BONDS AND INSURANCE
Questions or requests for guidance regarding bonds may be submitted to ABM.
(a)(1) DoN policy is to rely upon the commercial insurance industry to the maximum extent practicable to protect contractors against risks arising under contracts. However, it may be preferable or necessary to provide Government indemnification-
(i) Where there is a continuing program, such as for nuclear vessels, and insurance premium costs over a period of time could equal the amount of coverage;
(ii) Where war risk is involved;
(iii) Where the cost of insurance is so excessive it is unreasonable and constitutes a "turndown quotation";
(iv) Where the Government risk is rated only on its isolated experience and not shared with the risks of others, whether or not the risk is unusually hazardous;
(v) Where an urgent requirement allows insufficient time to receive a competitive insurance quotation;
(vi) Where the degree of risk is either very small or catastrophic; or
(vii) Where indemnification of the deductible portion of insurance coverage
will substantially reduce insurance costs.
(b) All matters concerning indemnification shall be referred to ABM for decision or recommendation sufficiently in advance of contract award.
(90) Authority. ABM is authorized to act by direction of the Secretary of the Navy, or as the duly authorized representative of the HCA, the contracting officer, or any other Naval official designated in the contract to:
(1) Require or approve contract insurance; and
(2) Execute, sign or endorse all lost policy releases; proofs of loss; subrogation agreements; endorsements of policies for claims and/or return premiums; payment orders; and insurance drafts made payable to the Secretary of the Navy and not affecting the obligation of appropriations.
(91) Payment of claims to third parties. The following procedure shall be used in making all payments under contracts in which the Government assumes the risk of liability to third parties and such liability is not compensated for by insurance or otherwise:
(a) When a claim is made for loss of or damage to property, death or bodily injury arising out of performance of a contract, the officer in charge (OIC) shall submit to the cognizant contracting activity:
(1) statements of all pertinent facts;
(2) the OIC recommendation and the contractor recommendation as to the action to be taken with respect to the claim; and
(3) the amount, if any, to be paid.
(b) The contracting activity shall promptly forward the information via the HCA to ABM for determination of whether the Government has assumed
liability for the claim and if so, the amount to be paid.
(c) If ABM determines that the Government has assumed liability for the claim, the third party shall be paid the amount fixed by ABM unless pursuant to appeal by the contractor under the Disputes clause, a different amount is allowed.
(d) If ABM determines that the Government did not assume liability, no payment shall be made, unless pursuant to appeal by the contractor under the Disputes clause, a different decision is made.
5228.304 Risk-pooling arrangements.
ABM will confirm to the cognizant contracting activity the amount of premium due and, if the funds allocated to the contract are not sufficient, the amount due shall be paid as an item of cost under the contract out of other appropriated funds.
5228.305 (DFARS 5228.305) Overseas workers' compensation and war-hazard
insurance.
(d) Submit requests for waiver through ABM.
5228.307 Insurance under cost-reimbursement contracts.
5228.307(90) Liability of subcontractors to third parties.
(a) In general, DoN will not assume liability of subcontractors to third parties.
(b) However, under cost-plus-fixed-fee contracts, contracting officers may, when in the best interest of Government, provide for flow down of the clause at FAR 52.228-7, Insurance--Liability to Third Persons, to cost-plus-fixed-fee subcontracts.
Refer all matters concerning self-insurance covering any kind of risk to ABM.
SUBPART 5228.90-INSURANCE UNDER LEASES
When Government property is leased under the authority of 10 U.S.C. 2667, the lessee, at its own expense, shall insure the property and the liabilities of itself and the Government to third parties, including employees.
The requirement to insure the property may be waived by ABM when more than 75% of its use is for Government work. In such case the Government will assume the risk of loss or damage to the property and the lease will be modified accordingly.
5228.9002 Lessee Requirements.
Where insurance is required:
(1) The lessee, for the period of the lease, shall purchase and maintain Fire and Extended Coverage insurance or its equivalent and, if applicable, Boiler and Machinery insurance, in an amount equal to replacement value less depreciation or in any lesser amount determined by the contracting officer.
(2) Lessee will provide insurance on special types of property (e. g., floating drydocks, mobile power plants, etc.) as designated by ABM.
(3) When a co-insurance clause is used, failure of the lessee to maintain adequate insurance will not relieve the lessee of its responsibilities under any other terms of the lease.
(a) Insurance policies for leased property shall be issued in the names of the lessee and of the Department of the Navy and shall contain a loss payable provision as follows: "Loss, if any, under this policy shall be adjusted with (Lessee) and the proceeds, at the election of the Government, shall be payable to the (Lessee); any proceeds not paid to the (Lessee) shall be payable to the Treasurer of the United States."
(b) Each insurance policy shall contain a provision for thirty days prior notice to ABM in the event of cancellation of the policy.
(c) A certificate of insurance or copy of each insurance policy shall be deposited with ABM.
5228.9004 Contracting officer requirements.
(a) Leases involving significant insurance costs shall conform to the requirements of the FAR. If required, modify existing leases.
(b) Refer all questions in connection with this subpart to ABM or, with respect to form and legality, to the Office of General Counsel.