Who is the best insurance broker for government contractors? This tends to be a question that many contractors don’t think of until they are filling out a contract proposal, a contracting officer is waiting, and the certificate comes back wrong. Most contractors tend to report spending more time vetting subcontractors and evaluating insurance brokers, and it is not long before that time gap is felt at the worst and most inconvenient time for most contractors.
A generalist broker can help with a policy, but a generalist broker may not be as helpful with providing compliant certificate wording within 48 hours of an active solicitation, or doing their own DFARS article research or framing the risk and cost the way underwriters may actually want to see. That is a completely different skill set. Risk Reconnaissance LLC was built to fill this particular space. The team members have military backgrounds and understand Gov Con fundamentals. By the end of this guide, you will not only understand the required coverages for all federal contracts, but you will also avoid the common contracting pitfalls and learn to identify the specialists from the rest of the pack.
Why most government contractors end up with the wrong broker
The generalist gap is real and when a broker is not well versed in FAR and DFARS, the contractor has to do the explaining.
The contracting process itself is complex, resource-intensive, and fraught with numerous areas where deficiencies may be introduced. However, it is at precisely this step that proposals must be the most meticulous. Many commercial brokers cover a wide variety of industries, which account for different compliance calendars, clause structures, and levels of urgency that may not translate from a retail or construction account to government contracting.
Imagine the scenario. A proposal is required in 72 hours, and the prime necessitates specific wording for several certificates. The brokers must then evaluate what a contracting officer’s insurance exhibit actually requires. This type of scenario is not only frustrating, but can also cause a failure to comply, a missed deadline, and potentially a lost contract. The procedural errors can also put a strain on the relationship with the prime contractor because the paperwork is constantly being returned for correction. The cost is eventually revealed in a way that is not easily reconciled, often in the form of a lost proposal, removal from a prime contractor’s approved vendor list, and an audit that is conducted months post contract award.
These brokers have capitalized on all of the aforementioned by familiarizing themselves with the process prior to making the first call. They also understand the implications for the contracting officer when certain clauses are not acceptable and understand how to appropriately request the necessary documentation.
Coverages and endorsements federal contracts actually require
The baseline under FAR Part 28 includes three core coverages: Workers’ Compensation, Commercial General Liability, and Automobile Liability. The core soon becomes individual elements. At the very least, per FAR 28.307-2, bodily injury liability for automobiles is set with a limit of $200,000 for each person and $500,000 for each occurrence, while the limit for one occurrence for bodily injury liability for automobiles is set at $500,000. Limits are set at the minimum; contracting officers more often than not set limits above the minimum to satisfy the nature and scope of the work of the agency.
The endorsement layer most contractors overlook
The area most contractors forget is the layer of endorsements sitting on top of the baseline policy. A surprise to contractors is what is on top of the baseline policy. Contracting officers and prime contractors require certain endorsements in the primary and non-contributory form, with waiver of subrogation across multiple policy divisions, additional insured status for both ongoing and completed operations, and cancellation-notice language consistent with the contracting officer’s requirements. The rejection of a certificate is automatic for any one of these being missing. It is beneficial to know in detail the most common reasons for certificate rejection.
The most common reason for certificate rejection is the absence of additional insured status, whether it is for the prime or government agency, and without an endorsement.
Other common reasons for certificate rejection include the absence of primary and non-contributory language when the contract requires the contractor’s policy to pay first, waiver of subrogation missing from policy divisions where it is present, coverage dates that do not encompass the performance period of the contract, the wrong name of legal entities for the insured or certificate holder, and rejection of coverage for cyber and professional liability.
It bears mentioning that, while FAR does not require it to be a baseline, most primes make it a requirement, especially when the work falls under the domains of IT, consulting, and advisory services.
Expect to pay for these policies if your work impacts government data systems or if you give professional recommendations. Cyber insurance and E&O combine costs, on average, $1,000 to $6,000 and $1,000 to $7,500, respectively, based on the size and revenue of the company, the type of data in the system, and the breadth of the contract. These prices are estimates. Your actual costs may be different.
When Defense Base Act insurance enters the picture
If Defense Base Act insurance comes into effect, then Defense Base Act coverage is triggered when an employee works on a government contract outside the United States. It is not optional, and it is not the same as workers’ compensation in the United States. DBA is part of the Longshore and Harbor Workers’ Compensation Act and extends coverage to all employees of any nationality working on contracts outside the United States. Coverage is required before work begins on the contract. DBA applies to both prime contractors and subcontractors and cannot be substituted with a standard state workers’ compensation policy. This is where things get really different, especially during renewal and at quote time. The price for DBA coverage depends on the trade classification, payroll, and the location’s risk profile. Brokers lacking underwriter relationships in this market will take longer to provide a quote and will likely have challenges with placement. This is where clients will really notice why they need a broker specializing in GovCon versus a general commercial broker. Risk Recon is a broker specializing in building Defense Base Act coverage for defense and government contracting.
