What Is Defense Base Act Insurance?

Defense Base Act insurance covers civilian employees working in foreign countries in support of the military. It's a type of workers' compensation insurance, and it applies to employees regardless of their nationality.

Learn more about Defense Base Act insurance and how it works.

What Is Defense Base Act Insurance?

Federal contractors that employ workers on military bases outside the United States or on foreign public work contracts may be subject to a federal law called the Defense Base Act (DBA).

The law requires certain contractors to insure their employees against on-the-job injuries with workers’ compensation insurance that meets Defense Base Act requirements. This insurance can be purchased through approved insurance companies, and contractors can also request approval to self-insure.

Business owners that contract with the U.S. government should be aware of the DBA because the penalties for non-compliance are severe.

How Defense Base Act Insurance Works

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 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 military bases or any lands used by the United States for military purposes outside the country: If company A employs workers at snack shops on U.S. military bases throughout the world, they’re required to have DBA insurance.
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 included.
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 also included.
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 included.

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's two-thirds of the employee’s weekly income, up to $1,030.78 per week. For the 2020–2021 year, Montana state workers’ comp law pays a maximum benefit of up to $899 per week. The DBA offers a higher maximum benefit. For this reason, DBA coverage may be more costly.

Penalties For Noncompliance

Employers face severe 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 DBA. If the employer fails to pay, the injured worker may file a claim against the company for damages. In defending itself against the claim, the employer is barred from arguing any of the following:

• Contributory negligence: This occurs when a worker's negligence contributes to their injury.
• Assumption of risk: Employers can't argue that the worker assumed the risk of injury when they took the job.
• Fellow-servant rule: They also can't defend themselves by saying the worker's injury resulted from a fellow employee's negligence.

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.

What Does Defense Base Act Insurance Cover?

DBA insurance covers the benefits typically associated with workers' compensation insurance. This includes covering medical expenses and providing disability and death benefits. Workers are covered if the incident occurs during the course of employment; it doesn't have to be during work hours.

In the event of a total disability, employees receive two-thirds of their average weekly earnings up to a maximum of $1030.78 per week. It also provides compensation for partial disabilities. Death benefits are 50% of an employee's average weekly earnings paid to one survivor or two-thirds of earnings if there are two or more survivors. Spouses and children are considered survivors.

The DBA covers foreign employees, and they may receive their payments as a lump sum rather than weekly payments.