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Interim Internal Purchasing Guidelines > 7 Bonds, Insurance, and Taxes > 7.2 Insurance
7.2.1 Policy
7.2.1.a General. Suppliers may be required to carry insurance only when necessary
to protect the interest of the Postal Service. Examples of situations that may
warrant insurance are when:
1. It is desirable to use the facilities and service of the insurance industry
(for example, safety protection and claim services);
2. Insurance is necessary or desirable in connection with contract
performance (for example, in transportation of valuable Postal Service
property); or
3. Commingling of property or other contract conditions makes insurance
reasonably necessary for protection of the parties' interests.
1. The Postal Service is not usually concerned with the insurance carried
by fixed-price suppliers, except in special circumstances such as the
following:
(a) The supplier, or a segregated operation of the supplier, is
engaged primarily in work for the Postal Service.
(b) Postal Service property of substantial value is involved.
(c) The contract work required is performed within a Postal Service
facility.
(d) The Postal Service agrees to assume risks for which the supplier
ordinarily obtains commercial insurance.
2. In circumstances such as those described in subparagraph 7.2.1.b.1.
above, the types and amounts of liability insurance prescribed in 7.2.2
may be required. However, a qualified program of self-insurance (see
7.2.3) may be substituted for any of those types of insurance.
3. Professional services suppliers must be required to carry errors and
omissions insurance in accordance with 7.2.4.
7.2.1.c Non-Fixed-Price Contracts
1. The types of insurance referred to in 7.2.2, with limits of liability as
prescribed in 7.2.2, are required under non-fixed-price prime contracts
and any non-fixed-price subcontracts under them. However, a qualified
program of self-insurance (see 7.2.3) may be substituted for any such
type of required insurance.
2. Professional services suppliers must be required to carry errors and
omissions insurance in accordance with 7.2.4.
3. The contracting officer may waive a requirement for insurance with the
advice of assigned counsel.
7.2.2 Types of Insurance
7.2.2.a Workers' Compensation and Employers' Liability Insurance. Compliance with
applicable workers' compensation and occupational disease statutes is
required, and employers' liability coverage must be obtained when available.
In jurisdictions where occupational disease is not compensable by law, the
supplier must carry insurance for occupational disease under the employers'
liability section of the insurance policy.
7.2.2.b General Liability Insurance
1. The supplier must carry bodily injury liability insurance, with minimum
limits of $100,000 per person and $500,000 per accident, on a
comprehensive form of policy. The contracting officer, at his or her
discretion, may require higher limits of insurance coverage. Clause 7-4,
Insurance, should be amended to reflect the higher levels of insurance
coverage.
2. The supplier must carry property damage liability insurance in an
amount determined by the contracting officer when the nature of the
contract operations warrants it, or when those operations are not
separable from the supplier's commercial operations.
7.2.2.c Automobile Liability Insurance. The supplier must carry automobile liability
insurance on a comprehensive form of policy that provides for bodily injury
and property damage liability covering the operation of all automobiles used
in contract performance. Minimum limits of $100,000 per person and
$500,000 per accident for bodily injury and $100,000 per accident for
property damage must be carried. The contracting officer, at his or her
discretion, may require higher limits of insurance coverage. Clause 7-4,
Insurance, should be amended to reflect the higher levels of insurance
coverage.
7.2.3 Self-Insurance
A qualified program of self-insurance covering any kind of liability may be
approved in place of any type of insurance discussed in 7.2.2 when found to
be in the interest of the Postal Service. However, in a jurisdiction where
workers' compensation does not completely cover employers' liability to
employees, a program of self-insurance for workers' compensation may be
approved only if:
1. The supplier also maintains an approved program of self-insurance for
any employer's liability that is not covered; or
2. The supplier has shown that the combined cost to the Postal Service of
self-insurance for workers' compensation and commercial insurance for
employers' liability will not exceed the cost of covering both kinds of
risks by commercial insurance.
7.2.4 Errors and Omissions Insurance
7.2.4.a Professional Services. Suppliers providing the following categories of
services must carry errors and omissions (malpractice) insurance:
1. Accountants.
2. Architects.
3. Engineers.
4. Fiscal agents.
5. Medical doctors and dentists.
7.2.4.b Amount. Insurance coverage should be at least $200,000, unless the
contracting officer determines that a different limit is needed to protect the
interests of the Postal Service.
7.2.4.c Waiver. The contracting officer may waive the requirement for errors and
omissions insurance in whole or in part, with the concurrence of assigned
counsel.
7.2.4.d Other Professional Services. The contracting officer may require other
professional services suppliers to carry errors and omissions insurance when
in the interest of the Postal Service.
7.2.5 Insurance Policies
When insurance is required, it may be provided either by specific insurance
policies or by the supplier's existing insurance policies. When existing
policies are used, they must be amended to make the Postal Service a loss
payee.
7.2.6 Contract Clauses
Include Clause 7-4, Insurance, when a supplier is required to carry insurance.
Include Clause 7-5, Errors and Omissions, when errors and omissions
insurance is required in accordance with 7.2.2.
7.2.7 Notice of Cancellation or Change
When insurance (other than errors and omissions insurance issued on an
occurrence basis) is required by the contract, the insurance policy must
contain an endorsement to the effect that a cancellation of or material change
in the policy that adversely affects the interest of the Postal Service will not
be effective until at least 30 days after written notice of the cancellation or
change is given to the contracting officer.
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