The lack of familiarity with Federal Acquisition Regulations and government immunities can leave U.S. government contractors exposed to costly lawsuits from customers and business partners, says Chubb Group of Insurance Companies.
Contractors working for the Department of Defense or on national security initiatives often engage in a broad array of business activities. As a result, Chubb has introduced a new errors and omissions insurance policy than can help protect contractors for a variety of work they perform for the U.S. government.
“As their business offerings become more diverse, federal contractors that focus primarily on technology should make sure they extend their E&O insurance to all areas,” Reed said. “Previously, they needed to buy additional policies for this purpose. Now, Chubb can offer them a single policy to address their E&O-related exposures.”
Many of these businesses mistakenly believe that the work they perform for the government is protected by governmental immunity, according to Reed. “In reality, immunity statutes are no panacea. For example, suits can be initiated by business partners beyond the scope of the government contract, and immunity statutes are subject to legal attack by zealous plaintiffs,” he said.
As a general rule, immunity statutes protect contractors from liability when they perform in accordance with government design specifications and take steps to adequately warn the government of actual or inherent risk. However, immunity statutes are only a defense; contractors must still defend themselves against lawsuits. Furthermore, many product or services that contractors develop for the federal government end up on the commercial market or with governments overseas. In these cases, any immunity that may have been granted by the U.S. government will no longer apply.
To address this and other complex and unique risks that information and network technology companies face serving the federal government, Chubb has assembled a group of underwriters, loss control engineers and claim specialists and has created specialized products and services for federal contractors in close collaboration with outside legal counsel. Chubb also has compiled a proprietary database of independent contractors that enter into U.S. government contracts.
“To better understand the marketplace, we are continually educating ourselves, our producers and our customers,” said Richard Reed, vice president, Chubb & Son, and federal government segment manager, Chubb Commercial Insurance.
Source: Chubb Group of Insurance Cos.