INSURANCE UNDER COST-TYPE CONTRACTS

(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;

(iii) the contractor has an effective and established policy for claims investigation;

(iv) the contractor has established a plan of funding so that the annual cost of "loss payments" remains reasonably constant;

(v) the charges to be made against the contract for the cost of the selfinsurance program may reasonably be expected to be less than the charge for an equivalent program of insurance; and

(vi) the Government contracts will share equitably in any release of reserve funds.

Self-insurance programs which do not meet the foregoing conditions shall be submitted for approval to the Assistant Administrator for Procure

ment.

(b) When the clause at 10.403(e) is required, the following clause shall also be inserted in the contract, but only if the Assistant Administrator for Procurement 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 (JUNE 1972)

(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:

(i) 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

NASA PROCUREMENT REGULATION

10.502

BONDS AND INSURANCE

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 (b) above shall contain (i) the estimated cost for war hazard losses, (ii) the clause at 7.203-4(a) appropriately limited to cover allowable war hazard cost, (iii) the Examination of Records by the Comptroller General clause (7.104-15), and (iv) 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 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.

10.503 Government Property. The contractor's responsibility for loss of or damage to Government property under cost-reimbursement type contracts is set forth in the applicable Government property clause.

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 (b) below, include the following clause.

FLIGHT RISKS (JUNE 1972)

(a) Notwithstanding any other provision of this contract, and particularly subparagraph (g)(1) of the Government Property clause and paragraph (c) of the Insurance-Liability to Third Persons clause, the Contractor shall not. (i) 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

10.503

80-138 0-81-34

CFR TITLE 41 CHAPTER 18.

INSURANCE UNDER COST-TYPE CONTRACTS

caused by aircraft during flight, unless the flight crew members have previously been approved in writing by the Contracting Officer.

(b) For the purposes of this clause:

(i) 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 Contracting Officer. 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.

(iii) The term "flight crew members" means the pilot, the co-pilot and, unless otherwise specifically provided in the Schedule, the flight engineer, and navigator, when required, or assigned to their respective crew positions, to conduct any flight on behalf of the Contrac

tor.

(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 (i) 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.

(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.

10.550 Administration.

(a) In approving a contractor's insurance program under a cost-reimbursement contract, it is desirable to determine whether this program is identical with a program already approved in connection with similar contracts with the Military Departments or other Government agencies. The possibility of combining insurance coverage under the NASA contract with insurance pertaining to contracts with such other agencies, thereby effecting savings in reimbursable insurance premium costs, should be explored.

(b) Where minimum limits are prescribed in this Subpart, higher limits may be approved by the contracting officer where the circumstances so justify. Interference with a contractor's established commercial insurance program should be avoided to the maximum extent possible. Where

NASA PROCUREMENT REGULATION

10.550

BONDS AND INSURANCE

NASA contract operations are commingled with a contractor's commer

cial operations, all operations should normally be insured together.

10.550

CFR TITLE 41 CHAPTER 18

Subpart 6-Insurance of Industrial Facilities

10.600 Scope of Subpart. This Subpart sets forth NASA policy with respect to insurance of industrial facilities held by a contractor.

10.601 Responsibility for Liabilities to Third Persons. When industrial facilities are provided by the Government under a facilities contract or a lease, the contract or lease shall require that during the period of construction, installation, alteration, repair, or use, and at any other time as directed by the installation concerned, the contractor or lessee shall insure or otherwise provide approved security for liabilities to third persons (including employees of the contractor or lessee) in the same manner and to the same extent as required in 10.501.

10.602 Responsibility for Loss or Damage to Facilities.

10.602-1 Facilities Contracts. Facilities contracts shall provide that the contractor shall not include the cost of insurance in any contract except to the extent of insurance required or approved by NASA. If a facilities contract does not restrict the use of the facilities to work performed for the Government, provision shall be made that the contractor shall procure and maintain insurance as NASA may require against loss or damage to the industrial facilities (see 13.414).

NASA PROCUREMENT REGULATION