FAR 28.307-2—Liability.
Plain-English Summary
FAR 28.307-2 sets the liability insurance requirements that contracting officers may or must include in contracts to protect the Government and third parties from losses arising out of contract performance. It covers five main subject areas: workers’ compensation and employer’s liability, general liability, automobile liability, aircraft public and passenger liability, and vessel liability. The section establishes minimum coverage amounts for certain risks, identifies when coverage is mandatory versus discretionary, and recognizes special situations such as exclusive or monopolistic state workers’ compensation funds, commingled commercial operations, and Defense Base Act treatment under FAR 28.305(c). In practice, this section tells contracting officers what insurance clauses and minimum limits to require, and it tells contractors what proof of coverage they must maintain to perform lawfully and in compliance with the contract. The practical effect is to shift and manage risk before performance begins, especially where work involves employees, vehicles, aircraft, or vessels, or where state law creates special workers’ compensation rules.
Key Rules
Workers’ Compensation Required
Contractors must comply with applicable Federal and State workers’ compensation and occupational disease laws. If occupational diseases are not compensable under those laws, the contractor must cover them under employer’s liability insurance unless contract operations are so commingled with commercial operations that requiring that coverage would be impractical.
Employer’s Liability Minimum
Employer’s liability coverage of at least $100,000 is required, except in States with exclusive or monopolistic funds that do not allow workers’ compensation to be written by private carriers. Contracting officers must account for the special treatment of Defense Base Act contracts under FAR 28.305(c).
General Liability Coverage
The contracting officer must require bodily injury liability insurance on a comprehensive policy form with at least $500,000 per occurrence. Property damage liability insurance is not automatic; it is required only when the agency determines special circumstances justify it.
Automobile Liability Coverage
When automobiles are used in connection with contract performance, the contracting officer must require comprehensive automobile liability insurance covering bodily injury and property damage for all such vehicles. For vehicles operated in the United States, the minimum limits are $200,000 per person, $500,000 per occurrence for bodily injury, and $20,000 per occurrence for property damage.
Aircraft Liability Coverage
If aircraft are used in performing the contract, the contracting officer must require aircraft public and passenger liability insurance. Minimum limits apply for bodily injury and property damage, and passenger bodily injury coverage must be at least $200,000 multiplied by the number of seats or passengers, whichever is greater.
Vessel Liability Coverage
When performance involves vessels, the contracting officer must require vessel collision liability and protection and indemnity liability insurance, as determined by the agency. The rule gives agencies discretion on the exact requirement, but it clearly identifies the types of marine coverage to consider.
Responsibilities
Contracting Officer
Determine which liability coverages are required based on the contract’s risks and performance methods, insert the appropriate insurance requirements into the solicitation and contract, and ensure the minimum coverage limits are met where the rule specifies them. The contracting officer must also decide when property damage liability, vessel liability, or other special coverage is warranted by agency circumstances.
Contractor
Obtain and maintain the required insurance coverage, comply with Federal and State workers’ compensation and occupational disease laws, and ensure the policy limits and coverage types match the contract requirements. The contractor must also account for any special state workers’ compensation structure and provide coverage evidence as required by the contract.
Agency
Establish internal policy or guidance for when special circumstances justify property damage liability or vessel liability requirements, and ensure contracting officers apply the rule consistently. The agency must also recognize exceptions and special statutory treatment, including exclusive or monopolistic fund states and Defense Base Act-related contracts.
Insurance Carrier / Broker
Provide policies that meet the required coverage forms and minimum limits, and issue documentation showing that the contractor’s insurance satisfies the contract’s liability requirements. Where applicable, the carrier must structure coverage to address occupational disease, automobile, aircraft, or vessel risks tied to contract performance.
Practical Implications
Contracting officers should identify liability risks early, before award, because the required coverage can affect competition, pricing, and responsibility determinations.
Contractors often miss the distinction between mandatory and discretionary coverage: general bodily injury and auto coverage are required in many cases, but property damage and vessel coverage depend on agency judgment or contract circumstances.
State workers’ compensation law matters a great deal here; contractors operating in monopolistic fund states or under special occupational disease rules need to verify how coverage can legally be provided.
If the work uses vehicles, aircraft, or vessels even incidentally, the contract may need specialized insurance limits that are easy to overlook during proposal preparation.
A common pitfall is assuming commercial general liability or auto policies automatically satisfy FAR limits; contractors should confirm the policy form, per-occurrence limits, and any exclusions before performance begins.
Official Regulatory Text
(a) Workers’ compensation and employer’s liability . Contractors are required to comply with applicable Federal and State workers’ compensation and occupational disease statutes. If occupational diseases are not compensable under those statutes, they shall be covered under the employer’s liability section of the insurance policy, except when contract operations are so commingled with a contractor’s commercial operations that it would not be practical to require this coverage. Employer’s liability coverage of at least $100,000 shall be required, except in States with exclusive or monopolistic funds that do not permit workers’ compensation to be written by private carriers. (See 28.305 (c) for treatment of contracts subject to the Defense Base Act.) (b) General liability. (1) The contracting officer shall require bodily injury liability insurance coverage written on the comprehensive form of policy of at least $500,000 per occurrence. (2) Property damage liability insurance shall be required only in special circumstances as determined by the agency. (c) Automobile liability . The contracting officer shall require automobile liability insurance written on the comprehensive form of policy. The policy shall provide for bodily injury and property damage liability covering the operation of all automobiles used in connection with performing the contract. Policies covering automobiles operated in the United States shall provide coverage of at least $200,000 per person and $500,000 per occurrence for bodily injury and $20,000 per occurrence for property damage. The amount of liability coverage on other policies shall be commensurate with any legal requirements of the locality and sufficient to meet normal and customary claims. (d) Aircraft public and passenger liability . When aircraft are used in connection with performing the contract, the contracting officer shall require aircraft public and passenger liability insurance. Coverage shall be at least $200,000 per person and $500,000 per occurrence for bodily injury, other than passenger liability, and $200,000 per occurrence for property damage. Coverage for passenger liability bodily injury shall be at least $200,000 multiplied by the number of seats or passengers, whichever is greater. (e) Vessel liability . When contract performance involves use of vessels, the contracting officer shall require, as determined by the agency, vessel collision liability and protection and indemnity liability insurance.