The Defense Base Act of 1941
The DBA provides compensation to injured civilian workers or their dependents for disability or death due to an injury occurring on U.S. military bases. The Act extends to public works contracts with the government for the building of non-military projects such as dams, schools, harbors, and roads abroad. Today, almost any contract with an agency of the U.S. government for work outside of the United States, military or not, will likely require DBA coverage. Two other federal laws reflect the DBA coverage, The Nonappropriated Fund Instrumentalities Act and the War Hazards Compensation Act.
When is DBA Coverage Required?
If any one of the following criteria is met, all employees engaged in such employment, regardless of nationality, are covered under the Act:
work on any military, air, or naval base acquired after January 1, 1940, by the United States from any foreign government;
work on any lands occupied or used by the United States for military or naval purposes outside of the United States;
work on public work contracts through any U.S.
The commercialization of university research, technology, engineering, and agriculture has
increased the number of contracts originating with various branches of the U.S. government.
When the work takes place outside of the United States, institutions may have an obligation to
purchase Defense Base Act (DBA) insurance. Even if a contract does not specify this requirement,
it is important to understand when it is required. Although the Act has been in existence since
1941, there remains confusion in the higher education community about applicability of this
requirement to their respective institutional operations. This brief provides a timely overview
of the DBA, when this coverage is required, defines “public work contracts” and resultant
applicability, and reviews three other laws that may create an obligation for the institution.
government agency to be performed outside of the United States;
work on contracts approved and funded by the United States under the Foreign Assistance Act, which provides, among other things, for cash sale of military equipment, materials, and services to U.S. allies if the contract is performed outside of the United States; or
work for U.S. employers providing welfare or similar services outside of the United States for the benefit of the Armed Services (i.e., USO).
An Extension of the Longshore
Harborworkers Compensation Act
As DBA extends the provisions of the Longshore Harborworkers Compensation Act (LHWCA), employees of U.S. government contractors working overseas are assured protection of a law that is uniformly administered, providing uniform benefits, regardless of:
the state in which the employee was hired;
the state in which the employee maintained residence; and
the local law of the country in which the employee works.
LHWCA and DBA have rarely been amended. Unlike LHWCA, there is no minimum compensation rate under the DBA.
The War Hazards Compensation Act
The War Hazards Compensation Act (WHCA) provides benefits to persons injured or killed due to a war, whether it is declared or is an “armed conflict” by military forces of any origin occurring in the foreign country where the claimant is working; or to a worker who is detained or taken prison by hostile forces. It provides coverage to employees covered under the DBA and the Non-Appropriated Fund Instrumentalities Act who are working outside of the United States who would not otherwise be covered by those acts because the injuries/deaths were caused by hostile actions. In essence, it is a funding mechanism. All WHCA claims are handled by the Office of Workers’ Compensation Programs (OWCP) in Cleveland, Ohio. Any injury or death caused by “hostile action” can be the basis of a claim. The scope of persons covered is broad, but they must be civilian, nongovernment workers. The list includes, but is not limited to, employees of contractors, public welfare organizations, and military base civilian personnel.
The Nonappropriated Fund
Instrumentalities Act
Civilian employees, compensated from nonappropriated funds of the Army and Air Force Exchange Service, Army and Air Force Motion Picture Services, Navy Ship’s Stores Ashore, Navy exchanges, Marine Corps exchanges, Coast Guard exchanges, and other instrumentalities of the United States under the jurisdiction of the Armed Forces conducted for the comfort, pleasure, contentment, and mental and physical improvement of personnel of the Armed Forces shall not be held and considered as employees of the United States for the purpose of any laws administered by the Civil Service Commission or the provisions of the Federal Employees’ Compensation Act. The endorsement (NCCI form WC 00 01 08A) to a workers’ compensation policy extends coverage to workers at sites specified in the endorsement that are subject to the Nonappropriated Fund Instrumentalities
Act. The Act applies to civilian workers who provide services to the U.S. Armed Forces, such as Post Exchange (PX) services.
The LHWCA shall apply with respect to the disability or death resulting from injury.
A Requirement for Global Business
The commercialization of university research,
technology, engineering, and agriculture has increased the number of contracts originating with various branches of the U.S. government. When the work takes place outside of the United States, organizations may have an obligation to purchase DBA insurance.
DBA and Higher Education
There is a debate and much confusion in the higher education community about the applicability of DBA in higher education, largely due to the terminology “public work contracts.”
