the Contracting Officer, whichever shall occur first;

(3) "United States" comprises geographically the 50 States and the District of Columbia; and

(4) "War Risk Hazards Compensation Act" refers to the statute compiled in chapter 12 of title 42 United States Code (sections 17011717), as amended.

(b) If pursuant to an agreement entered into prior to the capture, the Contractor is obligated to pay and shall have paid benefits to a captured person, or his dependents, on account of his detention, the Government will reimburse the Contractor for such payments up to an amount which will equal the lesser of (i) the total wage or salary (computed at the rate being paid at the time of capture) due from the Contractor to the captured person for the period of detention, or (ii) that amount which would have been payable to such person if the detention had occurred under circumstances wherein the benefit provisions of the War Risk Hazards Compensation Act would have been appli

cable.

(c) The period of detention shall not be considered as time spent in the performance of this contract, and the Government shall not be obligated to make payment under this contract on account of such person for the period of the detention except as provided in this clause.

(d) The obligation of the Government to make payments provided for by this clause shall be applicable to the entire period of detention except that it is expressly conditioned upon and subject to the availability of funds from which payment can be made. The rights and obligations of the parties under this clause shall survive the earlier expiration, completion, or termination of this contract.

(e) The Contractor shall not be reimbursed under the provisions of this clause for payments made to employees for a period of detention during which the employees were entitled to compensation for capture and detention under the War Risk Hazards Compensation Act, as amended.

[33 F.R. 15391, Oct. 17, 1968]

Subpart E-Insurance Under CostReimbursement Type Contracts

§ 10.500 Scope of subpart.

This subpart sets forth the policy of the Departments with respect to insurance under cost-reimbursement type contracts for supplies or services. [25 F.R. 14259, Dec. 31, 1960]

§ 10.501 Policy.

The types of insurance listed below, with the minimum amounts of liability indicated, ordinarily shall be required in cost-reimbursement contracts and sub

66-071-72- -6

contracts thereunder where the provisions of the prime contract are extended to the subcontract. An approved program of self-insurance, as provided in § 10.502, may be substituted for any of the types of insurance ordinarily required.

[30 F.R. 14900, Dec. 2, 1965]

§ 10.501-1 Workmen's compensation and employers' liability insurance. Compliance with applicable workmen's compensation and occupational disease statutes shall be required. In jurisdictions where all occupational diseases are not compensable under applicable law, insurance for occupational disease shall b required under the employer's liability section of the insurance policy; however, such additional insurance shall not be required where contract operations are commingled with the contractor's commercial operations so that it would be impracticable to require such coverage. Employers' liability coverage in the minimum amount of $100,000 shall be required except in states with exclusive or monopolistic funds which do not permit the writing of workmen's compensation by private carriers (Nevada, North Dakota, Ohio, Washington, West Virginia, and Wyoming). The clause in § 10.403(a) shall be included in all public work contracts described therein to be performed outside the United States.

[36 F.R. 7948, Apr. 28, 1971]

§ 10.501-2 General liability insurance.

Bodily injury liability insurance, in the minimum limits of $50,000 per person and $100,000 per accident shall be required on the comprehensive form of policy; however, property damage liability insurance ordinarily shall not be required.

[30 F.R. 14900, Dec. 2, 1965] § 10.501-3

ance.

Automobile liability insur

This insurance will be required on the comprehensive form of policy and will provide for bodily injury liability and property damage liability covering the operation of all automobiles used in connection with the performance of the contract. The minimum limits of $50,000 per person and $100,000 per accident for bodily injury and $5,000 per accident for property damage will be required. [29 F.R. 6937, May 27, 1964]

§ 10.501-4 Aircraft public and passenger liability insurance.

Where aircraft are used in connection with the performance of the contract, such insurance ordinarily will be considered required coverage. The minimum limits of $50,000 per person and $100,000 per accident for bodily injury, other than passenger liability, and a limit of $50,000 per accident for property damage shall be required. Passenger liability bodily injury limits of $50,000 per passenger with an aggregate equal to total number of seats or number of passengers whichever is greater, shall be required. [29 F.R. 6937, May 27, 1964]

§ 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 will be required whenever deemed necessary by the Department concerned.

[25 F.R. 14259, Dec. 31, 1960]

§ 10.502 Self-insurance.

(a) Qualified programs of self-insurance covering any kind of risk may be approved where an examination of the program indicates that its application to the cost-reimbursement type contract is in the best interest of the Government. However, a program of self-insurance for workmen's compensation in any jurisdiction where workmen's compensation does not completely cover employers' liability to employees may be approved only if:

(1) The contractor also maintains an approved program of self-insurance for any employers' liability which is not so covered; or

(2) The contractor shows that the combined cost to the Government of selfinsurance for workmen's compensation and commercial insurance for employers' liability will not exceed the costs of covering both kinds of risks by commercial insurance.

