for:

(i) Loss of Production during the Maximum Recovery Period at each of the Insured’s Premises as defined in this LOPI Section; and/or

(ii) the Increased Cost of Working as defined in this LOPI Section

directly caused by either:

(a) physical loss of or physical damage to real or personal property; or

(b) Well Out of Control as defined in this LOPI Section

arising out of an Occurrence while this LOPI Section is in force.

B. WAITING PERIOD
The Waiting Period shall, in respect of each Occurrence, commence on the date on which the Insured first suffers Qualifying Loss of Production and shall, thereafter, include all days (whether consecutive or non-consecutive) on which the Insured suffers Qualifying Loss of Production but not exceeding the total number of days stated as the Waiting Period in Item 2 of the Declarations.

C. RECOVERY PERIOD
The Recovery Period shall, in respect of each Occurrence, commence on the date on which the Insured first suffers Qualifying Loss of Production and shall continue until the earliest of:

(i) the date on which, with the exercise of due diligence and dispatch, Normal Operations could be restored; or

(ii) expiry of the Maximum Recovery Period.

The Recovery Period hereunder shall not be limited by the expiry date of this LOPI Section.

D. LIMIT OF LIABILITY
Underwriters hereon shall in no circumstance be liable for more than the amount stated in Item 5 of the Declarations as the Occurrence Limit in respect of Loss of Production at all Insured’s Premises combined in respect of any one Occurrence. Any payment within the Occurrence Limit shall itself be subject to the following sub-limits of Liability:

(i) the amount calculated in accordance with the Measure of Recovery Clause hereunder for each of the Insured’s Premises separately as stated in Item 1 of the Declarations; and

(ii) as stated in item 8 of the Declarations in respect of Loss of Production at all Insured’s Premises combined, directly caused by each Occurrence of physical loss of or physical damage to Scheduled Dependency Premises unless the Insured has made a specific declaration of such Scheduled Dependency Premises as stated in Item 7 of the Declarations.

E. MEASURE OF RECOVERY
Subject to the Limit of Liability hereunder, the Measure of Recovery hereunder shall be calculated as the Loss of Production multiplied by the applicable Unit Price.

2. DEFINITIONS

A. Actual Production means the Insured’s proportionate share of Volume actually produced during the Maximum Recovery Period in respect of each of the Insured’s Premises which suffers an interruption of the business in accordance with Insuring Clause 1A.

B. Adjusted Production means, in respect of each of the Insured’s Premises which suffers an interruption of the business in accordance with Insuring Clause 1A, Standard Production adjusted as may be necessary to provide for variations in Volume or other special circumstances including but not limited to planned or unplanned shutdown or a change in the Insured’s financial and/or working and/or ownership interest and/or royalty amount which affects Volume either before, during or after the loss and which would have affected Volume had no loss occurred, so that the Adjusted Production shall represent as nearly as may be reasonably practicable the Insured’s proportionate share of Volume which, but for the loss, would have been obtained during the Maximum Recovery Period.

C. Daily Unit Volume is as stated in Item 1 of the Declarations.

D. Scheduled Dependency Premises means real or personal property upon which the Insured’s production and/or pipeline throughput at the Insured’s Premises is dependent, other than the Insured’s Premises themselves, but including:

(i) real or personal property situated at the Insured’s Premises in which the Insured has no interest as owner, operator or co-venturer; and

(ii) real or personal property situated elsewhere, whether or not the Insured has an interest as owner, operator or co-venturer.

E. Increased Cost of Working means the Insured’s proportionate share of any additional cash expenditure necessarily and reasonably incurred for the sole purpose of reducing a claim amount otherwise payable hereunder.

F. Insured’s Premises means the facilities and/or platforms and/or pipelines as stated in Item 1 of the Declarations which are owned by or in the care, custody or control of the Insured and/or in which the Insured has an interest as co-venturer.

G. Insured Well means a Well in which the Insured has a financial and/or working and/or ownership interest and in respect of which such Well is covered under Section {insert reference to OEE/PD Section} of this Policy.

H. Loss of Production means the shortfall, if any, for each of the Insured’s Premises of the Actual Production below the lesser of:

(i) Adjusted Production, or

(ii) 110% of the Insured’s proportionate share of the Daily Unit Volume

for each day, whether or not consecutive during the Recovery Period, which is not a Waiting Period day.

