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.

With the end of the United States Army Corps of Engineers (USACE) DBA program on September 30, 2013, contractors with USACE DBA policies have been faced with placing their DBA Insurance in the open market. Because of the difference in the way USACE program policies were issued in comparison to how policies are rated and issued on the open market, a number of issues have come to light.

Under the USACE DBA program, contractors were not required to submit a Statement of Work (SOW) as part of the application process. DBA policies were issued upon completion of a standard application, which was reviewed by the insurance broker to confirm selection of the correct rate class based on the type of work to be done.

In the open market the DBA application process isn’t as simple. There is more scrutiny by underwriters when rating and issuing policies, and a Statement of Work is required to give underwriters a better assessment of the project and all the services required as part of the contract. As a result of this requirement, Underwriters are discovering new exposures upon reviewing the SOWs.

Services “Outside the Wire”

One new risk brought to light is the idea of contracted employees performing services “outside the wire”―working off base in war zones, either with or without military security protection (i.e. engineering firms sending their engineers off base to an IED* explosion site to evaluate the affects of the explosion on military equipment). Clearly the risk of injury or death to these employees is increased when they are sent into dangerous territory without proper security.

Many DBA underwriters will not provide coverage for any type of off-base exposure, whether military security is provided or not. If the SOW is not explicit regarding what is required as part of the job, or if there is any uncertainty whatsoever, it’s likely that the underwriters will decline offering coverage altogether.

Descriptions of Work

Work done by engineers is affecting the rates that are set on a contract. Under the USACE program, engineers were classified under the service rate, which was set at $4 per $100 of payroll, and specific duties and services performed by the engineers were not fully defined. In the open market, however, responsibilities are defined for all employees in the Statement of Work, including complete descriptions of work to be completed. An example is modifying radio signal jamming equipment and mounting it to vehicles . This enhanced description resulted in increased rates for engineering services, upwards of $8 per $100 of payroll.

Inaccurate Payroll Adjustment

A trend occurring in the open market is the downward adjustment of payroll by contractors to avoid paying additional DBA premium out-of-pocket. For example: a contractor with a USACE DBA policy with a construction rate of $4.25 per $100 for work to be done after September 30, 2013 (the termination date of the USACE DBA program) must re-market their contract to obtain DBA coverage. Rates on the open market for construction services range from $10-$15 per $100 depending on the type of services, country of performance and the number of employees performing the work. With the significant rate increase, the DBA premium for the remaining work under this contract is now higher than what was included, and reimbursable, under the original contract, leaving additional DBA premium due. Contractors are attempting to avoid this situation by reducing the amount of payroll reported.

However, inaccurate payroll reporting is not the correct way to handle this situation. Instead, contractors should:

• Determine what the new open market DBA premium will be for the remaining period of performance on the contract, based on true payroll estimates
• Contact the USACE Contracting Officer to request that the contracts be modified to accommodate the increase in DBA premium, and that is reimbursable, eliminating any out-of-pocket DBA premium

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, and can help contractors make sense of the anomalies associated with the end of the USACE DBA program. Contact LATITUDE DBA Insurance today―we’re here to assist contractors in creating an insurance plan that protects their business and their employees against all their overseas exposures.

*Improvised Explosive Device

Defense Base Act (DBA) Insurance is an enhanced form of Workers’ Compensation that is specific to contractors performing work overseas under a Government contract. Contractors are required to purchase DBA Insurance just like employers in the United States are required to purchase Workers’ Compensation Insurance to cover employees stateside based on state statutes.

Outlined below are some basic coverage benefits* for both Defense Base Act Insurance and domestic Workers’ Compensation to help clarify the difference between the two.

Defense Base Act Benefits

The Defense Base Act is a division of the U.S. Department of Labor’s Longshore and Harbor Workers’ Compensation Act that was enacted in 1941 to cover U.S. civilian workers while working overseas under U.S. Government contracts. DBA benefits provided to contracted employees include:

• Loss of wages during the recovery process if an employee is injured during the course of his or her work and not able to continue working (up to a cap of 66-2/3% of his/her weekly wage)
• Medical expenses related to the claim
• Medical evacuation authorized by the treating physician
• Rehabilitation
• Death benefits
• Treatment for diseases endemic to an area such as Malaria, Tuberculosis and Baghdad Boil (a skin disease transmitted by sand flies) contracted while working in foreign lands

A maximum amount payable to any employee under DBA is currently set at $1,346.68 per week. This amount is reviewed annually on October 1st by the Department of Labor and, if applicable, a Cost of Living Adjustment (COLA) may be assessed.

War Risk Hazards

In some instances, injuries and deaths incurred while working overseas are caused by “war risk hazards”. The War Hazard Compensation Act (WHCA)—a section under the Defense Base Act—provides benefits to cover this risk. Under the WHCA, reimbursement is provided to contractors for benefits that result from injury or death caused by the risks of war or terrorist activities. War risk hazards include actions such as:

• Discharge of weapons
• Any action by a hostile force or person, including insurrection or rebellion
• Discharge of munitions intended for use in war
• Collision of vessels and aircraft operating without customary navigation aids
• Operation of a vessel or aircraft in a zone of hostility or engaged in war activities.

Benefits for “capture and detention” are also included under the WHCA for any employee who is taken by force as a prisoner or hostage while working under a contract that requires DBA coverage. While detained, an employee is entitled to total disability benefits at a rate of 100% of his or her average weekly wage at the time of capture, for up to 12 months time. Seventy percent of this benefit amount may be disbursed to the employee’s dependents in the U.S. If the employee is still detained after one year, the claim reverts back to a standard DBA claim, and death benefits payable under the Employer’s DBA policy begin. A kidnapping incident should be immediately reported and filed as a DBA claim with the DBA Insurance carrier who will direct the claim to the Department of Labor for proper handling.