(b) When the clause in § 10.403 (e) is required, the following clause shall also be inserted in the contract, but only if the head of a procuring activity or his designee has decided that the contractor shall not purchase insurance against the liability described in § 10.403(d) (2).

REIMBURSEMENT FOR WAR HAZARD LOSSES
(JULY 1968)

(a) The Contractor's costs for assuming liability for employee protection against war

hazard risks pursuant to paragraph (b) of the clause of this contract entitled "Workmen's Compensation and War Hazard Insurance" shall be an allowable cost under this contract, subject to the following:

(1) The Contractor shall submit proof of loss files to support payment or denial of each claim.

(ii) As soon as practicable, but no later than one year after the expiration or termination of this contract, unless the time shall be extended by the Contracting Officer, the Contractor shall convert each claim which has not been finally settled into a suitable arrangement under which the claim can be extinguished by the Contractor with a lump sum payment. Subject to approval by the Contracting Officer, the Contractor shall thereupon obtain necessary release documents and settle the claim by lump sum arrangement, taking into account any payments previously made.

(iii) As to any potential claim which is known to, or reasonably should be within the knowledge of, the Contractor at the time of final settlement under this contract, the Contractor shall, at that time, present to the Government a full report and evaluation, indicating as to each potential claim that a reasonable investigation of the circumstances has been made, the results thereof, an evaluation of the merits, and an estimate of the amount involved should the potential claim mature into a valid obligation.

(iv) The cost of insurance against a liability reimbursable under this clause shall not be an allowable cost or otherwise recoverable under this contract.

(b) The Government may require the Contractors to assign to the Government in the manner, at the times, and to the extent directed by the Contracting Officer all right, title and interest of the Contractor to any refund, rebate or recapture arising out of any claim settlement. The Government may handle such assigned entitlements in such manner as it deems appropriate and may recover any benefits related to claim settlements.

(c) The Contractor shall, as soon as practicable after an occurrence which appears to give rise to a claim under this portion of the contract, perform such investigations as may be appropriate and promptly notify the Contracting Officer in writing of any additional amount estimated to be necessary to be obligated on account of such claim or potential claim. In addition, the Contractor shall give the Government or its representatives immediate written notice of any suit or action filed, the cost or expense of which may be reimbursable to the Contractor under this clause. The Contractor agrees to render full assistance to the Government in connection with any third party suit or claim relating to this clause or its subject matter which the Government elects to prosecute or defend in its own behalf.

(c) The schedule of each contract containing the clause in paragraph (b) of

this section shall contain (1) the estimated cost for war hazard losses, (2) the clause at § 7.203-4(a) of this chapter appropriately limited to cover allowable war hazard cost, (3) the Examination of Records clause (§ 7.104-15 of this chapter), and (4) an entry similar to the following.

The portion of this contract providing for the Contractor to afford protection to his employees and subcontractors to their employees against war hazard risks (see the clauses entitled Reimbursement for War Hazard Losses and Workmen's Compensation and War Hazard Insurance Overseas) is on a cost-reimbursement, no fee basis, notwithstanding the basis of the remainder of the contract.

(d) The estimated cost for war hazard losses will be based upon estimates arrived at in the light of experience, taking into account the number of the contractor's employees subject to protection for war hazard risks, the level of benefits applicable to such employees, location, nature of the risks to which the contractor's employees are exposed. The amount allotted to the contract will initially be kept as small as reasonably feasible. As reports are received indicating the need to increase the allotment to a particular contract, these will be evaluated and the allotment increased as necessary. When negotiating for the inclusion in a contract of provisions applicable to war hazard risks, the contracting officer may include provisions concerning the types of foreign nationals employed by the contractor, the level of benefits applicable to them, and other pertinent provisions relating to the manner in which the program will function to the benefit of all concerned. Advance agreements pursuant to § 15.107 of this chapter may also be advantageous with respect to the levels of proof considered acceptable to justify the contractor commencing payments and being reimbursed therefor prior to the time he is able to work out, in a proper case, lump sum settlement of his obligation.

[34 F.R. 13845, Aug. 29, 1969, as amended at 36 F.R. 21153, Nov. 4, 1971] § 10.503

Government property.

The contractor's responsibilities for loss or damage to Government property under cost-reimbursement-type contracts are set forth in the clause in § 7.203-21 of this chapter. 136 F.R. 7948, Apr. 28, 1971]

§ 10.504 Aircraft-flight risk.

