For businesses contracting with the U.S. government on overseas projects, especially in high-risk or conflict areas, the Defense Base Act (DBA) requires specialized insurance. DBA insurance ensures that U.S. government contractors and subcontractors have the necessary coverage to protect employees working abroad on military, diplomatic, or humanitarian assignments.
Here are the key insurance coverages every DBA business should consider, including those for OCONUS (Outside Continental United States) defense contractors.
DBA insurance is required by law for U.S. government contractors working overseas. It provides workers’ compensation coverage for employees, including medical expenses, disability benefits, and death benefits, for injuries or fatalities that occur on the job. This insurance protects both employees and employers from financial risk associated with workplace injuries in potentially high-risk environments. DBA insurance is especially important for OCONUS contractors, as it provides a safety net in challenging locations where healthcare costs and medical evacuation may be costly.
Foreign general liability insurance offers coverage for third-party claims of bodily injury or property damage that occur due to business operations outside the U.S. For defense contractors working internationally, this insurance is crucial, as it covers liabilities that may arise on job sites, project facilities, or interactions with local communities. This coverage helps protect businesses from lawsuits and claims related to incidents on foreign soil.
For OCONUS contractors operating in regions with heightened security risks, kidnap and ransom insurance (K&R) provides essential coverage. K&R insurance offers financial and logistical support in the event of a kidnapping, extortion attempt, or illegal detention. It typically covers ransom payments, negotiations, and crisis management services, ensuring that both employees and the business have critical protection in place for high-risk assignments.
Although DBA insurance covers work-related injuries abroad, foreign voluntary workers’ compensation provides additional coverage for employees outside DBA requirements. This policy extends protection for non-DBA-related incidents and offers 24/7 coverage in some cases, allowing for added security. It also covers employees who may not be eligible for DBA insurance, such as U.S. citizens on non-DBA projects or local employees hired by the contractor.
Business interruption insurance covers loss of income and extra expenses if operations are disrupted due to unexpected events, such as natural disasters, civil unrest, or terrorism. For DBA businesses, contingent business interruption insurance can also provide coverage if a supplier, subcontractor, or other key partner suffers a similar interruption. This helps OCONUS contractors maintain financial stability when unexpected events prevent them from fulfilling their contracts.
Many defense contractors require commercial auto and aviation insurance to cover vehicles and aircraft used in overseas operations. This coverage is essential for businesses moving personnel and equipment across rugged or conflict-prone areas. It includes liability and physical damage coverage for company-owned vehicles and aircraft, providing critical protection for assets used in high-risk regions.
For defense contractors handling sensitive information and digital communications, cyber liability insurance is a must. Cyber liability insurance provides coverage for data breaches, ransomware attacks, and other cybersecurity incidents. In an era where data privacy and security are paramount, this coverage helps DBA businesses protect against the costs associated with data recovery, legal expenses, and reputation management in the event of a cyberattack.
The Defense Base Act (DBA) provides vital workers’ compensation protections for U.S. government contractors and subcontractors working on projects overseas. Mandated by federal law, the DBA, along with the Longshore and Harbor Workers’ Compensation Act (LHWCA), ensures that employees injured in the course of their work outside the U.S. have access to medical benefits, disability compensation, and death benefits. Here, we’ll explore what DBA coverage entails, insurance requirements, benefits, and claim processes, and address frequently asked questions about workers’ compensation programs and alternative workers’ compensation benefits.
The Defense Base Act, codified at 42 U.S.C. §§ 1651-54, is a federal law requiring U.S. government contractors and subcontractors working on military bases and other government-sponsored projects overseas to secure workers’ compensation for their employees. This law applies to contractors working on U.S. military bases, public works projects related to national defense, and contracts under the Foreign Assistance Act.
Under the DBA, employees injured or killed in the line of duty, even outside of working hours, receive compensation. The U.S. Department of Labor’s Office of Workers’ Compensation Programs (OWCP), through the Division of Longshore and Harbor Workers’ Compensation, oversees DBA benefits to ensure timely and accurate compensation.
The DBA applies to specific categories of overseas work, including:
Employment on U.S. Military Bases or Lands Used for Military Purposes: Contractors working on U.S. military bases abroad or lands used for military activities fall under DBA coverage.
Public Works Projects Funded by U.S. Government Agencies: Employees working on construction or service contracts related to national defense or war activities outside the U.S. are covered.
Foreign Assistance Act Contracts: Contracts approved and funded by the U.S. under this Act—primarily those related to the sale of military equipment, materials, and services to allied nations—are included.
