Kellogg Brown & Root Services, Inc.

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of -- )

)

Kellogg Brown & Root Services, Inc. ) ASBCA Nos. 59357, 59358

)

Under Contract No. DACA63-03-D-0005 )

APPEARANCES FOR THE APPELLANT: Kurt J. Hamrock, Esq.

Herbert L. Fenster, Esq.

Raymond B. Biagini, Esq.

Covington & Burling LLP

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Thomas H. Gourlay, Jr., Esq.

Engineer Chief Trial Attorney

Michaele J. Mandulak, Esq.

Engineer Trial Attorney

Raymond M. Saunders, Esq.

Army Chief Trial Attorney

Kyle E. Chadwick, Esq.

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE DELMAN ON APPELLANT'S

MOTION FOR PARTIAL SUMMARY JUDGMENT

Kellogg Brown & Root Services, Inc. (KBRSI or appellant) 1 has filed a motion

for partial summary judgment under ASBCA Nos. 59357 and 59358, contending that

under its contract with the government it is entitled to be indemnified against certain

third-party claims and for the legal costs it has incurred in defending these claims. The

government opposes partial summary judgment, contending that the government has

no such contractual obligation under the circumstances. We have jurisdiction under

the Contract Disputes Act, 41 U.S.C. §§ 7101-7109.

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

1. In the run-up to "Operation Iraqi Freedom" and the invasion of Iraq in 2003,

the Secretary of Defense designated the U.S. Army Corps of Engineers

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The contract and the related task order were issued to "Brown & Root Services, A

Division of Kellogg Brown & Root," which later became KBRSI. For ease of

I reference, we refer to KBRSI as the contractor/appellant in this opinion.

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("government") as the executive agent for Iraqi restoration. Insofar as pertinent here,

the government established a "Task Force Restore Iraqi Oil" as the planning and

executive organization for management and operations to restore Iraq's oil production

as a result of the war and its aftermath. (R4, vol. 1, tab Cl at 101)

2. In response to the government's requirements under its Logistics Civil

Augmentation Program (LOGCAP) contract, appellant developed a contingency

support plan (CSP), dated 31 January 2003, to assess damage, repair, maintenance, and

the resumption and/or continuity of operations of the oil infrastructure oflraq during a

possible military occupation of Iraq (R4, vol. 4, tab D at 2). Following its receipt of

the CSP, the government approached appellant with respect to the performance of a

contract to execute the CSP and to perform oil field-related and support services.

3. On 3 March 2003, appellant sent a request to the government seeking

indemnification coverage under "Public Law 85-804" for unusually hazardous risks

associated with the performance of any such contract (R4, vol. 1, tab Cl at 065).

Public Law No. 85-804, 72 Stat. 972, signed into law on 28 August 1958, empowered

the President to authorize executive agencies to enter into, amend or modify

government contracts without regard to other provisions of law when necessary to

facilitate the national defense. Acting under this authority, President Eisenhower on

14 November 1958 issued Executive Order (EO) 10789, "Authorizing Agencies of the

Government To Exercise Certain Contracting Authority in Connection With

National-Defense Functions and Prescribing Regulations Governing the Exercise of

Such Authority." In summary, Paragraph 1 of this EO authorized the Department of

Defense and the service branches, "within the limits of the amounts appropriated and

the contract authorization provided therefor," to enter into, amend, modify or make

advance payments on government contracts when necessary to facilitate the national

defense. 23 Fed. Reg. 8897; see EO 10789 following 50 U.S.C. § 1431. (App. supp.

br. at 2)

4. On 22 July 197I, President Nixon issued EO 11610, which amended and

expanded EO 10789 by adding Paragraph IA. Insofar as pertinent, Paragraph IA

provided as follows:

IA. (a) The limitation in paragraph 1 to amounts

appropriated and the contract authorization provided

therefor shall not apply to contractual provisions which

provide that the United States will hold harmless and

indemnify the contractor against any of the claims or

losses set forth in subparagraph (b ), whether resulting

from the negligence or wrongful act or omission of the

contractor or otherwise (except as provided in

subparagraph (b)(2)). This exception from the

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limitations of paragraph 1 shall apply only to claims or

losses arising out of or resulting from risks that the

contract defines as unusually hazardous or nuclear in

nature ....

