Insurance-Liability to Third Persons
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.