52.250-1 Indemnification Under Public Law85-804
Source: FAR 52.250-1 on acquisition.gov
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.
As prescribed in 50.104-4 , insert the following clause:
Indemnification Under Public Law 85-804 (Apr 1984)
(a) "Contractor’s principal officials," as used in this clause, means directors, officers, managers, superintendents, or other representatives supervising or directing-
(1) All or substantially all of the Contractor’s business;
(2) All or substantially all of the Contractor’s operations at any one plant or separate location in which this contract is being performed; or
(3) A separate and complete major industrial operation in connection with the performance of this contract.
(b) Under Public Law85-804 (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title50-section1431&num=0&edition=prelim" target="_blank">50 U.S.C. 1431-http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title50-section1435&num=0&edition=prelim" target="_blank">1435) and Executive Order 10789, as amended, and regardless of any other provisions of this contract, the Government shall, subject to the limitations contained in the other paragraphs of this clause, indemnify the Contractor against-
(1) Claims (including reasonable expenses of litigation or settlement) by third persons (including employees of the Contractor) for death; personal injury; or loss of, damage to, or loss of use of property;
(2) Loss of, damage to, or loss of use of Contractor property, excluding loss of profit; and
(3) Loss of, damage to, or loss of use of Government property, excluding loss of profit.
(c) This indemnification applies only to the extent that the claim, loss, or damage (1) arises out of or results from a risk defined in this contract as unusually hazardous or nuclear and (2)is not compensated for by insurance or otherwise. Any such claim, loss, or damage, to the extent that it is within the deductible amounts of the Contractor’s insurance, is not covered under this clause. If insurance coverage or other financial protection in effect on the date the approving official authorizes use of this clause is reduced, the Government’s liability under this clause shall not increase as a result.
(d) When the claim, loss, or damage is caused by willful misconduct or lack of good faith on the part of any of the Contractor’s principal officials, the Contractor shall not be indemnified for-
(1) Government claims against the Contractor (other than those arising through subrogation); or
(2) Loss or damage affecting the Contractor’s property.
(e) With the Contracting Officer’s prior written approval, the Contractor may, in any subcontract under this contract, indemnify the subcontractor against any risk defined in this contract as unusually hazardous or nuclear. This indemnification shall provide, between the Contractor and the subcontractor, the same rights and duties, and the same provisions for notice, furnishing of evidence or proof, and Government settlement or defense of claims as this clause provides. The Contracting Officer may also approve indemnification of subcontractors at any lower tier, under the same terms and conditions. The Government shall indemnify the Contractor against liability to subcontractors incurred under subcontract provisions approved by the Contracting Officer.
(f) The rights and obligations of the parties under this clause shall survive this contract’s termination, expiration, or completion. The Government shall make no payment under this clause unless the agency head determines that the amount is just and reasonable. The Government may pay the Contractor or subcontractors, or may directly pay parties to whom the Contractor or subcontractors may be liable.
(g) The Contractor shall-
(1) Promptly notify the Contracting Officer of any claim or action against, or any loss by, the Contractor or any subcontractors that may be reasonably be expected to involve indemnification under this clause;
(2) Immediately furnish to the Government copies of all pertinent papers the Contractor receives;
(3) Furnish evidence or proof of any claim, loss, or damage covered by this clause in the manner and form the Government requires; and
(4) Comply with the Government’s directions and execute any authorizations required in connection with settlement or defense of claims or actions.
(h) The Government may direct, control, or assist in settling or defending any claim or action that may involve indemnification under this clause.
(End of clause)
Alternate I (Apr 1984). In cost-reimbursement contracts, add the following paragraph (i) to the basic clause:
(i) The cost of insurance (including self-insurance programs) covering a risk defined in this contract as unusually hazardous or nuclear shall not be reimbursed except to the extent that the Contracting Officer has required or approved this insurance. The Government’s obligations under this clause are-
(1) Excepted from the release required under this contract’s clause relating to allowable cost; and
(2) Not affected by this contract’s Limitation of Cost or Limitation of Funds clause.