Overview
FAR Subpart 28.3 establishes the policies and procedures regarding insurance requirements for government contractors. It defines when insurance is mandatory (such as for workers' compensation or work on government installations), sets minimum liability limits for cost-reimbursement contracts, and provides the framework for approving contractor self-insurance programs to protect the Government's interests.
Key Rules
- Mandatory Coverage: Contractors subject to Cost Accounting Standard (CAS) 416 must obtain insurance for all exposed perils unless specifically indemnified by the Government or relieved of liability for Government property.
- Liability Minimums (Cost-Reimbursement):
- Workers’ Compensation: Per statutory requirements; Employer’s liability minimum of $100,000.
- General Liability: Minimum $500,000 per occurrence for bodily injury.
- Automobile Liability: $200,000 per person and $500,000 per occurrence for bodily injury; $20,000 per occurrence for property damage.
- Aircraft/Vessel: Specific minimums based on passenger seating and type of operation.
- Defense Base Act (DBA): Mandatory for public-work contracts performed outside the U.S. It provides workers' compensation and war-hazard protection for overseas employees.
- Notice of Cancellation: All required policies must include an endorsement requiring the insurer or contractor to provide written notice to the Contracting Officer before any material change or cancellation.
- Self-Insurance Approval: Contractors must obtain formal written approval for self-insurance programs if the costs are expected to be $200,000 or more and 50% or more is allocable to negotiated government contracts.
Responsibilities
- Contracting Officers (CO):
- Determine and specify insurance requirements in the contract Schedule.
- Ensure the inclusion of mandatory clauses (e.g., 52.228-5 for work on Gov installations).
- Review and approve insurance policies or lower limits for overseas work.
- Administrative Contracting Officers (ACO):
- Review and approve contractor self-insurance programs and any subsequent major changes.
- Monitor the financial stability and loss history of contractors using self-insurance.
- Contractors:
- Maintain required coverage and provide proof of insurance when requested.
- Notify the CO of any policy cancellations or material changes.
- Submit detailed financial and program data when seeking self-insurance approval.
- Agency Heads: Responsible for recommending waivers for the Defense Base Act to the Secretary of Labor when appropriate.
Practical Implications
In real-world scenarios, this subpart shifts the financial risk of accidents or property damage from the taxpayer to the contractor's insurance carrier. For fixed-price contracts, the Government generally remains "hands-off" unless the work occurs on a federal installation, in which case the contractor must prove they carry the minimums specified in 28.307-2 to even begin work. For cost-reimbursement contracts, the Government is highly involved because the insurance premiums are an allowable cost; therefore, the CO must ensure the Government is not overpaying for excessive coverage while still being protected from third-party claims. Contractors working internationally must be particularly diligent regarding the Defense Base Act, as failing to secure this specific coverage can lead to massive unallowable costs and legal liability for employee injuries in combat zones or foreign sites.