On April 10, President Trump invoked his authority under 50 U.S.C. 1431 et seq. to authorize the VA to indemnify contractors "with regard to transactions directly responsive to the COVID-19 national emergency." This statutory authority may provide FAR 52.250-1 contractual indemnity protection for VA contractors against insurance coverage gaps related to COVID-19.
Contractors manufacturing or distributing PPE, testing kits, medical treatments, and ventilators for the government may already receive legal protection from the Public Readiness and Emergency Preparedness (PREP) Act. The President's order, however, may protect VA contractors providing other goods and services not currently eligible for PREP Act protection. The broad language of the President's April 10th memo may provide contractual indemnity from the federal government concerning any COVID-19 related work for the VA.
In order to request COVID-19 related contractual indemnity for goods or services provided to the VA – either in a new contract or through a contract modification – contractors must identify insurance gaps, provide required information, and submit a request to the contracting officer under FAR Part 50. If approved, the contracting officer will incorporate FAR Clause 52.250-1 (Indemnification under Public Law 85-804) into the contract. It is also possible that a prime contractor may, with prior written approval from the Contracting Officer, provide FAR 52.250-1 indemnification to its subcontractors.
If sued, a contractor must "[p]romptly notify the Contractor office of any claim or action against, or any loss by, the Contractor or any subcontractor that may reasonable be expected to involve indemnification under" FAR 52.250-1. With the indemnification clause, however, a contractor will likely have to submit a claim or other request to the federal government. While contractual indemnity requires administrative effort to properly invoke and get the federal government involved, the "Government may direct, control, or assist in settling or defending any claim or action that may involve indemnification under this clause." And, it is always nice to have the government and its litigation resources on a contractor's side when facing third party liability claims related to work performed or goods supplied to the VA in response to COVID-19.
Originally published by Duane Morris, May 2020
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
