52.246-25 Limitation of Liability-Services
Source: FAR 52.246-25 on acquisition.gov
This clause limits contractor liability for government property loss after acceptance of services, except in cases of willful misconduct, lack of good faith, or where insurance coverage applies.
Overview
FAR 52.246-25, Limitation of Liability-Services, establishes the extent to which contractors are liable for loss or damage to government property resulting from defects or deficiencies in services performed or materials furnished under a contract. Generally, after the government accepts the services, the contractor is not liable for subsequent loss or damage unless the contract specifically assigns such responsibility, or unless the loss results from willful misconduct or lack of good faith by the contractor's managerial personnel. Additionally, if the contractor has insurance or a self-insurance reserve covering such liability, the contractor is liable up to the amount of that coverage.
Key Rules
- General Limitation of Liability
- Contractors are not liable for loss or damage to government property occurring after government acceptance of services, unless expressly stated otherwise in the contract.
- Exceptions for Willful Misconduct or Lack of Good Faith
- The limitation does not apply if the loss or damage results from willful misconduct or lack of good faith by the contractor's managerial personnel.
- Insurance or Self-Insurance Coverage
- If the contractor has insurance or a self-insurance reserve for such liability, they are liable to the extent of that coverage for post-acceptance loss or damage due to defects or deficiencies.
Responsibilities
- Contracting Officers: Must ensure the clause is included in applicable service contracts and understand the limitations and exceptions to contractor liability.
- Contractors: Must be aware of their liability limitations, maintain appropriate insurance or reserves if required, and ensure managerial personnel act in good faith.
- Agencies: Should monitor compliance and investigate any loss or damage to government property post-acceptance.
Practical Implications
- This clause protects contractors from broad liability for government property loss after acceptance, except in cases of willful misconduct or where insurance applies.
- Contractors should carefully review their insurance policies and ensure their managerial personnel understand the importance of good faith conduct.
- Failure to comply with the exceptions can result in significant financial exposure for contractors.
As prescribed in 46.805 , insert the following clause:
Limitation of Liability-Services (Feb 1997)
(a) Except as provided in paragraphs (b) and (c) of this clause, and except to the extent that the Contractor is expressly responsible under this contract for deficiencies in the services required to be performed under it (including any materials furnished in conjunction with those services), the Contractor shall not be liable for loss of or damage to property of the Government that-
(1) Occurs after Government acceptance of services performed under this contract; and
(2) Results from any defects or deficiencies in the services performed or materials furnished.
(b) The limitation of liability under paragraph (a) of this clause shall not apply when a defect or deficiency in, or the Government’s acceptance of, services performed or materials furnished results from willful misconduct or lack of good faith on the part of any of the Contractor’s managerial personnel. The term "Contractor’s managerial personnel," as used in this clause, means the Contractor’s directors, officers, and any of the Contractor’s managers, superintendents, or equivalent representatives who have supervision or direction of-
(1) All or substantially all of the Contractor’s business;
(2) All or substantially all of the Contractor’s operations at any one plant, laboratory, or separate location at which the contract is being performed; or
(3) A separate and complete major industrial operation connected with the performance of this contract.
(c) If the Contractor carries insurance, or has established a reserve for self-insurance, covering liability for loss or damage suffered by the Government through the Contractor’s performance of services or furnishing of materials under this contract, the Contractor shall be liable to the Government, to the extent of such insurance or reserve, for loss of or damage to property of the Government occurring after Government acceptance of, and resulting from any defects and deficiencies in, services performed or materials furnished under this contract.
(End of clause)