Indemnification Under Public Law85-804
FAR 52.250-1 provides government indemnification for contractors against certain unusually hazardous or nuclear risks, but only with strict notification, documentation, and approval requirements.
Overview
FAR 52.250-1 establishes the terms under which the U.S. Government will indemnify contractors against certain third-party claims and losses arising from unusually hazardous or nuclear risks, as authorized by Public Law 85-804. This clause is used in contracts where the government determines that such indemnification is necessary to facilitate national defense or other critical interests, and where risks are not otherwise insurable or covered. The clause defines the scope of indemnification, exclusions (such as willful misconduct or lack of good faith by principal officials), and the process for extending indemnification to subcontractors with Contracting Officer approval. It also outlines contractor obligations for notification, documentation, and cooperation in the event of a claim, and clarifies that indemnification rights and obligations survive contract completion. For cost-reimbursement contracts, Alternate I specifies that insurance costs for covered risks are only reimbursable if approved by the Contracting Officer, and that indemnification is not subject to standard cost limitation clauses.
Key Rules
- Scope of Indemnification
- Covers third-party claims for death, injury, or property loss/damage, and certain losses to contractor or government property, but excludes loss of profit and willful misconduct.
- Conditions for Indemnification
- Applies only to risks defined as unusually hazardous or nuclear and not otherwise compensated by insurance.
- Subcontractor Indemnification
- Permits flow-down of indemnification to subcontractors with prior written approval from the Contracting Officer.
- Contractor Obligations
- Requires prompt notification, provision of documentation, and cooperation with government directions in claims handling.
- Survival and Payment
- Indemnification obligations survive contract termination; payments require agency head determination of reasonableness.
- Cost-Reimbursement Contracts (Alternate I)
- Insurance costs for covered risks are only reimbursed if approved; indemnification is not limited by standard cost clauses.
Responsibilities
- Contracting Officers: Approve indemnification for subcontractors, determine insurance reimbursement, and oversee claims process.
- Contractors: Notify, document, and cooperate on claims; ensure compliance with indemnification terms; seek approval for subcontractor indemnification.
- Agencies: Make just and reasonable payment determinations; may settle or defend claims directly.
Practical Implications
- This clause enables contractors to accept contracts involving extraordinary risks by providing government-backed indemnification, but imposes strict compliance and reporting requirements. Failure to notify or cooperate can jeopardize indemnification. Contractors must carefully manage insurance and subcontractor relationships to ensure coverage and compliance.