Services Benefiting U.S. Armed Forces (e.g., USO): American employers providing welfare services to support the Armed Forces are also included in DBA coverage.
Regardless of nationality, any employee engaged in these activities is entitled to DBA protections.
To comply with the DBA, contractors and subcontractors must secure insurance coverage before commencing contract work. Insurance policies must remain active for the entire contract duration. Key requirements include:
Compulsory Coverage: Every contractor and subcontractor must secure insurance or qualify as self-insured. Under Section 32(a) of the Longshore Act, employers are required to secure payment of benefits or receive OWCP authorization for self-insurance.
Primary Insurers: Major insurance carriers providing DBA coverage include ACE-USA, AIG, and CNA. These companies are authorized to offer DBA insurance to ensure coverage for all employees.
Liability Coverage: Under Section 4(a) of the Act, contractors must be liable for disability, medical, and death benefits if employees are injured or killed during employment. If a subcontractor fails to secure coverage, the primary contractor becomes liable.
Failure to secure coverage may result in fines or imprisonment, and contractors may face lawsuits from injured employees who opt to sue for damages.
In certain cases, the U.S. Department of Labor may waive DBA requirements if a government agency requests a waiver. However, the waiver only applies to non-U.S. citizens and does not cover U.S. citizens or permanent residents. Alternative compensation benefits must be arranged under local laws if a waiver is granted.
The DBA provides several types of compensation benefits:
Disability Benefits: Injured employees may receive compensation for total or partial disabilities. Total disability benefits are calculated at two-thirds of the employee’s average weekly wage, subject to a maximum limit.
Medical Benefits: Injured employees can choose their preferred physician and receive all necessary medical treatments related to the injury.
Death Benefits: In the event of death, surviving family members (e.g., spouse, children) receive benefits. Compensation is half of the employee’s weekly wage for a spouse or one child, or two-thirds for multiple dependents. Payments may continue for life, with cost-of-living adjustments applied annually.
For non-U.S. residents or foreign workers, death and permanent disability benefits may be paid as a lump sum, calculated based on half of the future compensation’s present value.
Employers must report work-related injuries immediately and submit an Employer’s First Report of Injury (Form LS-202) within 10 days of the injury. OWCP provides a SEAPortal for electronic submissions, allowing claims to be filed easily and viewed by the appropriate district office.
Injured employees must file a written claim for benefits within one year of the injury or the last payment date. If disputes arise, OWCP claims examiners can mediate informal conferences to reach a resolution, and unresolved cases may go to the Office of Administrative Law Judges.
DBA businesses, especially OCONUS defense contractors, face unique risks that require specialized insurance coverage to protect employees, assets, and operations abroad. By securing these essential coverages, DBA contractors can ensure compliance, safeguard their workforce, and mitigate financial risks. Working with an experienced insurance provider helps tailor a comprehensive plan to meet the requirements of both the DBA and the unique challenges of operating in high-risk or remote environments.
The Defense Base Act is a federal law requiring government contractors and subcontractors to provide workers’ compensation to employees working overseas on U.S. military bases, public works projects, and Foreign Assistance Act contracts.
The DBA incorporates provisions from the Longshore and Harbor Workers’ Compensation Act (LHWCA), which governs maritime and harbor workers’ compensation. The LHWCA provides the framework for DBA benefits, except where specified otherwise.
Yes, employers who fail to secure DBA insurance may face criminal penalties, including fines up to $10,000, imprisonment for up to one year, or both. Corporate officers may also be personally liable for these penalties.
Yes, if a subcontractor does not secure DBA coverage, the primary contractor becomes liable for any benefits owed to the subcontractor’s employees.
Foreign workers or non-U.S. residents may receive commuted death benefits as a lump sum, based on half of the future compensation’s present value, determined by the OWCP district director.
When a waiver is granted, the DBA may not apply to foreign employees. In these cases, alternative workers’ compensation benefits must be provided according to local laws.
The OWCP administers the DBA, ensuring that workers’ compensation benefits are provided accurately and promptly. It also mediates claim disputes and enforces compliance with the Act.
Employers must report injuries by filing Form LS-202 with OWCP within 10 days of the incident. The preferred submission method is online via the SEAPortal.
The Defense Base Act provides a critical safety net for overseas workers, ensuring access to compensation, medical care, and support in the event of work-related injuries or fatalities. By securing DBA insurance, contractors fulfill their legal obligations while providing essential protections to employees on U.S. government projects abroad.