(b)(l) Subparagraph (a) shall apply to claims

(including reasonable expenses of litigation and

settlement) or losses, not compensated by insurance or

otherwise, of the following types:

(A) Claims by third persons, including employees

of the contractor, for death, personal injury, or loss of,

damage to, or loss of use of property;

(2) Indemnification and hold harmless

agreements entered into pursuant to this subsection,

whether between the United States and a contractor, or

between a contractor and a subcontractor, or between two

subcontractors, shall not cover claims or losses caused by

the willful misconduct or lack of good faith on the part

of any of the contractor's or subcontractor's directors

or officers or principal officials which are (i) claims by

the United States (other than those arising through

subrogation) against the contractor or subcontractor,

or (ii) losses affecting the property of such contractor

or subcontractor. Regulations to be prescribed or

approved by the Secretaries of Defense, the Army, the

Navy or the Air Force shall define the scope of the term

'"principal officials." [Emphasis added]

36 Fed. Reg. 13755; see EO 10789 following 50 U.S.C. § 1431.

5. The government issued a determinations and findings (DAF) in support of

appellant's indemnification request, entitled: '"DETERMINATIONS AND

FINDINGS OF THE CONTRACTING OFFICER CONCERNING THE REQUEST

FOR INDEMNIFICATION SUBMITTED BY [APPELLANT] RELATING TO THE

CONTRACT TO EXECUTE A CONTINGENCY SUPPORT PLAN FOR THE

RESTORATION AND OPERATION OF THE IRAQI OIL INFRASTRUCTURE."

Insofar as pertinent, this DAF provided as follows:

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2. Definition of unusually hazardous risks and

statement that parties to the contract have agreed

concerning those risks.

a. Definition of unusually hazardous risks.

This is an unprecedented contract for an

unprecedented situation. The risks associated with this

contract are extraordinarily high. The extent of damage

that may be done to Iraq's oil infrastructure and other

related infrastructure remains unknown. Technical risks

are extraordinarily high. The Contractor must quickly

assess the condition of the facilities. Then he must quickly

make repairs to the Iraqi energy infrastructure and all

related systems and facilities, including but not limited

to ... water, pipeline distribution systems, and supporting

electrical grids in an austere environment without

sufficient time to evaluate the situation thoroughly. As a

result, there is significant risk that actions taken by the

contractor, particularly in the first few weeks after the

conflict begins will be less than optimum .

.. .Although the contract contemplates that

CENTCOM will provide a "benign" environment, there

will be many unusual and extraordinary hazards in the

area. These may include, but are not limited to, indirect

fire; booby traps; biological and chemical agents, which

may be persistent; suicide bombers; hazards caused or

increased by the deteriorated condition of the Iraqi

infrastructure and lack of instrumentation on the facilities;

and environmental hazards ....

Finally, even successful operations on a scale of the

one envisioned here are likely to result in contamination of

fresh water zones both on and beneath the surface and may

result in other environmental pollution.

(Appellant's Statement of Undisputed Material Facts (ASUMF), attach. 3 at 9, 12-13)

This DAF was signed by the contracting officer (CO) and other government officials

between 5 March and 6 March 2003 (id. at 18).

