FAR 52.237-7—Indemnification and Medical Liability Insurance.
Plain-English Summary
FAR 52.237-7, Indemnification and Medical Liability Insurance, is a special clause used in health care services contracts to protect the Government when it hires contractors to provide professional medical services as independent contractors rather than as Government employees. It addresses the nonpersonal-services nature of the contract, the Government’s limited role in evaluating quality without controlling medical judgment, the contractor’s indemnification obligation for liability-producing acts or omissions, and the requirement to maintain medical liability insurance in specified amounts. The clause also covers how insurance may be structured (occurrence or claims-made), the need for a tail or extended reporting endorsement for claims-made policies, proof of insurability before award, proof of coverage before services begin, and continued proof of tail coverage before final payment. It further requires notice of cancellation or material change, continuity of coverage if the contractor changes insurers, and flowdown of the same protections to subcontractors performing health care services. In practice, this clause is designed to ensure that the Government is not left financially exposed for malpractice-type risks arising from contractor-provided medical care, while also making clear that the contractor remains professionally responsible for its own clinical decisions and those of its personnel.
Key Rules
Nonpersonal services only
The contract must be treated as a nonpersonal services contract under FAR 37.101, meaning the contractor performs as an independent contractor. The Government may review the quality of services, but it does not control professional medical judgment, diagnosis, or treatment decisions.
Contractor indemnifies Government
The contractor is solely liable for liability-producing acts or omissions by itself, its employees, and its agents, and expressly agrees to indemnify the Government. This shifts the financial risk of professional negligence or similar liability away from the Government to the contractor.
Insurance coverage required
The contractor must maintain medical liability insurance for the contract term from a responsible insurer in at least the dollar amount(s) inserted by the contracting officer, per specialty per occurrence. The required amount is based on local community standards or a higher amount needed to protect the Government’s interests.
Proof before award and start
An apparently successful offeror must provide evidence of insurability before award if requested by the contracting officer. Separate evidence of actual insurance coverage for each health care provider must be provided before services begin.
Claims-made policies need tail coverage
Insurance may be occurrence-based or claims-made. If claims-made coverage is used, the contractor must provide an extended reporting endorsement (tail) for at least 3 years after the contract ends, and final payment may be withheld until proof of that endorsement is provided.
Notice of cancellation or change
The insurance policy must include an endorsement requiring 30 days’ written notice to the contracting officer before cancellation or any material change that could adversely affect the Government’s interests becomes effective.
Coverage must continue through insurer changes
If the contractor changes insurance providers during performance, it must show that the Government remains indemnified up to the required limits for the entire contract period, either under the new policy or a combination of old and new policies.
Flowdown to subcontractors
The contractor must include the substance of the clause, including the subcontract flowdown requirement, in all subcontracts for health care services and must ensure subcontractors maintain the required insurance. The contractor must give the contracting officer evidence of subcontractor insurance at least 5 days before the subcontractor starts work.
Responsibilities
Contracting Officer
Insert the required insurance dollar amount(s) in the clause, using local community standards or a higher amount if needed to protect the Government. Request and review evidence of insurability before award when appropriate, verify proof of coverage before services start, and ensure notice and tail-coverage requirements are satisfied before final payment.
Contractor
Perform as an independent contractor, accept sole liability for liability-producing acts or omissions, indemnify the Government, maintain the required medical liability insurance throughout the contract, provide proof of coverage and tail coverage when required, notify the Government of insurer changes, and flow down the clause to covered subcontractors.
Health Care Provider / Contractor Personnel
Maintain the required individual or covered professional insurance documentation as applicable and perform services within the scope of the contract while recognizing that professional medical judgment remains the contractor’s responsibility.
Subcontractor
Maintain the required medical liability insurance for subcontracted health care services and provide evidence of coverage so the prime contractor can furnish it to the contracting officer before work begins.
Government / Agency
Rely on the contractor for professional medical decisions while monitoring compliance with the clause to ensure the Government is protected from uninsured or underinsured liability exposure.
Practical Implications
This clause is a risk-allocation tool: if the contractor’s medical work causes a claim, the Government expects the contractor’s insurance and indemnity promise to absorb the loss, not the agency’s funds.
The dollar amount is not automatic; the contracting officer must tailor the coverage requirement to the specialty and local market, so contractors should check the solicitation carefully rather than assume a standard limit.
Claims-made policies are common but create a trap if tail coverage is overlooked; without the extended reporting endorsement, final payment can be withheld and the contractor may remain exposed after contract end.
Contractors must manage subcontractor compliance proactively, because the prime remains responsible for flowdown and for giving the contracting officer advance proof of subcontractor insurance.
A frequent pitfall is assuming that a certificate of insurance alone is enough; the clause requires evidence of insurability, proof of active coverage, notice provisions, and, when applicable, proof of tail coverage and continuity across insurer changes.
Official Regulatory Text
As prescribed in 37.403 , insert the following clause: Indemnification and Medical Liability Insurance (Jan 1997) (a) It is expressly agreed and understood that this is a nonpersonal services contract, as defined in Federal Acquisition Regulation (FAR) 37.101 , under which the professional services rendered by the Contractor are rendered in its capacity as an independent contractor. The Government may evaluate the quality of professional and administrative services provided, but retains no control over professional aspects of the services rendered, including by example, the Contractor’s professional medical judgment, diagnosis, or specific medical treatments. The Contractor shall be solely liable for and expressly agrees to indemnify the Government with respect to any liability producing acts or omissions by it or by its employees or agents. The Contractor shall maintain during the term of this contract liability insurance issued by a responsible insurance carrier of not less than the following amount(s) per specialty per occurrence: * _______________ . (b) An apparently successful offeror, upon request by the Contracting Officer, shall furnish prior to contract award evidence of its insurability concerning the medical liability insurance required by paragraph (a) of this clause. (c) Liability insurance may be on either an occurrences basis or on a claims-made basis. If the policy is on a claims-made basis, an extended reporting endorsement (tail) for a period of not less than 3 years after the end of the contract term must also be provided. (d) Evidence of insurance documenting the required coverage for each health care provider who will perform under this contract shall be provided to the Contracting Officer prior to the commencement of services under this contract. If the insurance is on a claims-made basis and evidence of an extended reporting endorsement is not provided prior to the commencement of services, evidence of such endorsement shall be provided to the Contracting Officer prior to the expiration of this contract. Final payment under this contract shall be withheld until evidence of the extended reporting endorsement is provided to the Contracting Officer. (e) The policies evidencing required insurance shall also contain an endorsement to the effect that any cancellation or material change adversely affecting the Government’s interest shall not be effective until 30 days after the insurer or the Contractor gives written notice to the Contracting Officer. If, during the performance period of the contract the Contractor changes insurance providers, the Contractor must provide evidence that the Government will be indemnified to the limits specified in paragraph (a) of this clause, for the entire period of the contract, either under the new policy, or a combination of old and new policies. (f) The Contractor shall insert the substance of this clause, including this paragraph (f), in all subcontracts under this contract for health care services and shall require such subcontractors to provide evidence of and maintain insurance in accordance with paragraph (a) of this clause. At least 5 days before the commencement of work by any subcontractor, the Contractor shall furnish to the Contracting Officer evidence of such insurance. * Contracting Officer insert the dollar value(s) of standard coverage(s) prevailing within the local community as to the specific medical specialty, or specialties, concerned, or such higher amount as the Contracting Officer deems necessary to protect the Government's interests. (End of clause)