Will I need Defense Base Act insurance for US government contracts?
A very common question from our audience is, Does my business need DBA Insurance? The answer to this question depends upon the location of the operation in which the contract takes place. For instance, if the contract work location(s) is within the United States, Defense Base Act insurance is NOT applicable. Standard state workers compensation programs will apply.
Defense Base Act insurance is required for ALL US government contracts that operate outside the United States, including Guam and Puerto Rico as territories. Defense Base Act Insurance may be waived for certain countries based on the US Department of Labor website at DOL.gov. With a waiver, a company may be granted permission to provide an alternative to DBA insurance, such as self-insurance. The waiver is determined by the US Department of Labor after an application is filed and a determination is made.
The premise for Defense Base Act insurance involving foreign operation locations outside the United States is quite simple. In general terms, it is a workers’ compensation program that is specifically designed for workers operating outside the United States since workers compensation is a state-based insurance program and will not extend benefits outside of the US.
The insurance benefits under DBA are greater than domestic workers’ compensation, provided by means of a legislative act signed in 1942 that ensures US contractor’s recovery for injury and lost wages because of injury or illness. Since state workers compensation laws and programs are not applicable outside of the United States, this program is critical to the success and safety of your employee base.
Defense Base Act insurance applies to US nationals, third-country nationals, and any local nationals that are working on the contract(s). The cost of DBA insurance is based upon the operations, country in which the work is performed, and the associated payroll. Additionally, any claims that have occurred under previous DBA insurance policies will impact the premium. There will be no difference in the rate for a US national, a third country national or local national.
Consequences of not obtaining DBA Insurance if required may include criminal charges and a fine. Furthermore, the contracting officer may view this negligence as a mark against the performance of the contract. Make sure you verify the requirements of the contract as related to insurance.