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6. On 8 March 2003, the government awarded to appellant Contract

No. DACA63-03-D-0005. This cost-reimbursement, indefinite delivery, indefinite

quantity contract had a base period of two years and three one-year options, not to

exceed a total of five years. The government's minimum guarantee for the contract

was $500,000 and the estimated maximum amount was $7 billion. (R4, vol. 1, tab B

at 1-3)

7. By Memorandum of Decision dated 19 March 2003 (''White Memo"), the

Secretary of the Army authorized the inclusion of the Indemnification clause into the

contract, Federal Acquisition Regulation (FAR) 52.250-1, Alternate I. In brief, this

clause provided for indemnification of appellant for certain losses arising out of or

resulting from a risk defined in the contract as "unusually hazardous." Enclosure A to

the White Memo defined "unusually hazardous risks" as follows:

ENCLOSURE A

DEFINITION OF UNUSUALLY HAZARDOUS RISKS

The definition of the unusually hazardous risks to which

the contract indemnification clause will apply is as

follows:

"The risk of

-fire, explosion, combustion or detonation of

hydrocarbons or other combustible substances, or of

munitions, explosives, pyrotechnics and ordnance of all

types, whether military or nonmilitary;

-exposure to lethal chemical agents, biological

agents, radioactivity or nuclear materials. The term "lethal

chemical agents" for the purposes of this clause, means:

(i) the agents GB, VX or mustard, (ii) any other military

chemical agent encountered at the work site, or (iii) any

other highly toxic, carcinogenic, mutagenic, teratogenic or

psychotropic chemical resulting from a reaction with the

items listed in (i) or (ii) above;

-sudden or nonsudden release of hydrocarbons or

other toxic or hazardous substances or contaminants

into the environment, including subsurface release;

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-failure of equipment or failure to control a wild

well.. .. " [Emphasis added]

(ASUMF, attach. 3 at 2-4)

8. The Indemnification clause, the White Memo and Enclosure A were

incorporated into the contract under Modification No. P00002, effective 20 March

2003 (R4, vol. 1, tab B at 126-29). The Indemnification clause is appended as an

appendix to this opinion.

9. Pursuant to the contract, the government issued Task Order No. 0003 to

appellant on 20 March 2003 (R4, vol. 1, tab B at 139-52). Task Order No. 0003, as

modified by Amendment No. 03 dated 30 April 2003, tasked the contractor to

"provide the necessary equipment, tools, materials and personnel to perform and

complete repairs on oil wells ... pipelines, pump stations ... and other associated

infrastructure which are necessary to ... restore the facilities to operating condition" (id.

at 138). The Task Order also provided: "'[C]ontractor personnel shall be notified by

ACO that benign conditions exist [Zl and directed by the ACO to deploy from staging

areas ... to specific facilities" (id. at 140).

10. One facility to which appellant was directed under Task Order No. 0003

was the Qarmat Water Treatment Plant (the "plant") near Al Basrah, Iraq. Simply

stated, this plant provided chemically-treated water that was distributed to pumping

stations which was then injected under pressure into nearby Iraqi oil fields to allow for

the oil and gas to rise, thereby facilitating extraction. (R4, vol. 2, tab Cl at 1283) The

operations at this plant had become degraded and needed to be restored as a link to the

restoration of Iraqi oil production (compl. ~ 19, answer~ 19).

11. Because of the ongoing dangerous conditions in Iraq, and as required by

the contract, the government provided uniformed U.S. military personnel as force

protection to KBRSI personnel while traveling throughout the war theater and while

performing work at Iraqi oil infrastructure facilities, including the subject plant

(compl. ~ 18, answer~ 18).

12. It is undisputed that in the spring of 2003 and beyond, there were persons at

the plant who were exposed by touch or inhalation to a chemical agent in powder form

known as "Sodium Dichromate," which was found in the soil and in other areas of the

2 The parties dispute the nature and extent of the government's responsibility to

provide "benign conditions" to Iraqi sites under Task Order No. 0003.

However, this dispute is unrelated to the interpretation of the Indemnification

clause, and hence is not a relevant, material dispute that would preclude

consideration of appellant's motion.