Contract language traps a generalist broker will consistently miss
Generalists miss gaps in hold-and-indemnity clauses. The devil is in the details of contract language. These clauses can be written to transfer all liability, regardless of the other party’s negligence. Most generalist brokers treat placing coverage as the end goal and do not consider the risk transfer associated with the contract. This can leave the contractor with exposure that is not covered by the policy. The indemnity provision may be broader than the policy, and the contractor may be exposed to risk that cannot be transferred. For example, a prime contractor’s boilerplate indemnity provision may include coverage for consequential damages, whereas the GL policy is limited to direct damages, and a manuscript endorsement may address this if identified in time. A generalist broker is unable to control the flow of the contract language requirements downstream to the subcontractors. A qualified broker examines the contractual chain throughout and verifies that the policies of the subcontractors can cover the contract, and not just what is stated in the subcontract. The endorsements must match in each of the policy lines covering the contract, not just GL coverage.
A subrogation waiver missing on the auto or umbrella policy, but present on the GL, is a compliance failure which may be found during a contract audit at the most embarrassing moment.
Who is the best insurance broker for government contractors: criteria that reveal a true GovCon specialist.
An operational background within the defense contracting sector may change the way a broker communicates your (the potential client) risk to the underwriting team. It is an operational advantage, not a strategic one. When a broker is able to express your exposure in the operational context that underwriting needs, it can lead to better pricing and broader coverages, rather than merely having a policy that meets the minimum requirements. The Risk Reconnaissance team brings this operational background into carrier discussions. Therefore, a contractor’s risk profile is not lost in translation. During your due diligence process, speed of proposal turnaround is another indicator. Ask any broker how long it takes him/her to develop a compliant certificate containing the endorsement language that the client needs for an active proposal. Certificates that do not have any changes to the endorsements may take a few minutes to a few hours. Certificates that require additional insured processing or modifications to the coverages based on the language of the contract may take 24 to 48 hours. If the answer is vague, or if the broker’s process is dependent on your description of what the contract language calls for, that is your answer.
A good GovCon insurance broker never needs to be prompted to explain FAR Part 28 insurance requirements, differences between DBA and Domestic Workers Comp, DFARS clauses related to DoD coverage, and certification structures that meet requirements of prime contracts. Explanation of these items to your broker is a concern, and a red flag that the broker is not capable of meeting your needs. This is the minimum anticipated for anyone claiming to have a concentration in this area.
Questions to ask before signing with any broker
Some basic questions to ask before signing with a broker include what is the makeup of their business and what percentage of that is government or defense contractors? A broker that does not clearly answer this or says something along the lines of ‘we work with many industries’ likely is indicating a concentration in other areas. Follow up this by asking the broker to recite the FAR clause for the insurance requirements for work on a government installation. A true focused specialty broker will say FAR 52.228-5 without issue. A generalist will search their memory. Follow up this with a request for the brokers process for fill in the blank certificate requests for proposal due in 48 hours where a client has requested insurance. True GovCon brokers will have a well-developed process because they have seen the contract structures many times. A generalist will have a process that is poorly developed, as they have to rely on the client explaining the requirements of the contract, which defeats the purpose of hiring a specialized broker.
Three things should be included on the documentation side for you to make a choice. These are:
· a sample certificate with GovCon endorsements with common language for primary and non-contributory, waiver of subrogation, and additional insured
· references from contracting companies in the same NAICS code or contracting vehicles such as 8(a), SDVOSB, and HUBZone
· descriptions of the underwriter relationships for DBA and professional liability, explaining how they manage requests where both types of coverage are required.
Assessing three to five brokers is a good approach. The idea is not to get too many quotes. The idea is to get a broker who fits your profile and the growth of your contracting business.
The broker relationship is a competitive advantage, not a checkbox
The best broker for government contractors is not the one with the lowest price or the longest list of clients. It’s the broker who has the most understanding of your world and the needs of your primes. Having a good broker will eliminate calls explaining what a contracting officer wants, unnecessary certificates coming back, and finding out you don’t have coverage during a contract audit. For a broker to protect your interests, they will help you respond to contract audit request (CAR) and contract audit defense (CAD) requests in a timely manner.
Apply the vetting questions in this guide to your current broker. Ask them about FAR 52.228-5. Ask for a sample GovCon certificate. Ask them what happens if a proposal must be submitted in 48 hours. The answers will tell you if you have the right partner or if it is time to find one built specifically for government contractor liability insurance and GovCon risk management. If you are still searching for answers to the question “who is the best insurance broker for government contractors?”, start with the brokers who pass these tests.