Insurance, Torts and Indemnity

As an agency of state government, NC State University is entitled to claim “sovereign immunity” from various types of liability, including tort liability. This immunity is recognized by the federal government and all state jurisdictions, and prevents third parties from suing the university except to the extent the university agrees to be sued. Only the General Assembly of North Carolina is authorized to waive this immunity and it has done so to a limited extent by enacting the North Carolina Tort Claims Act (GS 143-291, et seq.).

Policy

The university should endeavor to see that its immunity is recognized in all its various research agreements and must be certain not to waive its immunity. Similarly, if an entity subcontracting from the university has immunity, the university should recognize this status in any subcontract with the entity. Specific instructions for dealing with federal and nonfederal sponsors and subcontractors are as follows:

Federal

The government requires contractors receiving cost reimbursement, research and development contracts, whether or not their contracts are subject to the Cost Accounting Standards, to provide insurance for liability to third persons (e.g., workers’ compensation, employer’s liability, comprehensive general liability) and such other insurance as the Contracting Officer may require under the contract. However, the government does not require such insurance of contractors if the contractor is immune from tort liability. State law in North Carolina does not permit any state agency to purchase special liability insurance as described above.

Where the university is a subcontractor from a non-immune prime contractor, it is especially important that the university’s status is made clear at an early stage prior to the award of the contract so that valuable time is not lost in negotiating the subcontract after the award is made.

Where the university is the prime contractor and the subcontractor also has immunity from liability, the university should recognize that immunity by flowing down the immunity provisions of its own contract. If the subcontractor is not immune, then the university should use the federal contract clause applicable to non-immune parties.

Non-Federal

If no federal money is involved, the university may not promise to protect a sponsor or subcontractor from liability in any way (e.g., indemnifying, holding harmless, purchasing any type of liability insurance, etc.). Furthermore, the university should get a promise from the sponsor that the sponsor will indemnify and hold the university harmless from any liability arising out of the sponsor’s use of the results of the project, unless the sponsor is immune from liability, in which case such immunity should be recognized.