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plant. It is also undisputed that in or around the summer of 2003, appellant took action

to encapsulate the Sodium Dichromate at certain plant locations, and that later in the

year plant operations were shut down for a period of time due to personnel exposure

and related testing. (R4, vol. 2, tab C 1 at 1319-22, vol. 11, tab H at 2899, 2907)

13. According to '"Memorandum for Surgeon General of the Army from

Defense Health Board" dated 10 December 2008, Sodium Dichromate is "a corrosion

suppression agent used in the water treatment process." It is "an inorganic compound

containing hexavalent chromium known to be toxic and carcinogenic to humans and

animals." (App. supp. R4, tab J-15 at 105) Sodium Dichromate is also classified as a

hazardous substance under regulations implementing the Federal Water Pollution

Control Act. 40 C.F.R. § 116.4.

Sodium Dichromate Legal Actions Against Appellant 3

14. In 2005, former KBRSI personnel sought through arbitration to recover

from KBRSI for injuries allegedly caused by Sodium Dichromate exposure at the

Qarmat plant. See Langford v. Halliburton, AAA No. 704800064905. The

government reimbursed KBRSI for the legal costs it incurred in successfully defending

the Langford arbitration.

15. Beginning in December 2008, various groups of U.S. and British military

personnel filed claims against KBRSI in federal court, alleging that these individuals

had provided force protection for KBRSI personnel or perimeter security at the plant

in 2003 and had been exposed to injurious levels of Sodium Dichromate due to

appellant's negligence and wrongdoing.

16. The first claim brought by military personnel in federal court was

McManaway v. KBR Inc. (Southern District of Indiana), which was filed in late 2008

on behalf of a group of Indiana National Guard personnel. Throughout 2009, KB RSI

was named by military personnel in several additional lawsuits in federal court: Bixby

v. KBR Inc. (District of Oregon); Billiter v. Kellogg, Brown & Root Services, Inc.

(Northern District of West Virginia); Gallaher v. KBR Inc. (Northern District of West

Virginia); and Bootay v. KBR Inc. (Western District of Pennsylvania). KBRSI notified

the government of the lawsuits brought against it and requested assistance and

direction as to the management or disposition of the suits. The government

acknowledged receipt of these litigation notices, but stated in response that it was the

policy of the Army to remain neutral in the litigation.

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SOF iii! 14-18 are based upon ASUMF iii! 20-25. The government has accepted the

factual assertions in the ASUMF, except for ASUMF ii 18 (gov't opp'n at 3).

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17. KBRSI defended these lawsuits and obtained dismissals in McManaway,

Billiter, Gallaher, and Bootay. After the above dismissal, the McManaway plaintiffs

filed a similar action in 2011 in the U.S. District Court, Southern District of Texas, and

as far as this record shows, this action is currently pending.

18. In October 2012, following a jury trial in Bixby, the jury returned an $85.2

million verdict, including compensatory and punitive damages, against KBRSI and

other defendants. On remittitur, the court reduced the jury's verdict to an $81 million

judgment. KBRSI appealed.

19. On appeal, the Ninth Circuit vacated the judgment and reversed and

remanded, holding that the defendants were not subject to personal jurisdiction in

Oregon for actions performed in Iraq. Bixby v. KBR, Inc.; Kellogg, Brown & Root

Service, Inc., 603 F. Appx. 605 (9th Cir. 2015).

KBRSI Requests Indemnification from the Government

20. Throughout the above period, KBRSI notified the government of the

ongoing legal matters and the concomitant legal costs it was incurring (compl. ~ 87,

answer~ 87). By letter to the CO dated 29 December 2010, KBRSI requested that the

government acknowledge its indemnification obligations under the contract and

participate directly in the pending lawsuits (app. supp. R4, tab J-16 at 117-24).

21. By letter to KBRSI dated 6 April 2011, the CO denied the indemnification

request (R4, vol. 1, tab Cl at 449-50). KBRSI submitted additional information to the

government, and the parties met in August 2011 to further discuss this matter. By

letter to KBRSI dated 18 November 2011, the CO again denied KBRSI's

indemnification request (R4, vol. 2, tab Cl at 1256-57).

22. In July and August 2012, KBRSI submitted to the government invoices for

payment of some of the outside legal costs incurred to defend against these third-party

lawsuits (compl. ~ 4 7, answer~ 4 7). The government did not pay these invoices

(compl. ~ 49, answer~ 49).

