In Part 1 of this series, we introduced the Federal Acquisition Regulation’s (FAR) approach to insurance and risk allocation in federal procurement, with a focus on FAR Part 28 and the insurance-related clauses in FAR Subpart 52.228. That introductory post surveyed the FAR’s insurance framework and identified three recurring categories of insurance that frequently appear in federal government contracts: automobile liability, liabilities for workers, and liability to third persons.

The remaining posts in this series take a closer look at each of those categories in turn. This post begins that deeper dive by focusing on automobile liability and two clauses that commonly govern vehicle-related risk in federal contracts — FAR 52.228-8 (Liability and Insurance — Leased Motor Vehicles) and FAR 52.228-10 (Vehicular and General Public Liability Insurance). Together, these clauses illustrate the FAR’s allocation of responsibility for vehicle-related injuries and property damage and its use of insurance requirements to support that allocation.

Automobile Liability in Federal Contracts

Federal contracts may involve vehicles in a variety of ways — through leasing arrangements, transportation services, or other operational use. When vehicle-related risk is present, the FAR uses specific clauses to clarify the party bearing responsibility for injuries or property damage and the insurance that must be carried to support that allocation of risk.

FAR 52.228-8 and FAR 52.228-10 are among the most common of these clauses. While they may be — and many times are — included in the same contract, they address different risk profiles and serve different purposes.

FAR 52.228-8: Liability and Insurance — Leased Motor Vehicles

FAR 52.228-8 applies when the government leases motor vehicles from a contractor. It divides responsibility between the government and a government contractor. The government is responsible for loss or damage to the leased vehicles themselves, except for normal wear and tear or damage caused by the contractor’s own negligence. The government is also responsible for third-party injuries or property damage only to the extent the government is liable under the Federal Tort Claims Act (FTCA). Loss arising from the contractor’s own fault remains the contractor’s responsibility, and the contractor generally must indemnify the government for those losses.

Because the contractor generally retains responsibility for losses caused by its own fault, the clause requires auto liability insurance at specified minimum limits and written confirmation of coverage before performance. Policies must be endorsed to give the contracting officer at least 30 days’ written notice (or any longer notice period required under state law) of cancellation or material change, and they must waive subrogation against the United States so the insurer cannot try to recoup paid losses from the government.

The clause also clarifies the effect of this division of risk on pricing. Because the government assumes responsibility for certain categories of loss — such as most damage to the leased vehicles unless it results from the contractor’s negligence — the contractor cannot include costs or markups for insurance that would cover those government-assumed risks in the lease price. Instead, the contractor’s pricing and insurance should focus only on the risks it retains under the clause — namely, losses or injuries caused by its own fault. This ensures that each party bears and prices only its fair share of risk under the lease arrangement.

In practical terms, contractors should confirm their auto insurance program clearly covers hired/leased vehicles, ensure the policy endorsements include advance cancellation/material-change notification to the contracting officer and a waiver of subrogation in favor of the United States, and align internal claim-reporting procedures with the FTCA framework so the right party handles any later insurance claim without delay. 

FAR 52.228-10: Vehicular and General Public Liability Insurance

FAR 52.228-10 addresses automobile and public liability risk in circumstances where statutory minimum insurance limits are insufficient given the nature of the contracted work. Unlike FAR 52.228-8, which applies in the specific context of leased motor vehicles, FAR 52.228-10 accounts for elevated operational exposure and gives the contracting officer discretion to require higher liability limits tailored to the contract.

When this clause is included, the contractor is required — at its own expense — to maintain vehicular liability and commercial liability insurance at the limits specified in the contract. The clause reflects the FAR’s recognition that minimum limits established under state law may not adequately protect against the risks presented by certain federal projects, particularly those involving extensive vehicle operations, public-facing activities, or heightened exposure to bodily injury or property damage.

Rather than prescribing fixed limits, FAR 52.228-10 allows the contracting officer to calibrate insurance requirements to the specific risks of performance. In practice, this often means limits that exceed state minimums that align with the scope, location, and nature of the work contemplated by the contract. The clause also confirms that the contractor remains responsible for maintaining workers’ compensation and any other legally required employee coverages throughout performance.

From a risk-allocation perspective, FAR 52.228-10 functions as a risk-elevation mechanism. It does not shift responsibility for losses to the government; instead, it reinforces the contractor’s responsibility for third-party injuries and property damage arising from its operations and its obligation to purchase insurance adequate to support that responsibility. The clause ensures that sufficient financial protection is in place before performance begins, reducing the likelihood that serious losses will disrupt contract performance or result in uninsured exposure.

Because FAR 52.228-10 ties insurance requirements directly to the contracting officer’s assessment of risk, contractors should carefully review solicitations to understand both the types of coverage required and the limits specified. Where limits are unclear, outdated, or inconsistent with the contemplated operations, early clarification can help ensure that insurance obligations, pricing, and performance expectations remain aligned.

Aligning Contract Risk and Insurance Coverage

Although FAR 52.228-8 and FAR 52.228-10 apply in different contexts, both underscore the importance of aligning contractual risk allocation with the contractor’s insurance program. When reviewing solicitations that involve vehicle use or transportation-related work, contractors should pay close attention to:

• Which automobile liability clause applies, and whether the contract involves leased vehicles, transportation operations, or both;

• Specified liability limits, including whether the contracting officer has required limits above statutory minimums;

• Scope of coverage, including whether policies respond to leased or hired vehicles and the geographic areas where work will occur; and

• Contract-driven policy conditions, such as notice requirements or limitations on insuring risks the government has assumed.

Addressing these issues early — before pricing and performance — reduces the likelihood of disputes over responsibility when a loss occurs and helps avoid gaps between contractual obligations and available insurance coverage.

Looking Ahead

Automobile liability is only one component of the FAR’s broader framework for allocating operational risk. The next post in this series will examine liabilities for workers under FAR 52.228-3, including the Defense Base Act and related requirements that can arise in both domestic and overseas federal projects.