When Looking for DBA Insurance, What Other Insurance Options Should I Consider?

If you’re arranging Defense Base Act (DBA) insurance for an overseas government contract, don’t assume it covers every insurance need connected with the work. DBA insurance provides workers’ compensation protection for covered employees, but contractors may also need to evaluate auto, general liability, workers’ compensation, foreign voluntary workers’ compensation, and special-risk coverage based on the contract and overseas operations. 

Why Doesn’t Defense Base Act Insurance Cover Every Overseas Insurance Need?

DBA insurance coverage focuses on workers’ compensation protection for employees engaged in covered overseas work. Under the Defense Base Act, covered employment can include work on U.S. military bases abroad, public work contracts, and certain U.S.-funded contracts. Coverage can apply to U.S. citizens, host-country nationals, local hires, and third-country nationals.

Contractors also need to account for subcontractors. The Department of Labor states that contractors and subcontractors must secure DBA coverage for covered work or qualify as self-insured. If a subcontractor fails to secure the required compensation, the prime contractor may be held liable.

DBA has a narrower purpose than a full international insurance program. It addresses covered employee injuries, not losses involving company vehicles, third-party claims, or many of the travel and security exposures that can arise during overseas work. One incident can also entail more than one type of loss. An accident involving a covered employee, for example, may create a workers’ compensation claim as well as property damage or third-party liability claims.

What Auto and General Liability Coverage Should Contractors Review?

Vehicles used for contract operations create liability and physical damage exposures separate from employee injury coverage. Consider a covered employee who is driving a vehicle for contract work and collides with another vehicle, injuring the employee. DBA may apply to the employee’s work-related injury, while auto liability may come into play for injuries or property damage involving others. Physical damage coverage addresses a different issue: damage to the covered vehicle itself, subject to the policy’s terms.

General liability can address third-party bodily injury and property damage exposures arising from contract operations, subject to policy terms and exclusions. For example, a claim involving damage to a customer’s property or an injury to a nonemployee at a worksite presents a different exposure from an employee injury handled through workers’ compensation.

The Federal Acquisition Regulation also requires more context than a simple checklist of required policies. Cost-reimbursement contracts ordinarily require the types of insurance identified in FAR 28.307-2, including workers’ compensation, general liability, and automobile liability. Fixed-price contracts may also carry specified insurance requirements under certain circumstances. Contractors should therefore read the solicitation, contract clauses, and insurance requirements for the specific award rather than assume the same rules apply to every project.

How Do Workers’ Compensation and Foreign Voluntary Workers’ Compensation Fit With DBA?

Workers’ compensation needs can vary across the same organization depending on where employees work and whether their assignments fall under the Defense Base Act. A contractor may have domestic staff, employees working under DBA-covered contracts, and personnel working abroad under a different arrangement, with varying coverage considerations for each group.

Workers’ Compensation

DBA does not automatically replace an organization’s other workers’ compensation insurance obligations. Domestic employees and U.S.-based operations may still require workers’ compensation coverage under applicable state law, even when other employees are covered by DBA.

The employee’s assignment affects coverage considerations. Coverage for someone working primarily from a U.S. office may differ from that of an employee deployed under a covered government contract or traveling internationally for work unrelated to that contract. Contractors should not assume that one workers’ compensation arrangement follows every employee into every assignment.

Foreign Voluntary Workers’ Compensation

Foreign voluntary workers’ compensation may be considered for certain overseas employee injury exposures not covered by the applicable U.S. state workers’ compensation or DBA arrangement. It does not automatically satisfy local workers’ compensation requirements, and it is not a substitute for DBA when DBA applies. Policy terms also vary, making the employee’s status, work location, and assignment important to the analysis.

DBA waivers are separate from the initial question of whether an employee falls under the Act. A contractor cannot grant or request a waiver on its own. Under the Department of Labor’s DBA waiver rules, the Secretary of Labor may waive DBA requirements for a contract, work location, or class of employees following a written request from the head of a U.S. department or agency. DOL policy states that waivers do not apply to U.S. citizens, legal U.S. residents, or employees hired in the United States. A waiver also requires the affected employees to receive workers’ compensation benefits under applicable local law; if no local workers’ compensation law exists, the waiver has no effect.

Absent a waiver, employees engaged in covered work can fall under DBA regardless of nationality.

What Special Risks Come With Overseas Government Contracts?

Employee travel and overseas operations can create security and political exposures beyond workplace injury. Moody’s international portfolio includes political risk, travel accident, and kidnap/ransom-related coverage, including wrongful detention, political evacuation, and hijack.

Those coverages address different problems and shouldn’t be treated as interchangeable. Travel accident coverage focuses on specified accidental injury or death exposures associated with travel. Kidnap and ransom-related policies may address defined kidnapping, detention, and crisis-response costs, while political evacuation coverage can address certain costs associated with removing personnel from a location following a covered event. What each policy covers depends on its definitions, triggers, limits, and exclusions.

When evaluating kidnap and ransom insurance and other special-risk coverage, focus on what employees will be doing, not just the country where the contract is located. A contractor sending personnel on occasional short trips may face different concerns from one maintaining a long-term project team overseas. Employee roles, travel routes, lodging, ground transportation, assignment duration, local support, emergency procedures, and contract requirements can all affect the risk assessment.

Review the Whole Contract, Not Just the DBA Requirement

Instead of starting with a list of policies to buy, start with the contract and the way the work will be performed. Compare the insurance clauses with the people, vehicles, locations, subcontractors, and travel involved in the project. That process can reveal both gaps and unnecessary overlap.

Before finalizing coverage, contractors should be able to answer questions such as:

• Who will perform the work, including subcontractors and local hires?
• Where will employees be hired, based, deployed, and required to travel?
• Who will own, lease, rent, or operate vehicles used for the contract?
• What liability, workers’ compensation, auto, and local insurance requirements appear in the contract?
• What security, transportation, medical, or evacuation arrangements are already in place?

The answers may point to auto, general liability, workers’ compensation, foreign voluntary workers’ compensation, special-risk coverage, or a combination of them. A coverage that makes sense for one overseas contract may have little relevance to another.

Contact Moody Insurance Worldwide to review DBA requirements alongside the liability, workforce, vehicle, and international risk exposures tied to your overseas government contract.

About the Author

Christopher Moody is President of Moody Insurance Worldwide, a leading independent insurance agency located just outside Washington, D.C. He has been serving clients in the insurance industry for more than 30 years. Moody Insurance Worldwide offers a wide range of insurance options, serving clients in all 50 states and overseas. Moody specializes in tailoring insurance programs to fit the unique needs of our clients because when it comes to insurance, one size does not fit all.

About Moody Insurance Worldwide

We are a specialized, independent insurance agency that provides all types of business insurance. In addition to essential Property, Liability, and Benefits insurance, we have expertise in Professional Liability, Cyber Liability, Director & Officer Liability, and International insurance coverage.