23. KB RSI thereafter submitted three certified claims to the government, dated

21December2012, 21 February 2013 and 4 April 2014, seeking payment for the

unpaid invoices and additional legal costs related to the Sodium Dichromate claims,

totaling over $30 million (R4, tabs Cl, C2, C3). The government declined to issue a

CO decision on any of these claims.

24. Appellant appealed to this Board based upon the deemed denial of its

claims. The deemed denial ofthe certified claim of21December2012, as updated by

the claim of21 February 2013, was docketed as ASBCA No. 59357. The deemed

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l denial of the claim dated 4 April 2014 was docketed as ASBCA No. 59358. The

l appeals were consolidated and pleadings were filed.

l 25. On 23 December 2014, appellant filed the subject motion for partial

summary judgment under ASBCA Nos. 59357 and 59358. 4 Appellant sought

judgment under Count III of its complaint, which alleged entitlement to

indemnification pursuant to Public Law No. 85-804 and the Indemnification clause.

26. On 28 July 2014, appellant filed another certified claim with the CO,

seeking an additional $488,309.83, plus interest, under the Indemnification clause for

costs incurred to defend certain Sodium Dichromate matters (ASBCA No. 59873,

compl., ex. A at 26). By decision dated 10 December 2014, the CO denied this claim

(id., ex. B). Appellant appealed to this Board, and the appeal was docketed as ASBCA

No. 59873. Per appellant's request and without objection from the government, the

three appeals were consolidated and further proceedings under ASBCA No. 59873

were stayed pending resolution of the dispositive motions in ASBCA Nos. 59357 and

59358.

DECISION

Under appellant's motion for partial summary judgment we are asked to

interpret the parties' contract, specifically, the Indemnification clause, FAR 52.250-1,

Alternate I, and the related White Memo and its Enclosure A that were made part of

the contract under Modification No. P00002. "'Contract interpretation begins with the

plain language of the written agreement." McHugh v. DLT Solutions, Inc., 618 F.3d

1375, 1380 (Fed. Cir. 2010). We seek an interpretation of FAR clauses/regulations

consistent with the plain terms provided; it is not our prerogative to insert words or

phrases to alter an otherwise plain and clear meaning. Tesoro Hawaii Corp. v. United

States, 405 F.3d 1339, 1346-47 (Fed. Cir. 2005); Northrop Grumman Corp., ASBCA

No. 57625, 14-1 BCA ~ 35,501, recon. denied, 14-1BCA~35,743. Contract

interpretation is a question of law and may be resolved by summary judgment if the

provisions are unambiguous. Skanska US Building, Inc., ASBCA No. 56339, 10-1

BCA ~ 34,392 at 169,832.

The Indemnification clause, Paragraph (b ), states in part as follows:

Under Public Law 85-804 (50 U.S.C. 1431-1435) and

Executive Order 10789, as amended, and regardless of any

other provisions of this contract, the Government shall,

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Appellant had earlier filed a motion for judgment on the pleadings under ASBCA

Nos. 59357 and 59358.

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subject to the limitations contained in the other paragraphs

of this clause, indemnify the Contractor ....

We address below whether appellant has met the requirements for indemnification as

prescribed by this clause.

Per Paragraphs (b) and (c) of the Indemnification Clause, the Third-Party Claims and

Related Costs "Arisefsl Out of or Result[s] from" a Risk Defined in the Contract as

Unusually Hazardous and Are "Not Compensated for by Insurance or Otherwise."

By its very terms, Paragraph (b )( 1) of the Indemnification clause covers the

type of loss, i.e., litigation expense and personal injury claims, for which appellant

seeks indemnification here. Under Paragraph (c) of the Indemnification clause, the

government agreed to indemnify appellant for such loss that "arises out of or results

from a risk defined in this contract as unusually hazardous" and was "not compensated

for by insurance or otherwise."

