28.307-2 Liability
Source: FAR 28.307-2 on acquisition.gov
Contractors must maintain specific minimum liability insurance coverages for cost-reimbursement contracts to protect against claims arising from contract performance.
Overview
FAR 28.307-2 outlines the liability insurance requirements for contractors performing under cost-reimbursement contracts. It specifies the types and minimum amounts of insurance coverage that must be maintained, including workers’ compensation, employer’s liability, general liability, automobile liability, aircraft liability, and vessel liability. The section ensures that contractors are adequately insured to protect both the government and themselves from potential claims arising from contract performance. Contracting officers are responsible for ensuring these requirements are included in contracts and that coverage amounts meet or exceed the stated minimums, except where state law or unique circumstances dictate otherwise.
Key Rules
- Workers’ Compensation and Employer’s Liability
- Contractors must comply with all applicable federal and state workers’ compensation laws. If occupational diseases are not covered, employer’s liability insurance of at least $100,000 is required, unless state law prohibits private coverage.
- General Liability
- Bodily injury liability insurance of at least $500,000 per occurrence is required. Property damage liability is only required in special circumstances.
- Automobile Liability
- Comprehensive automobile liability insurance is required, with minimum coverage of $200,000 per person, $500,000 per occurrence for bodily injury, and $20,000 per occurrence for property damage in the U.S. Coverage outside the U.S. must meet local legal requirements.
- Aircraft Liability
- If aircraft are used, public and passenger liability insurance is required, with minimums of $200,000 per person, $500,000 per occurrence for bodily injury, and $200,000 per occurrence for property damage. Passenger liability must be at least $200,000 times the number of seats or passengers.
- Vessel Liability
- When vessels are used, appropriate vessel collision and indemnity insurance must be required as determined by the agency.
Responsibilities
- Contracting Officers: Ensure contracts include appropriate insurance requirements and verify coverage amounts.
- Contractors: Obtain and maintain required insurance policies and comply with all federal and state laws.
- Agencies: Determine when special coverage (property damage, vessel liability) is necessary and ensure compliance.
Practical Implications
- This section protects both the government and contractors from financial risk due to accidents or injuries during contract performance.
- Contractors must carefully review insurance requirements and ensure policies meet or exceed FAR minimums.
- Failure to maintain proper insurance can result in noncompliance, contract termination, or liability for uncovered claims.
(a) Workers’ compensation and employer’s liability. Contractors are required to comply with applicable Federal and State workers’ compensation and occupational disease statutes. If occupational diseases are not compensable under those statutes, they shall be covered under the employer’s liability section of the insurance policy, except when contract operations are so commingled with a contractor’s commercial operations that it would not be practical to require this coverage. Employer’s liability coverage of at least $100,000 shall be required, except in States with exclusive or monopolistic funds that do not permit workers’ compensation to be written by private carriers. (See 28.305(c) for treatment of contracts subject to the Defense Base Act.)
(b) General liability.
(1) The contracting officer shall require bodily injury liability insurance coverage written on the comprehensive form of policy of at least $500,000 per occurrence.
(2) Property damage liability insurance shall be required only in special circumstances as determined by the agency.
(c) Automobile liability. The contracting officer shall require automobile liability insurance written on the comprehensive form of policy. The policy shall provide for bodily injury and property damage liability covering the operation of all automobiles used in connection with performing the contract. Policies covering automobiles operated in the United States shall provide coverage of at least $200,000 per person and $500,000 per occurrence for bodily injury and $20,000 per occurrence for property damage. The amount of liability coverage on other policies shall be commensurate with any legal requirements of the locality and sufficient to meet normal and customary claims.
(d) Aircraft public and passenger liability. When aircraft are used in connection with performing the contract, the contracting officer shall require aircraft public and passenger liability insurance. Coverage shall be at least $200,000 per person and $500,000 per occurrence for bodily injury, other than passenger liability, and $200,000 per occurrence for property damage. Coverage for passenger liability bodily injury shall be at least $200,000 multiplied by the number of seats or passengers, whichever is greater.
(e) Vessel liability. When contract performance involves use of vessels, the contracting officer shall require, as determined by the agency, vessel collision liability and protection and indemnity liability insurance.