28.307-2
Liability
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.