Audit of Department of Energy`s contractor liability insurance costs

Fifty-four of DOE`s major contractors reported expending $44.3 million in liability insurance costs for the last 3 years of operation. Purpose of this audit was to evaluate how DOE implemented its policy to assume the risk of losses for its contractors rather than to insure them commercially. Contractors are required to use self-insurance if combined annual premiums for commercial insurance exceed $10,000. Review of 18 major contractors showed that DOE was not consistently following its policy and that contractors using commercial insurance incurred higher costs. Required approvals were not always obtained prior to purchasing certain other types of liability insurance. It is recommended that DOE`s policies requiring self-insurance be fully implemented; that requests for approval for commercial insurance when annual premiums exceeded $10,000 be fully justified; and that the commercial insurance policies specifically define the liability coverage prior to approval and payment. It is also recommended that the contracts include clauses limiting reimbursements for insurance expenditures to actual losses and administrative costs