Overview
This section mandates that whenever a contract requires insurance, the Government must receive formal advance notice before any policy is cancelled or significantly modified in a way that harms the Government's interests.
Key Rules
- Mandatory Endorsement: Commercial insurance policies must include a specific endorsement stating that cancellations or material changes are not effective without prior written notice.
- Notice Requirements: Written notice must be provided to the Contracting Officer (CO) by either the insurer or the contractor, as specified by the CO.
- Materiality Threshold: The notice requirement applies specifically to changes that "adversely affect the Government’s interest."
- Self-Insurance Restrictions: For contractors using self-insurance, any decrease or change in coverage is prohibited without the prior written approval of the Administrative Contracting Officer (ACO).
Practical Implications
- Contractors must coordinate closely with their insurance carriers to ensure policy language explicitly includes the required FAR endorsement.
- This regulation serves as a safeguard against "coverage gaps," ensuring the Government has time to intervene or require alternative coverage before a contractor's risk protection expires or diminishes.