With the U.S. involvement in the war on terror in Iraq and Afghanistan, the DBA exposure for contractors and DBA Insurance carriers has changed significantly due to the hiring of locals native to the country where work is being performed. Like U.S. workers employed under DBA contracts, locals are also eligible for DBA benefits. This eligibility creates a number of challenges in the claims management process—ranging from cultural differences to financial disparities. Some of these challenges are outlined below:

Injury during commute

Typically, a local working in their home country under a contract that requires DBA is not entitled to DBA benefits if they are injured or killed during their commute to or from a work site. Commuting to and from a location under watchful eye by insurgents is a known occurrence, and claims for injury or death during a commute are only compensable if it can be proven the employee was the victim of a retaliatory attack by insurgents as a result of their employment by Westerners.

Proof of wages

For DBA carriers to pay loss of wages benefits, proof of wages for work performed by the injured or deceased employee must be presented for the previous 12 months. While wages in the U.S. are typically documented by an employee’s tax filing or W2 statement, many workers in third-world countries are paid by local employers in cash and wages are not carefully documented. In order for wages to be proven at the time of an injury or death, it’s imperative that wages be documented. Contractors with overseas contracts need to keep record of the wages for local workers via a wage statement so that it can serve as confirmation later, if needed.

Volatile environments

Due to volatile situations in many countries, locals often fear being terminated from their employment or even killed for accepting DBA benefits and, therefore, often hesitate to admit they have been injured on the job. It’s very important that local employees are educated about their rights to receive DBA benefits if they are injured and, likewise, employers and DBA Insurance carriers must be cognizant of the risks the employees face in collecting benefits.

Proof of marriage and birth

In order to provide a death benefit payment to a surviving spouse and eligible surviving children, DBA requires that both marriage and birth certificates of all dependents and for the deceased employee be presented to confirm ages and authenticate legal status as dependents. However, in some countries, such as Iraq and Afghanistan, births and marriages are not documented as precisely as they are in the U.S. Oftentimes a birth is only written in a book in the family home—a more formal record isn’t made. Because of the differences in how these types of events are recorded, many DBA carriers have agreed to accept alternate proof of marriages and births in recent years based on Department of Labor approval. This could include a written statement by a judge or tribal leader who performed a marriage ceremony, or a statement by a brother advising of a marriage and ensuing births of the children as a result of the union.

Unmarried workers

If a single person who lives with and supports his or her parents is killed during employment, the parents are entitled to a reduced death benefit assuming it can be proven that the employee was the sole source of income supporting the family.

Protection for widows

In many cultures, surviving female spouses are not entitled to receive death benefits if their husband is killed. Since accepting DBA benefits is often viewed as receiving aid from the Western culture, DBA carriers must be diligent to protect the anonymity of these widows in order to help prevent a threat to family members by insurgents.

Hindrance of benefits delivery

Many locals in the Middle East do not have access to banking systems, making electronic delivery of DBA benefit payments problematic. Likewise, there is not a reliable mail delivery system, which also renders the delivery of a payment by check to beneficiaries difficult. To assist in the transfer of benefits to entitled recipients, DBA carriers will often use a vendor to assist the local with establishing a bank account in order to receive DBA benefits via wire transfer. Again, precautions must be taken so as to not jeopardize the identity and security of the beneficiary.

As the DBA Insurance broker for Allied World Assurance, the LATITUDE DBA Insurance team has a deep understanding of the complexities of Defense Base Act coverage and the benefits entitled to covered employees. Contractors with questions about coverage or those seeking DBA coverage should contact LATITUDE DBA Insurance today.

Defense Base Act (DBA) is a form of Workers’ Compensation insurance that provides benefits to workers performing work overseas under contracts for the U.S. Government. Benefits under DBA include loss of wages, medical expenses, medical evacuation, rehabilitation services, and repatriation of mortal remains and funeral expenses.

Loss of Wages

In the event of an injury to an employee working OCONUS, a formula is used to determine the dollar amount the employee receives to recover their lost wages while unable to work. The formula is 66-2/3% of the average weekly wage for the 12 month period prior to the injury. However, if the loss of wage benefit payments do not meet the prior financial needs of the injured worker, the DBA carrier will often pay a partial benefit to the worker, using another formula, to yield an amount closer to their regular earnings. All total earnings are subject to a weekly wage cap, currently set at $1346.68. The loss of wage benefit is paid tax-free, is not combinable with any other benefit, and is paid to the employee until the time he or she is released to return to work with the exception of the following:

Permanent Total Disability – If the injured worker is deemed permanently unable to return to work, the loss of wage benefits are paid for life to the injured worker. As the U.S. Department of Labor increases the weekly wage cap to adjust for cost of living increases, loss of wage benefit amounts are simultaneously increased.

