Defense Base Act: Doing Business Outside the Box

Dealing with wartime issues and associated complications is a major factor in doing business in far-flung hotspots.

As the need for and presence of U.S. government foreign-based support personnel increases, so does the need for workers’ compensation coverage for contractors involved in U.S.-funded projects. As such, the opportunity to service workers’ compensation coverage for U.S. citizens and foreign nationals who work under U.S.-funded contracts overseas in places like Iraq and Afghanistan has attracted insurers to the Defense Base Act.

A broadened scope

Originally passed by Congress in 1941, the Defense Base Act mandated workers’ compensation coverage for civilians employed at American military bases overseas. Since its inception, the scope has been broadened to protect most private-sector employees working for the U.S. government on federally funded projects in overseas locations — regardless of nationality — including host country nationals and third country nationals.

The U.S. Department of Labor, Office of Workers’ Compensation Programs, Division of Longshore and Harbor Workers’ Compensation, administers the DBA through 11 district offices located throughout the nation.

Under the Defense Base Act, insurers cover disability and medical benefits for employees injured in the course of employment and death benefits to eligible survivors of employees killed in the course of employment. Compensation for total disability is two-thirds of the employee’s average weekly earnings, up to a specified maximum. Compensation is also payable for partial loss of earnings.

Death benefits are paid at the rate of one-half of the employee’s average weekly earnings to a surviving spouse or one child, or two-thirds of average weekly earnings for two or more eligible survivors.

Zurich gets into the Act

Zurich recently implemented a DBA workers’ comp program, offering coverage for employees of federal contractors who work outside the country on military bases, overseas public works projects or similar contracts funded by the U.S. government.

Andrew MacKinnon, vice president of Zurich Global Casualty, said establishing the program involved setting up a claims team. The company hired five Dallas-based adjusters, dedicated to dealing with highly specialized claims.

MacKinnon said the program’s key element is supplying services associated with coverage. For instance, in providing coverage for security contractors in Iraq, the insurer is involved with special circumstances in paying claims to injured parties and for death claims, he said.

Dealing with wartime issues and associated complications is a major factor in doing business in far-flung hotspots. Zurich’s “special investigation firms” assist in finding and servicing appropriate beneficiaries.

While Zurich establishes a foothold in the market, MacKinnon said the insurer does not plan to expand into single source contracts — common to smaller relief organizations — until 12 to 36 months have passed. “Our major objective is to support existing Zurich customers with their DBA needs,” he said. “We are not getting into the single source right now; we are going to walk before we run, by first supporting our current global corporate customer base.”

Other expansion plans

Yet other insurers such as ESIS Inc. are expanding globally. The risk management services subsidiary of the ACE Group of Companies, launched a local claim center in Bahrain in April to support ACE’s DBA business in the Middle East. The Bahrain claim center complements ACE’s claim teams located in New Orleans and Tampa, Fla.

William House of ACE Foreign Casualty urges U.S.-based contractors of any size who are awarded a contract that is authorized, approved or financed by any U.S. government agency to “act quickly to secure DBA workers’ compensation coverage.”

According to Steven Lulewicz, of ESIS Global Claims Operations, introducing claims capabilities with the addition of an “in-country claims staff” represented a strategic expansion of claim management services.

Topics USA Claims Workers' Compensation Contractors