The Long Tail Of Government Contracts

In the latest in a series of appellate decision concerning the Government's liability to reimburse contractors under World War II cost-reimbursement contracts for their liability to clean up environmental contamination, the Federal Circuit in Ford Motor Co. v. U.S. (Aug. 10, 2004) has upheld the contractor's reservation of the right to recover costs that were first incurred nearly 50 years after the contract was completed and "settled." The Court's broad reading of a provision reserving the contractor's right to indemnification for "[c]laims of the Contractor against the Government which are based upon responsibility of the Contractor to Third parties . . . and which involve costs reimbursable under the Contract . . . but which are not now known to the Officers, Directors, or other personnel of the Contractor whose duties include the acquisition of such knowledge" and a definition of reimbursable costs that included "loss or destruction of or damage to property as may arise out of or in connection with the performance of the work under this contract" suggests that most World War II-era contractors facing liability for environmental remediation will be entitled to indemnification under contractual provisions that were then standard in closing out war contracts.