BONDS AND INSURANCE

(d) The Government's assumption of risk shall not extend to damage to, or loss or destruction of, such aircraft: (i) resulting from failure of the Contractor, due to willful misconduct or lack of good faith of any of the Contractor's managerial personnel, to maintain and administer a program for the protection and preservation of aircraft in the open, and during operation, in accordance with sound industrial practice (the term "Contractor's managerial personnel" means the Contractor's directors, officers, and any of his managers, superintendents, or other equivalent representatives, who has supervision or direction of all or substantially all of the Contractor's business, or all or substantially all of the Contractor's operations at any one plant or separate location at which this contract is performed, or a separate and complete major industrial operation in connection with the performance of this contract);

(ii) sustained during flight if the flight crew members conducting such flight have not been approved in writing by the Contracting Officer;

(iii) while in the course of transportation by rail, or by conveyance on public streets, highways, or waterways, except for Government-furnished property;

(iv) to the extent that such damage, loss or destruction is in fact covered by insurance;

(v) consisting of wear and tear, deterioration (including rust and corrosion), freezing, or mechanical, structural, or electrical breakdown or failure, unless such damage is the result of other loss, damage, or destruction covered by this clause; provided, however, in the case of Government-furnished property, if such damage consists of reasonable wear and tear or deterioration, or results from inherent vice in such property, this exclusion shall not apply;

(vi) sustained while the aircraft is being worked upon and directly resulting therefrom, including but not limited to any repairing, adjusting, servicing or maintenance operation, unless such damage, loss, or destruction is of a type which would be covered by insurance which would customarily have been maintained by the Contractor at the time of such damage, loss, or destruction, but for the Government's assumption of risk under this clause.

(e) With the exception of damage to, or loss or destruction of aircraft in "flight," the Government's assumption of risk under this clause shall not extend to the first $1,000 of loss or damage resulting from each event separately occurring. The Contractor assumes the risk of and shall be responsible for the first $1,000 of loss of or damage to aircraft "in the open" or during "operation" resulting from each event separately occurring, except for reasonable wear and tear and except to the extent the loss or damage is caused by negligence of Government personnel. If the Government elects to require that the aircraft be replaced or restored by the Contractor to the condition in which it was immediately prior to the damage, the equitable adjustment in the price authorized by paragraph (i) below shall not include the dollar amount of the risk assumed by the Contractor under this paragraph. In the event the Government does not elect repair or replacement, the Contractor agrees to credit the contract price or pay the Government $1,000 (or the amount of the loss if smaller) as directed by the Contracting Officer.

(f) A subcontractor shall not be relieved from liability for damage to, or loss or destruction of, aircraft while in his possession or control, except to the extent that the subcontract, with the prior written approval of the Contracting Officer, provides for relief of the subcontractor from such liability. In the absence of such approval, the subcontract shall contain appropriate provisions requiring the return of such aircraft in as good condition as when received, except for reasonable wear and tear or for the utilization of the property in accordance with the provisions of this contract. Where a subcontractor has not been relieved from liability for any damage, loss, or destruction of aircraft and any damage, loss, or destruction occurs, the Contractor shall enforce the liability of the subcontractor for such damage to, or loss or destruction of, the aircraft for the benefit of the Government.

(g) The Contractor warrants that the contract price does not and will not include, except as may be otherwise authorized in this clause, any charge or contingency reserve for insurance (including self-insurance funds or reserves) covering any damage to, or loss or destruction of, aircraft while in the open, during operation, or in flight, the risk of which has been assumed by the Government under the provisions of this clause, whether or not such assumption may be terminated as to aircraft in the open.

(h) In the event of damage to, or loss or destruction of, aircraft in the open, during operation, or in flight, the Contractor shall take all reasonable steps to protect such aircraft from further damage, separate damaged and undamaged aircraft, put all aircraft in the best possible order and, further, except in cases covered by (e) above, the Contractor should furnish to the Contracting Officer a statement of:

(i) the damaged, lost, or destroyed aircraft;

(ii) the time and origin of the damage, loss or destruction;

(iii) all known interests in commingled property of which aircraft are a part; and

(iv) the insurance, if any, covering any part of the interest in such commingled property.