I. Maximum Recovery Period means the period of consecutive days as represented by the sum of:

(i) the number of days stated in Item 4 of the Declarations (Recovery Period Limit (days)), and

(ii) the number of days stated in Item 2 of the Declarations (Waiting Period (days)), and

(iii) the number of days calculated as the number of days stated in Item 4 of the Declarations (Recovery Period Limit (days)) multiplied by the percentage stated in Item 3 of the Declarations (Qualifying Volume Percentage); and

In no event shall the Maximum Recovery Period exceed 200% of the number of days stated in Item 4 of the Declarations (Recovery Period Limit (days)).

J. Normal Operations means the condition present at such time that production and/or pipeline throughput are restored through repair, reinstatement or replacement to the volumes that would have existed had no loss occurred.

K. Occurrence means an event which can be isolated in time, in place and in the manner of its happening as being the cause of or, where there is no evident cause, as consisting of an instance or instances of physical loss or physical damage or Well Out of Control. In addition, for the purposes of this definition:

(i) As respects windstorm, all tornadoes, cyclones, hurricanes, similar storms and systems of winds of a violent and destructive nature, arising out of the same atmospheric disturbance within any period of seventy-two consecutive hours commencing during the period of insurance provided by this LOPI Section, shall be deemed to be one event.

(ii) Each earthquake shock or volcanic eruption, shall constitute one event hereunder, provided that if more than one earthquake shock or volcanic eruption shall occur within any period of seventy-two consecutive hours commencing during the period of insurance provided by this LOPI Section, such earthquake shocks or volcanic eruptions shall be deemed to be one event.

Clauses (i) and (ii) above shall not operate if any such peril is otherwise excluded under this Policy, if applicable.

L. Preceding Period means the period of consecutive days as stated in item 6 of the Declarations which immediately precedes the date of Occurrence.

M. Qualifying Loss of Production means where the Loss of Production exceeds the Qualifying Volume.

N. Qualifying Volume means the Daily Unit Volume stated in Item 1 of the Declarations for each of the Insured’s Premises multiplied by the Qualifying Volume Percentage as stated in Item 3 of the Declarations.

O. Standard Production means, in respect of each of the Insured’s Premises, the Volume actually produced during the Preceding Period.

P. Unit Price is as stated in Item 1 of the Declarations.

Q. Volume means the daily production and/or daily pipeline throughput and shall be expressed by measure of barrels or thousands of cubic feet or such other measure as may have been specifically agreed by Underwriters as Volume Measure as stated in Item 1 of the Declarations.

R. Well means a hole bored into the ground with the intention of producing from or exploiting and enhancing the recovery of oil and/or gas and/or sulphur and/or thermal energy resources or deposits, including such conductor, casing, liner and/or tubing as may have been installed therein and such wellhead, christmas tree, blow-out preventer or mechanical pressure control equipment as may have been installed immediately above the bore of a Well.

S. Well Out of Control means

(i) as defined in the ‘Operators Extra Expense’ Section of this Policy; or

(ii) if this Policy does not have an ‘Operators Extra Expense’ Section, an Insured Well from which and only when and only while, there exists an unintended flow of drilling fluid, oil, gas, water or other substance, either from an Insured Well above the surface of the ground or water bottom or from one subsurface depth interval into another subsurface depth interval via the bore of an Insured Well, and which flow has not been or cannot be stopped or diverted into production.

Nevertheless, there shall not be a Well Out of Control solely because of a flow of oil, gas, water or other substance into the Insured Well bore which can be circulated out or bled off through the surface controls.

3. EXCLUSIONS

This LOPI Section does not insure against:

A. Loss of Production resulting from interference by strikes, lockouts, political or labour disturbances, riots or civil commotions, confiscation or expropriation or any delay caused thereby.

B. Loss of Production following and subsequent to abandonment of Insured’s Premises for any reason whatsoever.

C. Loss of Production caused by the suspension, lapse or cancellation of any lease, licence, contract or order, unless such suspension, lapse or cancellation results directly from an Occurrence in respect of which a claim has been paid or liability admitted under this LOPI Section and then Underwriters shall be liable for only such loss as affects the Insured’s production income during, and limited to, the Maximum Recovery Period covered under this LOPI Section of the Policy.

D. Fines, liquidated damages, penalties or damage for breach of contract or for late or non-completion of orders or for penalties of whatever nature.

