The U.S. Army Corps of Engineers (USACE) DBA Insurance program officially ended September 30, 2013. Contractors with a current USACE DBA policy should take immediate action to secure replacement DBA Insurance in the open market. Below are some very important things to consider when preparing to acquire replacement DBA Insurance.
1. Review the existing USACE DBA Insurance policy and determine if all contracted work will be completed prior to the expiration date of the policy. If the work will NOT be completed prior to the expiration date, the process to secure coverage for the remaining portion of the contract should be started immediately. It is also important to request a modification to the contract from the U.S. Government entity holding the contract in order to cover any increase in DBA premium that may result from the new open market policy. As mentioned in previous posts, the rates under the USACE program were significantly lower than what are available on the open market.
2. The USACE contract can, in most cases, be added to any non-program policy that might already be in place. To determine how this option will affect premium, it will be necessary to estimate the remaining amount of payroll on the USACE contract (from October 1 to the contract expiration date) and apply the current rate per $100 of payroll from the non-program policy to that payroll amount. If the non-program premium is higher than the USACE policy premium for the same period, contact the USACE Contracting Officer to negotiate a modification to the contract. By modifying the existing contract, additional funding will be provided for the increased premium once the contract is rolled into the non-program policy.
3. Estimated payroll amounts are reported on DBA applications and are used to calculate the DBA premium. When the USACE policy and any non-program DBA Insurance policies expire, it will be necessary to provide actual payroll figures to the insurance carriers. A payroll audit will be conducted to determine the actual payroll expended by contract number versus the estimate payroll reported when the original application was completed. If payroll was overestimated and premiums for the original premium have already been reimbursed to the contractor by the U.S. Government, a refund will be due back to USACE. If payroll was underestimated, additional premium will be due.
4. For new contracts bid during the time a USACE DBA Program policy was in effect and, therefore, reflected the same rates, the rates are only valid until the expiration date of the USACE DBA policy. If the new contract bid requires work beyond the expiration date of your USACE DBA policy, it will be necessary to obtain a second DBA Insurance proposal in the open market to cover the remaining period of performance of the contract. The two premiums added together will be what needs to be incorporated in the bid to reflect the increased DBA premium.
5. For USACE contractors that don’t have a current USACE DBA policy in place, welcome to the “open market”. Since the USACE DBA Insurance program has just ended, there is a possibility that new proposals being issued in the field by USACE Contracting Officers could still have the DBA Insurance program rates and contact information associated with them erroneously. Please be sure that USACE DBA program rates are not utilized on any current or future contracts, as they will not be honored by any open market DBA Insurance underwriters, and you will end up with a hefty discrepancy in the amount of premium included in the contract versus what is actually owed for DBA coverage.
Contractors who haven’t already begun the process to replace their DBA Insurance in the open market need to get started now. See our Post title “The DBA Insurance Application Process” to get a full understanding of what will need to be submitted to a DBA agent or broker to secure a proposal. The agent/broker will need ample time to assess the contract and Statement of Work, and collect bids from insurance carriers. If a non-program DBA policy is already in place, the insurance carrier should be willing to review a completed application and Statement of Work in order to include the USACE contracts in the non-program policy.
The LATITUDE DBA Insurance program understands the complexities associated with the ending of the USACE program and the impact switching to the open market will have. If you have any questions about the points discussed in this article, please contact us—we’re here to help! We are the DBA Insurance broker for Allied World Assurance, and our team has a deep understanding of 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.