(a) Cost-reimbursement - type contracts for the development, production, modification, maintenance, or overhaul of aircraft, or otherwise involving the furnishing of aircraft to the contractor by the Government, shall, except as provided in paragraph (b) of this section, include the following clause.

FLIGHT RISKS (OCTOBER 1965)

(a) Notwithstanding any other provision of this contract, and particularly subparagraph (g)(1) of the Government Property clause and paragraph (c) of the InsuranceLiability to Third Persons clause, the Contractor shall not (1) be relieved of liability for, damage to, or loss or destruction of, aircraft sustained during flight, or (ii) be reimbursed for liabilities to third persons for loss of or damage to property, or for death or bodily injury, which are caused by aircraft during flight, unless the flight crew members have previously been approved in writing by

(b) For the purposes of this clause:

(1) Unless otherwise specifically provided in the Schedule, the term "aircraft" means any aircraft, whether furnished by the Contractor under this contract (either before or after acceptance by the Government) or furnished by the Government to the Contractor under this contract, including all Government Property placed or installed therein or attached thereto: Provided, however, That such aircraft and property are not covered by a separate bailment agreement.

(ii) The term "flight" means any flight demonstration, flight test, taxi test, or other flight, made in the performance of this contract, or for the purpose of safeguarding the aircraft, or previously approved in writing by the As to land based aircraft, "flight" shall commence with the taxi roll from a flight line and continue until the aircraft has completed the taxi roll to a flight line; as to sea planes, "flight" shall commence with the launching from a ramp and continue until the aircraft has completed its landing run and is beached at a ramp; as to helicopters, "flight" shall commence upon engagement of the rotors for the purpose of take-off and continue until the aircraft has returned to the ground and rotors are disengaged; and for vertical take-off aircraft, "flight" shall commence upon disengagement from any launching platform or device and continue until the aircraft has been reengaged to any launching platform or device.

(ii) The term "flight crew members" means the pilot, the co-pilot and, unless otherwise specifically provided in the Schedule, the flight engineer, navigator, bombardier-navigator, and defense systems operator, when required, or assigned to their

* See footnote at end of clause.

respective crew positions, to conduct any flight on behalf of the Contractor.

(c) If any aircraft is damaged, lost, or destroyed during flight, and if the amount of such damage, loss, or destruction exceeds one hundred thousand dollars ($100,000) or twenty percent (20%) of the estimated cost (exclusive of any fee) of this contract, whichever is less, and if the Contractor is not liable for the damage, loss or destruction pursuant to the "Government Property" clause of this contract together with paragraph (a) above, then an equitable adjustment for any resulting repair, restoration, or replacement that is required under this contract shall be made (1) in the estimated cost, delivery schedule, or both, and (ii) in the amount of any fee to be paid to the Contractor, and the contract shall be modified in writing accordingly; provided, in determining the amount of adjustment in the fee that is equitable, any fault of the Contractor, his employees, or any subcontractor, which materially contributed to the damage, loss, or destruction shall be taken into consideration. Failure to agree on any adjustment shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

*In the foregoing clause, insert in contracts of the Department of the Army, the Department of the Navy, the Department of the Air Force, and in contracts to be administered by the Defense Contract Administration Services the activity designated in combined regulation identified as Air Force Regulation 84-7, Army Regulation 95-20, BUWEPS Instruction 3710.6A, Defense Supply Agency Regulation 8210.1, dated 18 November 1964, subject, Requirements for Contractor Operating Procedures and Flight Crews, enclosure 1.

(b) In the foregoing clause, the definition of "aircraft" may be appropriately modified in the Schedule if the contract covers helicopters, vertical take-off aircraft, lighter-than-air airships, or other nonconventional types of aircraft.

[27 F.R. 1713, Feb. 22, 1962, as amended at 30 F.R. 1743, Feb. 9, 1965; 30 F.R. 14900, Dec. 2, 1965]

§ 10.505 Group insurance plans under cost-reimbursement type contracts.

(a) Group insurance plans under costreimbursement contracts shall be submitted for approval to the Heads of Procuring Activities for the Department of the Army; the Chief of Naval Material (Attention: Contract Insurance Branch) for the Department of the Navy; Air Force Systems Command, Air Force Contract Management Division, Attention: CMK, for the Department of the Air Force; and the Executive Director, Pro

curement and Production, for the Defense Supply Agency. Changes in the benefits provided under an approved plan that can reasonably be expected to increase significantly the costs being charged to the Government shall be submitted as provided above for approval. Provision shall also be made for the Government to participate in all premium refunds or credits paid or otherwise allowed to the contractor, as required by § 15.201-5 of this chapter. In determining the extent of the Government's participation in such premium refunds or credits, consideration shall be given to any special reserves and other refunds that may subsequently be paid to the contractor.