E. Infidelity or any dishonesty or fraud on the part of the Insured or any officer or employee of the Insured.

F. Loss of market or loss of contract.

4. CONDITIONS

A. DIRECT DAMAGE
No claim shall be payable under this LOPI Section:

(i) unless and until a claim has been paid, or liability admitted by Underwriters, in respect of direct physical loss or physical damage to the Insured’s Premises under Section {insert reference to OEE/PD Section } of this Policy or unless or until direct physical loss or direct physical damage to Scheduled Dependency Premises occurs which would, if said Scheduled Dependency Premises were scheduled herein as Insured’s Premises, be indemnifiable by application of the terms, conditions and exclusions applicable to Section {insert reference to OEE/PD Section } of this Policy; or

(ii) in respect of Well Out of Control, unless and until a claim has been paid, or liability admitted by Underwriters, under Section {insert reference to OEE/PD Section } of this Policy.

This condition shall not apply if the sole reason for no such payment having been made, or liability admitted, is the operation of a deductible, excess or retention.

B. RESUMPTION OF OPERATIONS
The Insured shall act at all times with due diligence and dispatch in reducing loss hereunder and prioritising, when appropriate in the interest of Underwriters and the Insured in reducing loss hereunder, the repair, reinstatement or replacement necessitated by the Occurrence. If the Insured could reduce Loss of Production:

(i) by complete or partial resumption of operations at the Insured’s Premises or property affected; and/or

(ii) by enhancement to or of other facilities, platforms or pipelines subsequent to the Occurrence at the Insured’s Premises or property affected,

then such possible reduction shall be taken into account in arriving at the amount of loss hereunder. The Insured shall make all reasonable efforts to ensure that operators and/or owners of non-owned property act in concert with the interest of Underwriters and the Insured in reducing loss hereunder.

Where as a consequence of deferred repairs mitigating a loss otherwise payable hereunder and expressly approved by and agreed by Underwriters, it is agreed that an equitable allowance may be made when adjusting any loss payable hereunder.

C. INSPECTION OF RECORDS
Underwriters and/or their representatives may examine and audit the Insured’s books and records at any time during the period of this insurance and thereafter, as far as they relate to the subject matter of this LOPI Section.

D. DECLARED, COMPLETED AND OPERATIONAL WELLS
No claim shall be payable under this LOPI Section for Loss of Production in respect of any Well which the Insured is not able to demonstrate is, at the time when the Occurrence giving rise to the Loss of Production commences, is either:

(i) An existing Well that is capable of production and which is included within the Daily Unit Volume as stated in Item 1 of the Declarations; or

(ii) a Well that is both:

a. declared and included within the Daily Unit Volume as stated in Item 1 of the Declarations prior to the date of Occurrence giving rise to the Loss of Production; and

b. intended to be capable of being completed and operational within the 12 month period following the date of Occurrence giving rise to the Loss of Production.

DENIAL OF ACCESS BY ORDER OF CIVIL OR MILITARY AUTHORITY

Subject to the exclusions, conditions and definitions applicable to the Policy and to this LOPI Section, the Insured will be indemnified for Loss of Production during the Maximum Recovery Period at the Insured’s Premises when, directly as a result of physical loss or physical damage to real or personal property within 1,000 meters of the Insured’s Premises, access to the Insured’s Premises is specifically prohibited by order of civil or military authority, whether de facto or de jure.

In any case, coverage hereunder shall be limited to 4 (four) weeks of Loss of Production immediately after expiry of the Waiting Period in accordance with Insuring Clause 1B of the Policy. The coverage hereunder shall not extend beyond the Maximum Recovery Period.

All other terms and conditions remain unaltered.

JR2020-025
8 July 2020

 

Policy Period: {Insert date from} to {insert date to}

Calorific Values (Gas only)
Insured Premises 1
…..
…..
…..
Insured Premises x

Month 1 Month 2 Month 3 … … … … … … … … Month x

Insured’s Premises 1 UNIT VOLUME Gas
(mmscf/day)
Liquids
(kboe/day)

UNIT
PRICE Gas, p/therm
Liquids, $/bbl
…..
…..
…..
Insured’s Premises X VOLUMES Gas
(mmscf/day)
Liquids
(kboe/day)

UNIT
PRICE Gas, p/therm
Liquids, $/bbl

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