52.246-25
Limitation of Liability-Services
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.