When contractors are awarded a U.S. Government contract for construction work overseas, the next step should always be to secure Defense Base Act (DBA) Insurance.* Required by the U.S. Department of Labor, DBA Insurance provides Workers’ Compensation benefits to employees performing work OCONUS on military bases or public works projects and must be secured before the contracted work commences.
Applying for insurance can seem overwhelming, and understanding insurance terminology can be a challenge in itself. To help contractors understand the DBA Insurance application process, we’ve listed below the questions contractors will typically be asked and the information that will need to be provided to the underwriters in order for them to assess the work the firm will be doing. To simplify the process and ensure proper coverage, contractors should work with an insurance agent or broker who specializes in government contracts and DBA to secure DBA Insurance.
Defense Base Act (DBA) Application Questions
The application is the core document that the underwriter will use to assess the risk of a project and determine if they want to underwrite (provide) the DBA coverage. Some of the questions that will be asked on the application include:
Who is the contracting entity (i.e. U.S. Navy)?
What is the duration of the contract?
What is your performance period?
Tip for question completion
- The performance period may be shorter than the full contract period.
What is the number of employees who will be assigned to the project?
What is the job function for each employee (DBA coverage is rated by Job Class)?
What is the annual payroll and country of origin for each employee?
Tips for question completion
- When calculating payroll, include only the “taxable income” that appears on the Employee’s Wage Statement (otherwise called the “unburdened” rate of pay—that which the employee earns—not the “burdened” rate of payroll charged to the USG.
- The figure reported should include the Base salary, Post Differential/Hazard Pay, Housing, Country Allowance, Vacation Leave Accruals and Bonus. Housing allotment should be omitted if housing is provided by the Employer’s premises and is a condition of employment.
- Report the amount of payroll for the performance period only. If the performance period of the contract is not a full 12months, only report payroll for the time period the employees will be working under the contract.
- Country of origin: Some DBA underwriters will offer a lower rate for Third Country Nationals and local employees from the country where the work is being performed. The death benefits paid under DBA for these employees can be commutated by 50%—paying a lump sum payment to the beneficiary equal to half of the future wages contemplated to the age of mortality for the deceased worker as calculated and confirmed by the Department of Labor.
What is the Country and City where the work will be performed?
Is the work at an Embassy, Military Base or other location?
How many employees will there be per deployment flight?
Tip for question completion
- Typically, underwriters prefer that contractors limit the number of employees on a single flight to five or less. This is a good corporate risk management tool as most contractors cannot afford to lose more than five employees in an accident at any one time.
Where will the employees be living?
How far or near is the closest medical facility?
What type of security will be provided as employees are commuting to and from work, as well as at their living quarters?
Are employees required to carry firearms for protection?
What are the emergency evacuation plans from the job site and from living quarters?
What is the deployment period for the employees? Will they reside in the country for the entire performance period of the contract, or will they rotate in and out on a 90-day stay in the country?
Additional Documentation Required
In addition to completing the DBA application, contractors will also be required to submit:
1. A copy of the project Contract issued to the company by the Government entity or Prime Contractor
2. The company’s DBA and/or domestic Workers’ Compensation Loss History (aka Loss Runs). This will help the underwriter assess the losses the company has had, in both the number of losses (or claims filed) and their level of severity.
3. A Statement of Work (SOW). The SOW provides a detailed description of the project and is often part of the official contract provided by the contracting Government entity or Prime Contractor.
Once all required documentation has been submitted, the underwriter will do a thorough review and determine whether or not they will proceed with a formal DBA proposal. Keep in mind that, based on the information provided in the SOW, the underwriter may have additional questions that will need to answered in order determine their interest in assuming the DBA risk for the project.
If the application is accepted, a proposal will be prepared and submitted through the insurance agent and the contractor will typically have 10 days to accept or refuse the proposal terms. Upon acceptance of the proposal, the agent will work with the underwriter to finalize premium payment details and, once paid, will provide a a “paid” invoice to the contractor to submit to the U.S. Government Contracting Officer. The Contracting Officer will then arrange for reimbursement of the DBA premium. Again, it’s wise to include the amount of the DBA premium at the contract negotiation stage or submission of the bid to ensure reimbursement of 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, the Defense Base Act and DBA Insurance. 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.
* Because DBA Insurance premiums are reimbursable by the U.S. Government, it’s wise to obtain a quote for DBA Insurance prior to finalizing the contract with the Government Contracting Officer so the DBA premium amount can be included in the final price of the contract. Because some contracts are issued as a “firm fixed price,” collecting reimbursement for DBA premiums that were not included in the negotiation process may not be possible.