"Unusually hazardous" risks are defined in "Enclosure A" of the White Memo,

which was made part of the contract under Modification No. P00002. One such risk

was defined as the "nonsudden release" of a "toxic or hazardous substance."

Sodium Dichromate contains hexavalent chromium, a toxic and carcinogenic

substance. It is also classified as a hazardous substance under regulations

implementing the Federal Water Pollution Control Act. (SOF ii 13) Indeed, it is

undisputed that appellant took action to encapsulate the Sodium Dichromate powder at

the plant in or around the summer of 2003, and that later in the year the plant was shut

down for a period of time due to personnel exposure and related testing. We believe

that Sodium Dichromate is a "toxic or hazardous substance" in accordance with the

plain meaning of the term and in accordance with Enclosure A of the White Memo in

the contract.

The parties' motion papers do not dispute the meaning of the term "nonsudden

release" and do not dispute the application of the term to the Sodium Dichromate

exposure in this case. The Army has defined "non-sudden release" of an agent in an

indemnification context under Public Law No. 85-804 as a release of toxic material

"which takes place over time and involves continuous or repeated exposure." Mark J.

Connor, Government Owned-Contractor Operated Munitions Facilities: Are They

Appropriate in the Age ofStrict Environmental Compliance and Liability?, 131

MILITARY LAW REVIEW 39 n.262 (1991). It is undisputed that there were persons at

the plant who were repeatedly exposed to Sodium Dichromate powder in the soil and

in other areas of the plant over a period of time through touch or inhalation. We

believe that this exposure is consistent with the term "nonsudden release" of a toxic or

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hazardous substance in accordance with Enclosure A of the White Memo in the

contract.

Based upon the above, we believe that appellant has shown an "unusually

hazardous risk" to which indemnification applies under the Indemnification clause.

We also believe that, per Paragraph ( c) of the clause, the loss for which appellant seeks

indemnification "arises out of' or "results from" that risk. The parties' motion papers

also do not dispute that such loss was "not compensated for by insurance or

otherwise," per Paragraph (c) of the clause, and we so conclude.

Accordingly, we conclude that appellant has met the requirements of

Paragraphs (b) and ( c) of the Indemnification clause for purposes of obtaining

indemnification under the clause.

Per Paragraph (d) of the Indemnification clause, Willful Misconduct or Lack of Good

Faith of the Contractor Does Not Bar Indemnification of the Costs Claimed.

The government contends that it did not intend under the Indemnification

clause to indemnify appellant for third-party claims and related litigation costs

attributable to appellant's own misconduct, and spends much of its opposition citing to

the evidence of record supporting this alleged misconduct (gov't opp'n at 31-37).;

The government's contention, however, is not supported by the language of the

Indemnification clause. Paragraph (d) of the clause expressly addresses claims or

losses "caused by willful misconduct or lack of good faith" of the contractor. Under

such circumstances, said paragraph bars indemnification of costs incident to

"Government claims against the Contractor" or for "Loss or damage affecting the

Contractor's property." It does not bar the indemnification of third-party claims

against appellant and related legal costs. To the same effect is EO 10789 as amended

(SOF ~ 4). Hence, assuming, arguendo, that there was some element of misconduct by

KB RSI here, such misconduct does not bar indemnification of the covered losses

arising from these third-party actions.

We have considered all the government's arguments regarding the

interpretation of the Indemnification clause and otherwise. We conclude that the

Indemnification clause - and the related White Memo and Enclosure A - are

unambiguous, and that the plain language of these contract provisions support

5 For example, the jury in Bixby found appellant liable for compensatory and punitive

damages and the trial court, in response to post-trial motions, found that

appellant, inter alia, affirmatively concealed the risks of exposure to Sodium

Dichromate to the plaintiffs (gov't opp'n at 29-31). The Ninth Circuit vacated

this judgment on jurisdictional grounds (see SOF ~ 19).

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appellant's entitlement to indemnification as a matter of law under the circumstances

presented.

