The 5 Myths of Defense Base Act (DBA) Insurance

After all the bid & proposal work, you finally landed a fantastic contract with the U.S. Government with operations overseas. Then you realize workers need insurance and it isn’t workers’ comp. In fact, it’s called Defense Base Act insurance. Whether you are already familiar with DBA insurance, or simply want to learn more, read on as we tackle the five myths of Defense Base Act insurance in this post of “The Reconnoiter”.

Hello, fellow GovCon Professionals. Today we are reviewing the five myths of Defense Base Act insurance. Now, before we dive in and make sure you’re subscribed to our YouTube channel with your notifications being turned on, and give us a thumbs up for this video. We want to make sure you’re aware of everything that’s going on so when the updates come through, you’ll be made aware. Okay, here we go.

Defense Base Act insurance or DBA insurance provides the equivalent of workers’ compensation for civilian contractors working on operations in overseas countries, such as Iraq, Afghanistan, Japan, Germany, many others, just to name a few. If you’re interested in a more thorough examination of DBA insurance, you can view my other videos where I dive into it with more specifics about the history and its application in today’s government contracting environment.

Now let’s get started with the five myths of DBA insurance, and what you can do to avoid common mistakes. So here we go.

1. Myth number one, the contractor says, “We don’t need it.” Well, DBA insurance is not optional. Even if the work is for just one day, say for instance, you’re going to a meeting or a conference overseas, the insurance is required. There are severe penalties for firms and contractors that are required to hold DBA insurance, but fail to do so. If it’s not purchased, you are subject to prosecution and/or the potential for imprisonment and/or a fine. If you’re part of a large corporation, the President, Vice President, Secretary and Treasurer may be held individually responsible, resulting in direct liability for those program benefits that are not provided. And if the contracting officer is aware, the contract payments may freeze or cancellation of the contract could result. And you certainly don’t want that.
2. Myth number two, contractors say, “It’s complicated and will take way too much time.” Well, not really. The application process is easy and consists of about three pages, but the key is to make sure your insurance professionals know what heck they’re talking about in the first place. If they haven’t heard of DBA insurance before, it may be time to seek out a specialists. Quotes can usually be provided in one or two days, maybe longer if the work is complex or not understood by the underwriter. I suggest, along with your application that you provide the statement of work or PWS.  Now here’s a pro tip for you, it’s not what your employees do, it’s really what they don’t do that’s important when discussing your work with an underwriter. For instance, if your contract statement of work indicates live fire exercises, but your workers have nothing to do with this portion of the contract, take the time to explain it. Once the statement of work is viewed by the underwriter and they see live fire anywhere. Chances are those insurance rates that they were originally going to provide to you are going to skyrocket. The application could be slowed down, or it could even be denied.
3. Myth number three, contractors say, “It covers everything 24 hours a day, right?” Again, no. DBA insurance doesn’t cover everything and it may not cover your workers for 24 hours a day. If your worker becomes ill while working, the treatment of the illness unless directly related to their work will not be covered. Business travel insurance will provide a stop gap measure for health related issues. Also, if your employee uses their available time off to travel to other countries or sites while overseas, for instance, they’re going to use it for RNR, DBA insurance doesn’t necessarily follow. Again, business travel accident coverage would be used and suggested here.
4. Myth number four, contractors will say, “I’m a subcontractor to a prime. I don’t need to have it.” Well, maybe. Every layer of work, prime, sub, sub must be insured under the Defense Base Act. If you’re a subcontractor without DBA insurance, the liability will fall into the lap of the prime. A careful review of the contract will spell out who is responsible for DBA insurance and verified by the prime if the subcontractor is responsible. So you got to make sure that you’ve got this insurance in place.
5. Myth number five, contractors say, “DBA insurance is only for U.S. citizens or nationals.” No. Regardless of the work in the contract, U.S. nationals, third country nationals, or even local workers of that country, DBA is required. Some countries are afforded a waiver status by the U.S. Department of Labor, and a list of those countries can be found by visiting the U.S. Department of Labor website. Unless the country has a waiver in place, all workers are to be insured under the act.

Well, there you have it. Five myths of Defense Base Act insurance. If you have any questions, be sure to contact me in the link below. Again for Risk Reconnaissance, I’m Brian Smith with the Insurance Office of America.