Except in cases covered by (e) above, and equitable adjustment shall be made in the amount due under this contract for expenditures made by the Contractor in performing his obligations under this paragraph (h) and this contract shall be modified in writing accordingly.

(i) If prior to delivery and acceptance by the Government any aircraft is damaged, lost, or destroyed and the Government has under this clause assumed the risk of such damage, loss or destruction, the Government shall either (1) require that such aircraft be replaced or restored by the Contractor to the condition in which it was immediately prior to such damage, or (2) shall terminate this contract with respect to such aircraft. In the event that the Government requires that the aircraft be replaced or restored an equitable adjustment shall be made in the amount due under this contract and in the time required for its performance, and this contract shall be modified in writing accordingly. If, in the alternative, this contract is terminated under this paragraph with respect to such aircraft and under this clause the Government has assumed the risk of such damage, loss, or destruction, the Contractor shall be paid the contract price for said aircraft (or, if applicable, any work to be performed on said aircraft) less such amounts as the Contracting Officer determines (1) that it would have cost the Contractor to complete the aircraft (or any work to be performed on said aircraft) together with anticipated profit, if any, on any such uncompleted work, and (2) to be the value, if any, of the damaged aircraft or any remaining portion thereof retained by the Contractor. The Contracting Officer shall have the right to prescribe the manner of disposition of the damaged, lost, or destroyed aircraft, or any remaining parts thereof; and, if any additional

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costs of such disposition are incurred by the Contractor, a further equitable adjustment will be made in the amount due to the Contractor. Failure of the parties to agree upon an equitable adjustment or upon the amount to be paid in the event of termination of the contract with respect to any aircraft, shall be a dispute concerning a question of fact within the meaning of the Disputes clause of this contract.

(j) In the event the Contractor is at any time reimbursed or compensated by any third person for any damage, loss, or destruction of any aircraft, the risk of which has been assumed by the Government under the provisions of this clause and for which the Contractor has been compensated by the Government, he shall equitably reimburse the Government. The Contractor shall do nothing to prejudice the Government's rights to recover against third parties for any such damage, loss, or destruction and, upon the request of the Contracting Officer shall at the Government's expense furnish to the Government all reasonable assistance and cooperation (including the prosecution of suit and the execution of instruments of assignment or subrogation in favor of the Government) in obtaining recovery.

(b)(1) In paragraph (b) of the foregoing clause, certain of the defined terms may be modified by insertion of appropriate additional definitions in the Schedule in accordance with the following. The purpose of the clause is to have the Government assume risks which generally entail unusually high insurance premiums and which are not covered by the contractor's "contents," "work-in-process," or other similar insurance. It is recognized that all of the definitions prescribed in the foregoing clause may not cover all situations which should be covered if the above purpose is to be accomplished. Therefore, changes may be effected in the Schedule as set forth below.

(i) Since the standard definition of "aircraft" contemplates conventional types of winged aircraft, a modified definition is necessary if the contract covers helicopters, vertical take-off aircraft, lighter-than-air airships or other nonconventional types of aircraft. The modified definition should take into consideration that the aircraft has reached a point of manufacture comparable to that required in the standard definition;

(ii) The definition of "in the open" may be modified to include "hush houses," test hangers, and comparable structures, and other designated areas;

(iii) "Contractor's premises" shall be expressly defined in the Schedule and shall be limited to those locations where aircraft, as defined in the above clause, may be located during and for the performance of the contract. "Contractor's premises” may include, but are not limited to, premises owned or leased by the contractor or premises as to which the contractor has a permit, license, or other right of use either exclusively or jointly with others, including Government airfields. (2) The Government need not assume the risk of damage to, or loss or destruction of, aircraft, as provided by the foregoing clause, if the best estimate of premium costs which would be included in the contract price for insurance coverage for such damage, loss, or destruction at any plant or facility is less than $500. If it is determined not to assume such risk, the foregoing clause shall not be made a part of the contract, and the cost of necessary insurance to be obtained by the contractor to cover such risk shall be considered in establishing the contract price. In such cases, however, if performance of the contract is expected to involve the flight of Governmentfurnished aircraft, the substance of the "Flight Risks" clause in 10.504, suitably adapted for use in a fixed-price type contract, shall be used.