Death – If a worker is killed in the course of their employment resulting in a compensable claim, a death benefit is paid to his or her survivors. For surviving spouses only, a death benefit of 50% of the average weekly wage is paid for the life of the surviving spouse, or until he/she remarries, at which time a lump sum benefit equaling two years of benefit payment is made to the spouse. The death benefit amount increases to 66-2/3% of the average weekly wage if there are one or more minor children. The minor children receive benefits until age 18 (age 23 if a full-time student). If there are only surviving children (no surviving spouse), the children will split the total amount of the benefit equally. The total amount paid to all survivors will not exceed the weekly wage cap as set by the U.S. Department of Labor. Death benefits also increase annually to accommodate a cost of living adjustment.

Medical Expenses

Medical expenses that are attributable to a compensable claim are paid by the DBA Insurance carrier until the claim is closed. While an injured worker is entitled to choose their treating physician once they’ve returned to the U.S., they are dependent on whatever medical facilities are available in their location. However, the DBA Insurance carrier has the right to request an independent medical examination by a physician of their choice as a second opinion.

In addition, the DBA Insurance carrier will oftentimes assign a Nurse Case Manager to assist in the coordination of care for the injured worker. This is common in cases where an injury is severe or it appears recovery time will be lengthy, and is done not only as a cost-control measure for the insurance carrier, but as an assurance that the injured worker receives the best possible care.

Medical Evacuation

In cases where an injury is severe and the local medical facilities are unequipped to provide the necessary medical treatment, a medical evacuation will be authorized by the treating physician in the country where the injury occurred so the injured worker can be transported to his or her country of citizenship. The DBA Insurance carrier will coordinate the actual medical evacuation and make payment for the related costs.

However, if the injured worker is able to be transported on a commercial airline, the DBA carrier will not pay for the cost of the evacuation. In cases where an injured person is able to fly on a commercial airline, but requires expanded space (such as what’s offered in first-class seating), the DBA carrier will pay the difference in the price for the upgraded ticket.

Vocational Rehabilitation

If an injury forces a covered employee out of the type of work he or she is accustomed to doing (such as the work they were performing overseas), rehabilitation services are coordinated by the U.S. Department of Labor to train the injured employee in a new occupation. These services are only available for U.S. nationals residing in the U.S.

Repatriation of Mortal Remains

The DBA Insurance carrier will pay for the return of mortal remains of a deceased worker to their country and city of residence. A funeral benefit of $3,000 is also afforded under DBA policy.

Just as U.S. employers are required to provide Workers’ Compensation benefits to their employees, affording benefits to workers going overseas for employment is a vital part of doing contract work for the U.S. Government, and is required under Federal Law. Employees and their families can feel confident that the risks of working in remote parts of the world are covered by DBA benefits.

The LATITUDE DBA Insurance Program, the DBA Insurance broker for Allied World Assurance, is a great source for DBA Insurance. Our team has a deep understanding of the complexities and unique business needs associated with government contracts. Contact LATITUDE DBA Insurance today―we’re here to assist you in creating an insurance plan that protects your business and its employees against all your overseas exposures.

With the end of the USACE DBA Insurance program on September 30, 2013, contractors must now look to the open market for replacement DBA Insurance. According to some underwriters, the DBA open market is currently experiencing an onslaught of submissions—in some cases, six to eight per day for upcoming renewals, new awards and contracts that were awarded prior to the termination of the USACE program. Some contractors are already reviewing DBA programs that renew as far in the future as March 2014 to be sure they have time to educate underwriters about their exposures and obtain the most competitive rates available.

 Getting Started: the DBA Insurance Review Process

While a six-month jump start may be a bit early, it’s recommended that contractors begin the renewal process at least 90 days in advance of the DBA renewal date, even if the USACE contracted work won’t begin until six months into the policy term. Since some USACE contractors are finding they are able to secure a lower rate in the open market, it’s essential to begin negotiation with underwriters as early as possible . While lower rates won’t be the case for all contractors—rates will be dependent on the type of work being done—it has been reported that CNA (the carrier for the USACE DBA program) may allow a contractor to end a policy with them prior to the expiration date and replace it with an open market policy.