(b) The Defense Department Group Term Insurance Plan is available for use by cost-reimbursement type contractors. A contractor is eligible only if the number of covered employees is 500 or more, and (1) the contractor is wholly engaged in operations under eligible contracts, or (2) 90 percent or more of the payroll of contractor's operations to be insured under the Plan arises under eligible contracts. Insurance policies under this plan shall be submitted for approval to the Army Materiel Command, Attention: AMCPP-SC, for the Department of the Army; the Chief of Naval Material, Attention: Contract Insurance Branch, for the Department of the Navy; Air Force Systems Command, Air Force Contract Management Division, Attention: CMK, for the Department of the Air Force; and the Executive Director, Procurement and Production, for the Defense Supply Agency.

[32 F.R. 16406, Nov. 30, 1967]

§ 10.506 Capture and detention of contractor employees.

datory as to contracts which meet the use and eligibility standards in § 10.603. Construction subcontractors whose contracts provide that the prime contractor shall furnish insurance, and whose operations are at the project site, shall be included automatically in the prime contractor's rating plan policies for similar coverage.

Construction subcontractors whose operations are away from the project site shall not be included in the prime contractor's rating plan.

[30 F.R. 14901, Dec. 2, 1965] § 10.601 Purpose of plan.

This plan is designed to utilize the services and organizations of the insurance industry for safety engineering and the handling of claims arising under eligible contracts at a minimum cost to the Government.

[30 F.R. 14901, Dec. 2, 1965]

§ 10.602 Description of plan.

This plan is effected by endorsements attached to standard insurance policy forms for workmen's compensation, employer's liability, general liability, and automobile liability. The rating plan provides for a fixed deposit premium, for a reduced rate of current premium payments, for yearly adjustments of the premium depending upon loss experience during the period, and for final adjustment of the premium based upon the experience of the entire period covered by the policies. The final adjustment may be deferred for a maximum of 68 months after expiration of the policies. The total adjusted premium is the sum of the following:

(a) A fixed charge which is a percentage of the standard premium and is to compensate the insurance company for general expenses other than those referred to hereafter;

(b) Modified losses, which are the losses paid or incurred, multiplied by a conversion factor of 1.12 to compensate the insurance company for claim department expense;

(c) Allocated claims expenses, which are expenses for claims services not of the type ordinarily rendered by the insurer's claim department, such as actual expenditures for attorney's fees and other trial or hearing expenses in connection with litigated cases;

(d) Special assessments imposed by the applicable jurisdiction for purposes such as second injury funds, rehabilita

tion funds, maintenance of workmen's compensation commissions, etc.; and (e) Actual premium taxes.

Each of the above adjustments are subject to review by authorized representatives of the Department concerned, and the total adjusted premium derived therefrom cannot exceed a maximum premium which is a percentage of the standard premium developed by use of manual rates issued or approved by the appropriate rating organization. In general, the plans are variations of commercially available insurance rating plans, but have been specifically developed to meet the requirements of the Departments.

[29 F.R. 6938, May 27, 1964, as amended at 30 F.R. 14901, Dec. 2, 1965]

§ 10.603

Use and eligibility for plan.

The rating plan described in this subpart shall be applied to all eligible defense projects where such application is determined by the Army Materiel Command, Attention: AMCPP-SC, for the Department of the Army; the Chief of Naval Material, Attention: Contract Insurance Branch, for the Department of the Navy; Air Force Systems Command, Air Force Contract Management Division, Attention: CMK, for the Department of the Air Force; and the Deputy Director, Contract Administration Services, Attention: DCAS-AF, for the Defense Supply Agency, to be in the best interest of the Government. The rating plan may be applied to cost-reimbursement type contracts and also, in appropriate cases, to fixed-price contracts with price redetermination provisions. A defense project is eligible for application of a plan when (a) eligible Government contracts represent, at inception of the plan, at least 90 percent of the payroll for total operations at the specific locations of the project; and (b) the annual premium for insurance is estimated to be at least $10,000. A defense project may include contracts awarded by more than one Department to the same contractor. [35 F.R. 6833, Apr. 30, 1970]

§ 10.604 Agreement for settlement of premiums under National Defense Projects Rating Plan.

The following agreement shall be used for accomplishing the assignment to the Government of the interest in return premiums, premium refund, etc., on insurance policies issued under the Na