(3) Subparagraph (d)(iii) of the above clause may be varied to provide for Government assumption of risk of transportation by conveyance on streets or highways where the contracting officer determines that such transportation is limited to the vicinity of the contractor's premises and is merely an incident to work being performed under the contract.

10.405 Work at Government Installation.

(a) Any contract requiring performance of construction, repair, or utilities work on Government installation shall require that any contractor or subcontractor doing such work furnish a statement in writing to the contracting officer attesting to the existence, in addition to legally required insurance, of Comprehensive General Liability and Automobile Insurance, in each instance for both bodily injury and property damage in such limits as contracting officer deems reasonable under the circumstances. The solicitation shall state the minimum insurance coverage required.

(b) Contractors and subcontractors may submit annual statements in compliance with the foregoing requirements, which statements shall be accepted in satisfaction thereof to the extent of the insurance coverage so reported.

(c) The foregoing requirements are not applicable to contracts of less than $10,000, or for work to be performed outside the United States, its possessions, and Puerto Rico.

NASA PROCUREMENT REGULATION

10.405

Subpart 5-Insurance Under Cost-Type Contracts

10.500 Scope of Subpart. This Subpart sets forth the policy of NASA with respect to insurance under NASA cost-reimbursement type contracts.

10.501 Policy. The kinds of insurance listed in this paragraph 10.501 shall ordinarily be required under cost-reimbursement type contracts and under those subcontracts where the provisions of the prime contract are extended to the subcontract. A program of self-insurance approved by the Director of Procurement or his designee, as provided in 10.502, may be substituted for any of the kinds of insurance ordinarily required.

10.501-1 Workmen's Compensation and Employers' Liability Insurance.

(a) Compliance with statutes shall be required. Related to workmen's compensation, and included in the same insurance policy, are (i) Employers' Liability; (ii) Workmen's Compensation for Occupational Disease; and (iii) Employers' Liability for Occupational Disease.

(b) Workmen's compensation is an obligation imposed upon an employer by the workmen's compensation law of a State or by the United States Longshoremen's and Harbor Workers' Compensation Act (33 U.S.C. 901). An employer subject to a workmen's compensation law can provide for his obligation by insuring either with a commercial insurance company or a State fund, or by self-insuring. In a few States, commercial insurance is not permitted and the State fund is the exclusive carrier. If the employer desires to self-insure, he must qualify himself as a self-insurer with the appropriate State authority. However, such approval is only one of the elements considered by NASA in its approval of a self-insurance plan. Information may be required as to the procedures followed in operating the self-insurance plan and the method of accruing the operating costs thereof prior to granting NASA approval of the self-insurance plan. (c) Occupational disease insurance is related to workmen's compensation insurance, and is usually required under applicable law. In jurisdictions where all occupational diseases are not compensable under applicable law, insurance for occupational diseases shall be required under the employers' liability section of the insurance policy. However, such additional insurance will not be required where contract operations are commingled with the contractor's commercial operations so that it would be impracticable to require such coverage.

(d) Employers' liability is the liability imposed upon the employer by law for damages on account of personal injuries, including death resulting therefrom, sustained by his employees by reason of accidents.

(e) The insurance coverage with respect to employers' liability and occupational disease shall be required with a minimum limit of $100,000 per incident.