Domestic Workers’ Compensation Benefits

Workers’ Compensation—also called Work Comp or Workman’s Comp—is a form of insurance that provides benefits to employees who suffer injury or illness as a result of their job-related duties. The requirements for employers to purchase Workers’ Compensation are determined at the individual state level, and can vary depending on the number of employees and gross payroll amount.

Benefits under Workers’ Compensation include compensation for:

• Lost wages
• Medical expenses
• Rehabilitation expenses
• Death benefits

Benefit amounts and stipulations are also regulated at the state level, as is the cap on the maximum weekly wage an injured employee can receive. Current maximum weekly wages range from $500 to over $1,000 per week—substantially lower than the weekly maximum provided under DBA.

The Workers’ Compensation claim process (including payment of benefits), is conducted between the employee, the employer and the employer’s insurance company, and is not monitored by the state. If an employee is dissatisfied with how their Work Comp claim is managed, they may file an appeal with their state’s Compensation Commission.

In most cases, an employee on a permanent disability Workers’ Compensation benefit can negotiate a lump sum settlement in lieu of continuing to receive weekly permanent disability payments. Permanent (or lump sum) settlements are not governed or approved by the state but are negotiated between the employee and the insurance carrier, often with the guidance of legal counsel and, in most states, authorized by a Workers’ Compensation judge.

One Source for Global Coverage

Government contractors often have the need to cover both U.S.-based employees and OCONUS employees. The LATITUDE DBA Insurance Program has the know-how and expertise to assist contractors with all their business insurance needs, both foreign and domestic, and can help simplify the insurance buying process. Contact us to begin a risk assessment today.

*The information provided in this article is not intended as a full assessment of DBA Insurance or Workers’ Compensation. For specific information about your state’s Work Comp requirements and benefits, visit your state’s Department of Labor website. For additional information about Defense Base Act Insurance, visit The U.S. Department of Labor website.

Communicating the benefits of DBA Insurance coverage to employees is important, but perhaps even more important is the communication of proper claim reporting procedures. Familiarizing employees with this information is a crucial part of efficient claim handling and loss control for the company, as well as for the employees.

Once a contractor has purchased Defense Base Act Insurance, the insurance carrier will deliver a “Notice to Employees” form (Form LS-241) along with the DBA Insurance policy. The Notice is much like the form that’s provided to domestic employers who purchase Workers’ Compensation, and is used to inform employees of their benefits and rights, as well as procedures for filing a claim. Much like domestic employers are required to post the Workers’ Compensation Notice in a place their employees can see it (such as in the company break room), the U.S Department of Labor requires that DBA policyholders do the same. The challenge here is that OCONUS (Outside Contiguous United States) employees working under DBA policies are not typically located in a single location and may reside in any number of locations while under contract (i.e. on a military base, in a hotel, in tents in remote areas of the world). Therefore, employers don’t have a centralized place to post the Notice for overseas employees and generally must rely on the Project Managers to inform the employees.

Regardless of the mode of communication, it is imperative that every employee working OCONUS understands:

• Who the Point of Contact is in the country where they are working
• How they can obtain assistance on-site if they are injured
• That every incident or accident must be reported—no matter the severity—to the Project Manager or Supervisor and/or the in-country Point of Contact

Claim Reporting Timeline

When reporting a claim under the Defense Base Act, timing is of the essence:

• Employees have up to one year from the time they become aware of an injury (or an incident that could potentially lead to an injury) to file for DBA benefits. However, immediate reporting to their Project Manager is recommended.
• Employers have 10 days from the time of appropriate notification by the employee to notify the Department of Labor.
  • The Project Manager should be given no more than 24 hours to report the incident or injury to the employer’s Point of Contact in the U.S. Therefore, it’s crucial that on-site Project Managers or Supervisors know who their Point of Contact is for reporting claims within the company to ensure timely reporting and timely benefits delivery to the employee.
  • The Employer has ten days to submit an “Employers’ First Report of Injury or Occupational Illness” form (Form LS-202) to the U.S. Department of Labor. A copy of the LS-202 form should simultaneously be provided to the DBA Insurance carrier. (This form can be found on the Department of Labor’s website here).

Don’t Delay Reporting an Injury

Delaying the submission of an injury report can result in a very stiff penalty for the employer by the Department of Labor. Failure to submit the LS-202 form within ten days can result in a late filing penalty of up to $11,000 for each offense. This makes educating the Project Managers, Supervisors and Points of Contact a mandatory part of project management. Each party must fully understand the DBA claim reporting process, and the urgency behind prompt incident reporting.

Reporting a Fatality

The worst possible outcome of an accident is the death of an OCONUS employee. While proper risk management and safety techniques on the job will do a lot to help reduce the chance of fatalities, it’s important to have formal procedures in place if a fatality occur. The procedures should outline how:

• The on-site Project Manager should handle this type of sensitive situation
• The U.S. Point of Contact should appropriately communicate the death of an employee, including the notification of next of kin

Claims Payment

Upon receipt of the claim notification, the insurance company will:

• Investigate the compensability of the claim
• Determine if compensation and medical care are payable to the employee
• Disburse claim payments according to schedule

Effective communication with the team of Project Managers, Points of Contact and employees is essential in proper and efficient claim filing. 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 the DBA Insurance options available to contractors.