All U.S. Government funded contracts require Defense Base Act (DBA) Insurance, which provides medical, disability and death benefits for employees who perform work overseas on military bases and for public works projects. DBA Insurance is required for contracts awarded as a primary contract, and any subcontracts that are procured by the primary contractor to assist in the completion of a project.
All employees who work under these contracts are eligible for DBA benefits regardless of their country of origin unless a DBA requirement waiver has been approved and applied to the contract by the U.S. Department of Labor. Such waivers will only be granted if the employer provides alternate Workers’ Compensation coverage for the employees for whom DBA coverage is waived. Waivers do not, however, apply to U.S. citizens, legal residents of the U.S., or employees hired in the U.S.
Suffering the Consequences
What happens if a contractor fails to purchase DBA Insurance and an injury or death occurs? The answer to this question is that it won’t come without penalty. In the case of an employee’s injury or death, the employee and/or his survivors may elect to sue the contractor (the employer) for tort damages—payment for the unintentional wrongdoing that unfairly caused the employee or survivors to suffer a loss. To avoid a lawsuit, however, the employer is often given the opportunity to pay a cash settlement in the amount equal to the benefits that would have been payable under the Defense Base Act, had DBA Insurance been in place.
In cases where the injured or deceased person is the employee of a subcontractor who has neglected to purchase DBA Insurance, the primary contractor of the project is deemed the employer—and held partially accountable. In most instances, the primary contractor’s DBA Insurance will not apply to a subcontractor’s contracts, ultimately resulting in claims being uninsured, and leaving both the subcontractor and the primary contractor responsible for paying damages out-of-pocket.
And the consequences don’t stop there. In addition to paying out-of-pocket to cover uninsured claims, an employer may face a fine up to $11,000, imprisonment, or both, imposed by the U.S. Department of Labor, if an injured employee files for benefits under the Defense Base Act. The penalty is even steeper if an employer fails to pay the out-of-pocket benefits that are due to an injured/deceased employee (in cases where there was no DBA coverage). The President, Secretary and Treasurer of the corporation at fault will be individually and personally liabile for any compensation or benefits payable to the injured/deceased employee. This means that if corporate funds are not available to pay the benefits, the personal assets of the named corporate officers will be attached to the claim as means for payment of benefits.
These DBA penalties make a clear statement of how important it is to be prudent in your project management—and just how important securing DBA Insurance is for the protection of your employees as well as your corporate assets.
Get Started Today
As the DBA Insurance broker for Allied World Assurance, the LATITUDE DBA Insurance team has a deep understanding of the complexities and unique business needs associated with government contracts and the Defense Base Act. Contact LATITUDE DBA Insurance today―we’d be happy to assist you in creating an insurance plan that protects your business and its employees against all your overseas exposures.
*Please note that even if the DBA clause is not included in your U.S. Government funded contract for work outside of the U.S., DBA coverage is still required based on the Christian Doctrine, which we will discuss in a later post.