(f) With respect to workmen's compensation insurance overseas, pursuant to the Defense Base Act, as amended (42 U.S.C. 1651), the clause set forth in 10.403(b) shall be included in all construction contracts, as defined in 10.101-6, to be performed outside the United States. 10.501-2 General Liability Insurance

(a) Liability insurance, commonly referred to as third-party liability insurance, protects the insured against his liability to members of the public for bodily injury or death or for damage to or destruction of the property of others. An insurance policy may be obtained to insure the several general liability hazards separately or in various combinations. The advantage of a comprehensive general liability policy is that the insurance afforded protects the insured from loss arising from any cause other than those causes specifically excluded. This contrasts with the ordinary policy, which names the hazards insured against. In this manner the danger of “uninsured gaps" in the insured's insurance program is minimized. Comprehensive general (bodily injury) liability insurance shall be required with minimum limits of $300,000 per occurrence. (b) Property damage liability insurance will be required only in special circumstances. Examples of such special circumstances are:

(i) where a commingling of operations permits property damage coverage at a nominal cost to NASA under insurance carried by a contractor in the course of his commercial operations; and (ii) where the contractors are engaged in the handling of high explosives or in extrahazardous research and development activities undertaken in populated areas. Otherwise, prior approval for purchase of property damage liability insurance must be obtained from the Director of Procure

ment.

NASA PROCUREMENT REGULATION

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BONDS AND INSURANCE

(c) The Government normally will assume the risk of a contractor's uninsured third-party liability to the extent provided for by the clause entitled "Insurance-Liability to Third Persons," contained in 7.203-22.

10.501-3 Automobile Liability Insurance.

(a) Automobile liability insurance shall be required on the comprehensive form of policy and shall provide for bodily injury liability and property damage liability covering the operation of all automobiles used in connection with the performance of a contract. Such insurance will protect the contractor against (i) his liability to members of the public because of bodily injury or property damage arising out of the operations, maintenance, or use of the insured vehicles; and (ii) financial loss resulting from damage to and loss or destruction of insured vehicles.

(b) An insurance policy for automobiles can be written to apply to specific vehicles, classes of vehicles, or to all vehicles in which the insured may have an insurable interest. The comprehensive automobile liability policy is generally chosen by a contractor, since it can minimize the possibility of an uninsured loss. A comprehensive automobile liability insurance policy may or may not include coverage (comprehensive physical damage and collision) for damage to and loss or destruction of insured vehicles.

(c) Automobile bodily injury liability and property damage liability insurance shall be required with minimum limits of $100,000 per person and $300,000 per occurrence for bodily injury liability and $10,000 per occurrence for property damage liability on the comprehensive policy form covering all owned, non-owned, hired, and Government-furnished motor vehicles which will be used in the contract operations where use will not be limited exclusively to the premises on which the work under such contract is performed. Where such insurance relates to contracts to be performed outside the United States, its possessions, and Puerto Rico, the contracting office may revise downward the monetary limits prescribed herein. The Government shall normally assume the risk of a contractor's uninsured third-party liability to the extent provided for by the clause entitled "Insurance-Liability to Third Persons" contained in 7.203–22. 10.501-4 Aircraft Public and Passenger Liability Insurance.

(a) This type of insurance covers the liability imposed by law upon the aircraft owner and operator. The basic coverages are bodily injury liability, property damage liability, and passenger liability. Where aircraft are used in connection with the performance of a contract aircraft liability insurance shall be carried by the contractor to cover bodily injury, including passenger liability (if the exposure exists), and property damage coverage. The minimum limits of liability shall be $100,000 per person and $300,000 per occurrence for bodily injury and $100,000 per occurrence for property damage. The Government will normally assume the risk of contractor's uninsured third-party liability to the extent provided for by the clause entitled "InsuranceLiability to Third Persons," contained in 7.203-22.

(b) Aircraft hull insurance covers the insured for damage to or loss of the insured aircraft when loss or damage results from an insured peril. This type of insurance will not be purchased at Government expense to cover aircraft, manufactured, modified, or serviced, under a costreimbursement type contract, against risks which are assumed by the Government under the Government-Furnished Property clause or other clauses in a contract. Such insurance is appropriate and will be required for aircraft not owned by the Government and used in connection with operations under a cost-reimbursement type contract.

10.501-5 Vessel Collision Liability and Protection and Indemnity Liability Insurance. Where vessels are used in connection with the performance of the contract, such insurance shall be required whenever deemed necessary by the installation concerned.

10.501-50 Group Insurance.

