52.228-7 Insurance-Liability to Third Persons
Source: FAR 52.228-7 on acquisition.gov
Contractors must maintain and document required insurance coverage, promptly notify the government of claims, and comply with all approval and reimbursement procedures to ensure protection and cost recovery for third-party liabilities.
Overview
FAR 52.228-7, Insurance-Liability to Third Persons, requires contractors to maintain specified types of insurance (workers’ compensation, employer’s liability, general liability, and automobile liability) during contract performance, unless otherwise approved by the Contracting Officer. Contractors may use self-insurance with approval, and all insurance must meet the Contracting Officer’s requirements. The clause also addresses reimbursement for insurance costs and certain third-party liabilities arising from contract performance, provided these are not otherwise covered or excluded by the contract. Contractors must promptly notify the Contracting Officer of any claims or suits that may be reimbursable, and the government may participate in or take over the defense or settlement of such claims. Reimbursement is subject to appropriated funds and does not cover liabilities resulting from willful misconduct or failure to maintain required insurance.
Key Rules
- Required Insurance Coverage
- Contractors must maintain specified insurance types unless self-insurance is approved by the Contracting Officer.
- Approval and Form of Insurance
- All insurance must be in a form, amount, and with insurers approved by the Contracting Officer.
- Reimbursement for Insurance and Liabilities
- Contractors may be reimbursed for reasonable insurance costs and certain third-party liabilities not otherwise compensated, subject to government approval and appropriated funds.
- Exclusions from Reimbursement
- No reimbursement for liabilities due to willful misconduct, failure to maintain required insurance, or those otherwise covered by contract terms.
- Notification and Collaboration on Claims
- Contractors must promptly notify the Contracting Officer of claims and allow government involvement in defense or settlement.
Responsibilities
- Contracting Officers: Approve insurance forms, amounts, and self-insurance programs; review and approve claims for reimbursement; may participate in claim defense.
- Contractors: Maintain required insurance, seek approvals as needed, submit claims for reimbursement, notify of claims, and cooperate with government representatives.
- Agencies: Ensure oversight of insurance compliance and manage appropriated funds for reimbursements.
Practical Implications
- This clause ensures contractors are financially protected against third-party claims during contract performance, reducing government risk.
- Contractors must proactively manage insurance compliance and documentation to avoid reimbursement denials.
- Failure to maintain required insurance or notify the government of claims can result in unreimbursed liabilities and potential contract breaches.
As prescribed in 28.311-1 , insert the following clause:
Insurance-Liability to Third Persons (Mar 1996)
(a)
(1) Except as provided in paragraph (a)(2) of this clause, the Contractor shall provide and maintain workers’ compensation, employer’s liability, comprehensive general liability (bodily injury), comprehensive automobile liability (bodily injury and property damage) insurance, and such other insurance as the Contracting Officer may require under this contract.
(2) The Contractor may, with the approval of the Contracting Officer, maintain a self-insurance program, provided that, with respect to workers’ compensation, the Contractor is qualified pursuant to statutory authority.
(3) All insurance required by this paragraph shall be in a form and amount and for those periods as the Contracting Officer may require or approve and with insurers approved by the Contracting Officer.
(b) The Contractor agrees to submit for the Contracting Officer’s approval, to the extent and in the manner required by the Contracting Officer, any other insurance that is maintained by the Contractor in connection with the performance of this contract and for which the Contractor seeks reimbursement.
(c) The Contractor shall be reimbursed-
(1) For that portion-
(i) Of the reasonable cost of insurance allocable to this contract; and
(ii) Required or approved under this clause; and
(2) For certain liabilities (and expenses incidental to such liabilities) to third persons not compensated by insurance or otherwise without regard to and as an exception to the limitation of cost or the limitation of funds clause of this contract. These liabilities must arise out of the performance of this contract, whether or not caused by the negligence of the Contractor or of the Contractor’s agents, servants, or employees, and must be represented by final judgments or settlements approved in writing by the Government. These liabilities are for-
(i) Loss of or damage to property (other than property owned, occupied, or used by the Contractor, rented to the Contractor, or in the care, custody, or control of the Contractor); or
(ii) Death or bodily injury.
(d) The Government’s liability under paragraph (c) of this clause is subject to the availability of appropriated funds at the time a contingency occurs. Nothing in this contract shall be construed as implying that the Congress will, at a later date, appropriate funds sufficient to meet deficiencies.
(e) The Contractor shall not be reimbursed for liabilities (and expenses incidental to such liabilities)-
(1) For which the Contractor is otherwise responsible under the express terms of any clause specified in the Schedule or elsewhere in the contract;
(2) For which the Contractor has failed to insure or to maintain insurance as required by the Contracting Officer; or
(3) That result from willful misconduct or lack of good faith on the part of any of the Contractor’s directors, officers, managers, superintendents, or other representatives who have supervision or direction of-
(i) All or substantially all of the Contractor’s business;
(ii) All or substantially all of the Contractor’s operations at any one plant or separate location in which this contract is being performed; or
(iii) A separate and complete major industrial operation in connection with the performance of this contract.
(f) The provisions of paragraph (e) of this clause shall not restrict the right of the Contractor to be reimbursed for the cost of insurance maintained by the Contractor in connection with the performance of this contract, other than insurance required in accordance with this clause; provided, that such cost is allowable under the Allowable Cost and Payment clause of this contract.
(g) If any suit or action is filed or any claim is made against the Contractor, the cost and expense of which may be reimbursable to the Contractor under this contract, and the risk of which is then uninsured or is insured for less than the amount claimed, the Contractor shall-
(1) Immediately notify the Contracting Officer and promptly furnish copies of all pertinent papers received;
(2) Authorize Government representatives to collaborate with counsel for the insurance carrier in settling or defending the claim when the amount of the liability claimed exceeds the amount of coverage; and
(3) Authorize Government representatives to settle or defend the claim and to represent the Contractor in or to take charge of any litigation, if required by the Government, when the liability is not insured or covered by bond. The Contractor may, at its own expense, be associated with the Government representatives in any such claim or litigation.
(End of clause)