“Public work” is defined in the DBA as any fixed improvement or any project, whether or not fixed, involving construction, alteration, removal, or repair for the public use of the United States or its allies. However, public work is not limited to construction. It includes any project or operation under service contracts and projects in connection with the national defense or with war activities.
Additionally, the Department of Labor (DOL) goes a step further by mentioning that grants are not considered public works projects. Its interpretation is as follows:
Although this issue has been addressed by a court of law in only one instance, the Department of Labor has adopted a position consistent with the decision of the U.S. Court of Appeals for the Second Circuit in University of Rochester v. Hartman (Vishniac), 618 F.2d 170 (2nd Cir. 1980), that work performed pursuant to a grant is not covered under the DBA1.
In the case referenced above, a University of Rochester professor died in Antarctica while working on a NASA-funded grant. The survivors filed a claim invoking DBA before an administrative law judge in Rochester, New
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York. The judge issued an order denying the claim on the ground that, at the time of his death, the professor was not engaged in public work within the meaning of the DBA. The claimants appealed to the DOL Benefits Review Board, which rendered a decision reversing the ALJ decision. Pursuant to § 21 of the LHWCA, 33 U.S.C. § 921, the University, NASA, National Science Foundation (NSF), and the American Council on Education appealed the DOL decision in the U.S. Court of Appeals for the Second Circuit.
The Second Circuit said in its ruling:
In summary, we hold that to be compensable under the DBA, a benefit claim must stem from a contract with the United States to perform public work overseas, public work constituting government-related construction projects, work connected with the national defense, or employment under a service contract supporting either activity. This case does not involve a contract to perform such public work outside the continental United States. Rather it involves a professor who in furtherance of his ongoing basic scientific research received grants to support a brief expedition to Antarctica in order to obtain soil samples for later analysis in his laboratory back at his University home base. There is no contract within the purview of the DBA, and no activity related to a government construction project or the national defense. The Benefit Review Board erred in its construction of what constitutes “public work” and a “contract” in the context of 42 U.S.C. § 1651 et seq. We reverse its order awarding compensation, and dismiss the claimant’s benefit claim2.
However, this can be considered a “one-off decision” of the Second Circuit, and does not guarantee how other U.S. jurisdictions might interpret the applicability of DBA. At times, higher education institutions work directly on “contracts which are also known as research agreements,” so deciding whether DBA coverage applies must be done case by case.
Various insurers feel that higher education institutions require DBA, and the premium they charge is generally rated on payroll and can be significant. They also require a complete list of “contracts” with DBA exposure, which
may be challenging in instances in which the faculty is primarily working on campus, but goes for a short time to a defense base to present the results of the endeavor. The other dilemma in higher education is that there may be several individuals working on a particular government-funded research project, grant, and/or contract, with only some of them traveling to a defense base. Does this mean DBA coverage should be purchased for all, or for only a few individuals? In such cases, most higher education institutions don’t believe that DBA is warranted.
An alternative that is mentioned by DOL is to apply for a waiver, which the institution can cover under their workers’ compensation policy.
Upon the written request of the head of any department or other agency of the United States, the Secretary of Labor may waive the application of the Defense Base Act with respect to any contract, work location, or class of employees. The request for waiver must be made by the government agency to the Department of Labor (DOL), OWCP. It is Department of Labor policy that the waiver does not apply to citizens or legal residents of the U.S. or to employees hired in the U.S. Once granted, the waiver is only valid if alternative workers’ compensation benefits are provided to the waived employees pursuant to applicable local law3.
Examples of University DBA Exposures
Design and fabrication of a 5-blade cascade into an existing wind-tunnel facility and additional work, contracted for the U.S. Army, performed in Mexico.
Seed research contract with the Department of Agriculture, performed in South America.
Fan testing for the Department of Energy, performed in Taiwan and Canada.
Contract with the National Institutes of Health (NIH) to perform specific infectious disease research and associated clinical trials in various African countries.
Deliver a traffic-accident avoidance class in Malta as a subcontract to a prime contract with the U.S. Army.
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618 F.2d 170, 54 A.L.R.Fed. 877 United States Court of Appeals, Second Circuit Circa. 1980
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Assist the Beijing Transportation Research Center with technical assistance regarding traffic congestion measures.
Frequently Asked Questions
What are the consequences of not carrying Defense Base Act insurance?
