What Is Defense Base Act Insurance?

For federal contractors who hire employees working overseas

Overview of the Air Mobility Command ramp at Ramstein Air Base, Germany.
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Are you a federal contractor that employs workers on U.S. military bases outside the United States or on foreign public work contracts? If so, you may be subject to a federal law called the Defense Base Act (DBA). The law requires certain U.S. contractors to insure their employees against on-the-job injuries under a federal workers’ compensation program designed for dockworkers and other maritime employees. Business owners that contract with the U.S. government should be aware of the DBA because the penalties for noncompliance are severe.

Defense Base Act Explained

The Defense Base Act (DBA) was passed in 1941, a few months before the United States entered World War II. Its initial purpose was to provide workers’ compensation benefits to civilian employees working overseas for private contractors on U.S. military bases. The DBA was later expanded to include additional groups. The law currently applies to four groups of civilian workers, whether they are U.S. citizens or foreign nationals.

  1. Private contractors on U.S. military bases or any lands used by the United States for military purposes outside the country: If company A employs workers at snack shops it operates on U.S. military bases throughout the world, they’re covered.
  2. Public work contracts with any U.S. government agency: This includes construction and service contracts in connection with national defense or with war activities outside the U.S. So if company B employs workers in connection with a bridge-building project it has undertaken in Turkey under a contract with the U.S. Army, they’re covered.
  3. Contracts approved and funded by the U.S. under the Foreign Assistance Act generally providing for the cash sale of military equipment, materials, and services to its allies, if the contract is performed outside the United States: If company C has been hired by a charity to construct a school in Sudan and hires Sudanese civilians to do the work. they’re covered. The project is funded by the U.S. Agency for International Development (USAID).
  4. For American employers providing welfare or similar services outside the U.S. for the benefit of the Armed Forces: For example, if United Service Organization (USO) employees visit U.S. military bases overseas to deliver care packages, they’re covered.

Extension of the Longshore Act

The DBA is an extension of the Longshore and Harbor Workers Compensation Act (LHWCA), a federal law that provides benefits to land-based maritime workers who are injured on the job. The LHWCA affords the same types of benefits as state workers’ comp laws, including medical care, short- and long-term disability, and rehabilitation. However, the federal program may be more generous than some state workers’ comp laws.

For example, the DBA offers compensation for total disability that is two-thirds of the employee’s weekly income, up to $1,030.78 per week. For the 2019-2020 year, Montana state workers’ comp law pays a maximum benefit of up to $819 per week. The DBA offers a higher maximum benefit. For this reason, Longshore (and DBA) coverage may be more costly.

The LHWCA is administered by the U.S. Department of Labor (DOL).

DBA Insurance Coverage

Benefits from the DBA aren't covered under the Workers’ Compensation section (Part One) of the standard NCCI workers’ comp policy. Part One limits coverage to "the benefits required by the workers’ compensation law." The definition of this term specifically excludes any federal workers’ compensation law. Lawsuits filed against an employer under the DBA are excluded under the Employers Liability section (Part Two) of the policy. Part Two specifically excludes bodily injury to any person subject to the DBA.

DBA coverage can be added to a workers comp policy via the Defense Base Act Coverage Endorsement. The endorsement covers the work or project described in the schedule (or in the policy Information Page). The location of that work or project is included as if it were listed on the Information Page as a covered state. The endorsement amends the definition of workers’ compensation law under Part One to include the DBA. It also removes the DBA exclusion under Part Two.

DBA coverage is available only from insurers designated by the DOL as authorized carriers and self-insured employers. Contractors that don't want to buy coverage can seek approval from the DOL to become an authorized DBA self-insured employer.

Penalties For Noncompliance

An employer may face serious penalties if an employee subject to the DBA is injured on the job and the employer has failed to buy the required insurance. First, the employer must pay the benefits the worker is eligible to receive under the LHWCA. If the employer fails to pay, the injured worker may file a tort claim against the company for damages. In defending itself against the claim, the employer is barred from arguing any of the following:

  • Contributory negligence, such as if the worker's own negligence contributed to his injury
  • Assumption of risk, as in the worker assumed the risk of injury when he took the job
  • Fellow-servant rule when the worker's injury resulted from the negligence of a fellow employee

Failure to provide the benefits required by the DBA constitutes a misdemeanor. An employer that's found guilty may be fined up to $10,000, imprisoned for up to a year, or both. If the employer is a corporation, its corporate officers will be liable for the fine and may be subject to imprisonment. If the corporation fails to pay the benefits, the chief officers may be personally liable for the payment.

Article Sources

  1. U.S. Department of Labor. "Division of Longshore and Harbor Workers' Compensation (DLHWC): DBA Information." Accessed Dec. 19, 2019.

  2. U.S. Department of Defense. "Acquisition Strategy for Defense Base Act Insurance." Accessed Dec. 19, 2019.

  3. Montana State Fund. "Your Workers' Compensation Benefits." Accessed Dec. 19, 2019.

  4. NCCI. "Workers Compensation and Employers Liability Policy." Accessed Dec. 19, 2019.

  5. Wisconsin Compensation Rating Bureau. "Workers Compensation and Employers Liability Insurance: Defense Base Act Coverage Endorsement." Accessed Dec. 19, 2019.