As part of the review process, contractors seeking replacement DBA Insurance in the open market will need to request their policy loss runs (claims history) from the USACE program and spend time with their insurance broker analyzing the losses, making note of any that resulted from an Act of War or Terrorism. Since most USACE work contracts were awarded for work in war-ravaged Iraq and Afghanistan, DBA underwriters are sensitive to the nature of the work, and, in most cases, loss ratio shouldn’t negatively impact rates for new DBA coverage. However, many brokers didn’t manage prior claims because the rates were set in the USACE program, thus there was no need to analyze loss ratios. Now that the program has ended and losses are again being analyzed by open market underwriters, many contractors may have losses that could come back to haunt them depending on the nature of the claim and the amounts held in reserve to cover the loss.

Beyond the Insurance Review Process

In addition to a thorough DBA Insurance review process, contractors should also spend some time reviewing their current contracts in order to identify any possible premium increases that may result from the move to an open market policy. This affords contractors the opportunity to reach out to the contracting officer to renegotiate existing contracts with USACE and ensure that any changes in their DBA premium from a new open market DBA policy will be reimbursable to the contractor.

The LATITUDE DBA Insurance program is an excellent resource for understanding the complexities of DBA Insurance, including claim filing procedures. Our team of experts has more than 25 years of experience and extensive knowledge of DBA. Contact the LATITUDE DBA Insurance program today to explore your coverage options for your DBA Insurance.

In addition to providing coverage for what might be considered “typical” on-the-job injuries, Defense Base Act (DBA) Insurance also provides coverage for injuries or disorders not directly related to the work being done such as:

Endemic Disease

This includes exposure to diseases workers may contract that are prevalent in the region where the employment takes place (commonly referred to as “disease endemic to an area”). Examples include:

• Parasitic infections such as Malaria and Baghdad Boil (a skin infection caused by a parasite transmitted by sand fly bites)
• Airborne illnesses such as Tuberculosis

All of these would also be compensable DBA claims as being endemic to the Middle East.

Zone of Special Danger

The Zone of Special Danger doctrine was first applied in 1951, and modified the scope of DBA coverage to be more inclusive of deployment to war zones and other perilous locations. The doctrine states that it is not necessary for an employee to have been directly engaged in activity for his/her employer at the time of an injury or death for a claim to be compensable under DBA—that sheer presence in “zones of special danger” warrants a covered claim. Examples include:

• Reasonable recreation. Most employees will engage in typical social and recreational activities while working overseas. Claims stemming from activities not normally considered part of work are given consideration due to the hazardous living environment. However, reasonable recreational activity in a “zone of special danger” isn’t always black and white, and is usually reviewed on a case-by-case basis to determine if a particular activity is compensable if it results in a claim.
• Working conditions. Employees can be subjected to a variety of working conditions when performing their contracted duties. An assessment of one claim concluded that performing dangerous job assignments can have lasting effects, and can warrant compensation for non-occupational injuries under DBA.

Case Study: A 35-year-old employee worked for one year operating equipment that screens for explosive devices at a military base checkpoint in Iraq. The employee was diagnosed with a bleeding ulcer and, following cauterization by military doctors, was bedridden in a hotel in Jordan awaiting evacuation home to the U.S.

In order to avoid the risk of a “bleed out” during a commercial flight, the military required that the employee be medically evacuated back to the U.S., which resulted in an expense of nearly $100,000 for the employer. The DBA Insurance carrier indicated that it was not a compensable claim under DBA because the injury was not “occupational” in nature. However, after getting the perspective of other DBA Insurance carriers regarding this type of claim, and obtaining a legal opinion from a DBA Defense Attorney, it was determined that the claim was compensable under DBA. This determination was based on the fact that the bleeding ulcer was caused by not only the stress of checking vehicles for explosives on a daily basis, but also by the heat and strenuous working conditions in Iraq.

As the DBA Insurance broker for Allied World Assurance, the LATITUDE DBA Insurance team has a deep understanding of the complexities of Defense Base Act coverage. Contractors seeking DBA coverage should contact LATITUDE DBA Insurance today―we’d be happy to assist in creating an insurance plan that protects both the business and its employees against all overseas exposures.