Overview
This section establishes the federal government’s general policy of self-insuring its property during transit, while outlining the specific conditions and administrative requirements for exceptions to this rule.
Key Rules
- Self-Insurance Policy: The Government generally retains the risk of loss or damage to its property and does not purchase commercial insurance for goods in the possession of carriers.
- Exceptions for Special Circumstances: The Government may deviate from the general policy if it is in the Government’s interest to either purchase insurance directly or require the carrier to assume full responsibility and obtain insurance.
- Cost Allocation: If a carrier is required to purchase insurance, the cost of that insurance is treated as part of the overall transportation cost.
- Contracting Officer (CO) Requirements: To purchase insurance, the CO must ensure there is no statutory prohibition, verify that funds are available, and document the authorization and necessity in the contract file.
- Valuables: Shipments of high-value items are subject to specific Department of the Treasury regulations (31 CFR parts 361 and 362).
Practical Implications
- Standard Practice: In most contracts, contractors and carriers should expect the Government to bear the risk of loss for damages exceeding the carrier's legal liability rather than paying for supplemental insurance premiums.
- Administrative Burden: If a shipment is deemed high-risk or high-value enough to require insurance, the Contracting Officer must provide significant documentation and justification to override the default "no-insurance" policy.