Overview
FAR 28.301 establishes the policy requiring contractors to maintain insurance coverage to protect against specific perils, comply with legal mandates (such as workers' compensation), and safeguard the Government's interests under various contract types and conditions.
Key Rules
- CAS 416 Compliance: Contractors subject to Cost Accounting Standard (CAS) 416 must obtain insurance (purchased or self-insurance) for exposed perils, unless the Government provides indemnification or relieves the contractor of liability for Government property.
- Mandatory Legal Coverage: Regardless of CAS applicability, contractors must provide insurance required by law (e.g., workers' compensation) or when necessary for Government protection due to the nature of the operations or commingling of property.
- Cost Allowability: The allowability of insurance program costs is strictly governed by the cost principles found in FAR 31.205-19.
- Government Oversight: The Government reserves the authority to disapprove any insurance coverage deemed not in its interest and requires inter-agency coordination for the approval of insurance programs involving multiple agencies.
- Health Care Services: Nonpersonal health care service contractors must maintain medical liability insurance and are required to indemnify the Government for any liability-producing acts or omissions.
- Geographic Adjustments: Minimum insurance requirements may be reduced for contracts performed outside the United States and its outlying areas.
Practical Implications
- Cost Recovery: Contractors must ensure their insurance programs align with FAR 31.205-19 to ensure premiums and self-insurance reserves are allowable and reimbursable costs.
- Risk Allocation: For health care and high-risk contracts, the burden of liability is explicitly shifted to the contractor through mandatory indemnification and liability insurance requirements.