CONCLUSION

Appellant's motion for partial summary judgment under Count III of its

complaint, seeking entitlement to indemnification pursuant to Public Law No. 85-804

and the Indemnification clause, is granted consistent with this opinion.

Dated: 13 August 2015

\JAC

A ministrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

MARK N. STEMPLER RICHARD SHACKLEFORD

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA Nos. 59357, 59358, Appeals of

Kellogg Brown & Root Services, Inc., rendered in conformance with the Board's

Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

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APPENDIX

52.250-1 Indemnification Under Public Law 85-804.

As prescribed in 50.403-3, insert the following clause in contracts whenever the

approving official determines that the contractor shall be indemnified against

unusually hazardous or nuclear risks (also see 50.403-2(c)):

INDEMNIFICATION UNDER PUBLIC LAW 85-804 (APR 1984)

(a) "Contractor's principal officials," as used in this clause, means directors,

officers, managers, superintendents, or other representatives supervising or directing-

(1) All or substantially all of the Contractor's business;

(2) All or substantially all of the Contractor's operations at any one plant or

separate location in which this contract is being performed; or

(3) A separate and complete major industrial operation in connection with the

performance of this contract.

(b) Under Public Law 85-804 (50 U.S.C. 1431-1435) and Executive Order

10789, as amended, and regardless of any other provisions of this contract, the

Government shall, subject to the limitations contained in the other paragraphs of this

clause, indemnify the Contractor against-

(1) Claims (including reasonable expenses of litigation or settlement) by third

persons (including employees of the Contractor) for death; personal injury; or loss of,

damage to, or loss of use of property;

(2) Loss of, damage to, or loss of use of Contractor property, excluding loss of

profit; and

(3) Loss of, damage to, or loss of use of Government property, excluding loss

of profit.

(c) This indemnification applies only to the extent that the claim, loss, or

damage ( 1) arises out of or results from a risk defined in this contract as unusually

hazardous or nuclear and (2) is not compensated for by insurance or otherwise. Any

such claim, loss, or damage, to the extent that it is within the deductible amounts of the

Contractor's insurance, is not covered under this clause. If insurance coverage or

other financial protection in effect on the date the approving official authorizes use of

this clause is reduced, the Government's liability under this clause shall not increase as

a result.

(d) When the claim, loss, or damage is caused by willful misconduct or lack of

good faith on the part of any of the Contractor's principal officials, the Contractor

shall not be indemnified for-

( 1) Government claims against the Contractor (other than those arising through

subrogation); or

(2) Loss or damage affecting the Contractor's property.

(f) The rights and obligations of the parties under this clause shall survive this

contract's termination, expiration, or completion. The Government shall make no

payment under this clause unless the agency head determines that the amount is just

and reasonable. The Government may pay the Contractor or subcontractors, or may

directly pay parties to whom the Contractor or subcontractors may be liable.

(g) The Contractor shall-

( 1) Promptly notify the Contracting Officer of any claim or action against, or

any loss by, the Contractor or any subcontractors that may reasonably be expected to

involve indemnification under this clause;

(2) Immediately furnish to the Government copies of all pertinent papers the

Contractor receives;

(3) Furnish evidence or proof of any claim, loss, or damage covered by this

clause in the manner and form the Government requires; and

(4) Comply with the Government's directions and execute any authorizations

required in connection with settlement or defense of claims or actions.

(h) The Government may direct, control, or assist in settling or defending any

claim or action that may involve indemnification under this clause.

(End of clause)

Alternate I (APR 1984). In cost-reimbursement contracts, add the following

paragraph (i) to the basic clause:

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I (i) The cost of insurance (including self-insurance programs) covering a risk

defined in this contract as unusually hazardous or nuclear shall not be reimbursed

except to the extent that the Contracting Officer has required or approved this

insurance. The Government's obligations under this clause are-

(1) Excepted from the release required under this contract's clause relating to

allowable cost; and

(2) Not affected by this contract's Limitation of Cost or Limitation of Funds

clause.

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