(a) General.

(1) Group insurance plans provide various types of benefits for employees and their dependents. Usually, these benefits are provided through one or more group insurance policies with life or casualty insurance companies. Also, these benefits may be provided through individual insurance policies or through hospital association plans.

(2) Group insurance plans are either contributory, where the employees and the contractor jointly pay the costs of the benefits, or noncontributory, where the total costs of the benefits are paid by the contractor. Some group insurance plans provide for hospital and surgical benefits for the dependents of employees, and under these plans the employee usually pays all or a portion of

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the cost. Employees are usually eligible to participate in group insurance plans after 1 to 3 months of service.

(3) It is recognized that group insurance plans providing life insurance, surgical, hospitalization, major medical, and nonoccupational accident insurance coverages are important to industrial relations programs. Considerations which influence the benefits and the costs for benefits under a particular group insurance plan are (i) the geographical locality of the operations of the contractor, (ii) wage levels, (iii) amount of other fringe benefits, (iv) benefits available under applicable workmen's compensation laws, (v) union negotiations, (vi) the costs of the group insurance benefits, and (vii) the effects of such costs in competitive prices.

(b) Approval of Group Insurance Plans. The contracting officer will determine whether the group insurance benefits are reasonable in amount and necessary in connection with the performance of NASA contracts. Such plans will generally be approved where they are comparable to those of competing employers or industries in the contractor's operational areas. Where a contractor is working primarily on Government contracts, the restraints imposed by competition may be lacking, and a careful review will be made, including a determination that the contractor does not furnish his employees greater benefits under cost-reimbursement type contracts than are granted his employees engaged in regular commercial operations of the contractor. In addition, the experience of the Military Departments or other Government agencies with the particular contractor shall be investigated. Changes in previously approved group insurance plans (including changes in premium rates) must be submitted for approval by the contracting officer. (c) The contractor is required to credit to the NASA account a share of all premium refunds or other credits paid or otherwise allowed to the contractor by the insurance company. This share shall be proportionate to the premium costs reimbursed under NASA contracts which gave rise to such refunds or other credits.

(d) The contractor is required to furnish full information concerning his group insurance program, and NASA reserves the right to examine the program at any time.

10.501-51 Use and Occupancy Insurance.

(a) Use and Occupancy or Business Interruption Insurance is a form of insurance which idemnifies the contractor for certain losses incurred during a period of interruption or suspension of business operations resulting from physical damage to property essential to the conduct of business. Under such insurance, the contractor is protected against loss on account of fixed charges and other expenses which accrue during such period and for loss of net profit which the contractor is prevented from earning. The amount of coverage purchased under this form of insurance is based on the probable loss the contractor would sustain during the period of interruption or suspension of business operations. The premium charge is based on the aggregate indemnity under the policy.

(b)(1) When costs in connection with use and occupancy insurance are presented for allowance, the aggregate coverage available will be analyzed. Only that percentage of total insurance cost which is identifiable with insurance benefits determined to be acceptable within the intent of subparagraph (2) below will be allowed.

(2) Costs of insuring those items of fixed charges and other expenses which are allowable items of costs in NASA contracts will be considered allowable. Such fixed charges and other expenses include but are not limited to salaries of employees under contract and other key employees, rents, most insurance premiums, and charges for noncancellable contracts for light, heat, or power.

(3) The cost of insuring the net profit a contractor is prevented from earning during a period of business interruption or suspension is unallowable. Similarly, the costs of insuring certain items of fixed charges such as interest, Federal income taxes, donations, and certain advertising expenses are unallowable.

10.502 Self-Insurance.

(a) Self-insurance may be approved by the contracting officer in lieu of the insurance requirement for one or more of the mandatory coverages required by 10.501-1, 10.501-2, 10.501-3, 10.501-4, and 10.501-5 provided that:

(i) the contractor has maintained the practice of self-insurance in respect to such coverage or risk for a period of not less than 3 years;

(ii) adequate safety inspection and engineering programs are carried on by the contractor;

NASA PROCUREMENT REGULATION

10.502