Failure to obtain DBA insurance carries stiff penalties. All government contracts contain a provision that requires bidding contractors to obtain necessary insurance. Failure to do so will result in fines and possible loss of contract. The additional and most severe penalty is that employers without DBA coverage are subject to suits under common law, wherein common law defenses are waived. In other words, the claimants or their heirs need only file suit and do not have to prove negligence. Lastly, all claims may be brought in federal court and are against the insured directly. These cases can be costly, and should be a source of great concern for government contractors operating overseas. An injured worker who is covered under the DBA generally is entitled to the benefits and procedures set forth in the LHWCA, which provides that the employer must pay for the medical care required for its employee’s injury, for disability compensation payments, and for rehabilitation training. In the event of death resulting from the injury, benefits include payment for reasonable funeral expenses and compensation payments to surviving eligible dependents. Although the LHWCA does not provide for compensation for noneconomic losses, such as pain and suffering, compensation is payable regardless of whether the employer was negligent or at fault in causing a worker’s injuries.
What are single-source DBA programs?
The single-source programs are administered by third parties, which are awarded via RFP issued by the specific agency requesting a single-source program elected through a bidding process by the U.S. government.
In addition to competitive rates, the advantage of single-source programs is that an insured may not be rejected, including based on their claims experience.
Currently, CNA holds the single-source DBA
contracts for USACE/C3, DOS, and Black Operations, with Rutherfoord as administrative broker. Allied
World Assurance Company (AWAC) holds the USAID program.
Some of the disadvantages are
» a lack of claims advocacy for the insured, but Rutherfoord does participate in claims advocacy as requested and required, and
» a one-size-fits-all approach, no matter what size the institution is (e.g., no accidental death and dismemberment (AD&D) coverage extension is provided).
What is private market DBA insurance?
The vast majority of DBA coverage is underwritten in the private market.
An advantage of the non-single-source approach is that carriers can offer coverage extensions, notably for AD&D with no war risk coverage.
Underwriters will review an insured’s claims
experience, risk, territory, capacity, and other relative factors when underwriting the risk and will reward or penalize for quality of risk characteristics and loss performance.
Better claims data, loss advocacy, and loss control support typically accompany these programs, but those with poor claims records pay higher premiums or could be denied coverage with no alternative available.
Who is covered by DBA?
NOTE: The Act makes no reference to the nationality of the employee.
All U.S. citizens employed at a job location outside of the United States that is funded by government monies.
All third country nationals employed on a non-U.S. job site funded by the United States (unless a waiver is obtained—waivers are not currently available in Iraq or Afghanistan).
All local nationals employed on the government-funded job site (unless a waiver is obtained—waivers are not currently available in Iraq or Afghanistan).
All subcontractors of the prime or letting
contractor. Note: If a subcontractor does not secure coverage, responsibility lies with that of the prime or letting contractor.
For more information, please contact Marsh’s Education Practice or Marsh’s Multinational Client Service How is DBA cost computed?
The DBA premium is based on the “wages” of the employee and including such applicable items as: » additional pay for overseas assignment; » hazardous employment conditions; and » the “reasonable value of any advantage
received from the employer ” and subject to tax withholding required by the IRS (this definition is from the Dept. of Labor Longshore & Harbor Workers Division, under which DBA falls.)
USAID uses the term “employee remuneration4,” and defines it as salary plus overseas recruitment incentive and post differential.
Items such as housing allowances, education allowances, travel expenses, temporary quarters allowance, per diem, and other miscellaneous post allowances are not to be included when computing employee remuneration.
All new projects must be reported prior to deployment or the beginning of training.
An insurance policy must be arranged for each new project and correspond directly to the contract, grant, or cooperative agreement number assigned. Grants and co-ops are only accepted for coverage in the single source programs.
The project payroll is estimated and premium paid based on the premium rate. At the end of the policy year, actual payroll is audited and any additional premium paid.
Claims Reporting
Within 10 days of an incident, report it to the OWCP, and to both the insurance carrier and the DOL.
You will be asked to complete the Employers First Report of Injury Form (LS202) for the OWCP.
OWCP will file the claim on your behalf and instruct you further. For example, you will need to include current medical bills with the form.
Failure to report an incident in a timely manner (within 10 days) may result in a rejection of the claim and/or other penalties.
In closing, this paper will help institutions understand the many issues surrounding institutional operations and associated contractual requirements. The solutions outlined are intended to provide guidance in how to meet the requirements outlined, and to support the provisions of accountability in the higher education community.
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This definition is from the Dept. of Labor Longshore & Harbor Workers Division, under which DBA falls
— The Defense Base Act statute can be found at http://www.dol.gov/owcp/dlhwc/dba.htm
