COVID-19 Insurance Questions: What Does the Defense Base Act (DBA) Cover for US Government Contractors?
Clements Worldwide has been closely following the concerns and impact of COVID-19 on our clients in the US government (USG) contracting sector. There has been no uniformity in guidance across agencies and, in many cases, a lack of any clear communication to address these issues.
Adding to these concerns is the inconsistency among Defense Base Act (DBA) insurers as to whether or not the DBA, which ensures that workers’ compensation benefits are promptly and correctly provided for covered employees, will respond when contract personnel are inevitably infected by COVID-19. For the last few weeks we have received several questions from our insureds, including:
- How is the DBA responding to COVID-19?
- Are local nationals and third country nationals (TCN) covered?
- Does the “Zone of Special Danger” apply in this circumstance?
- What are the options to extend policies or return the premium if a covered contract is suspended and the earned premium is much lower than the minimum earned premium?
- Are medical evacuations available to infected expatriates?
We discussed these concerns with insurance underwriters to get some guidance and have summarized the key take-aways below:
1. Don’t assume blanket coverage
If companies are relying on the DBA for primary medical and evacuation coverage for their deployed expatriates, this may leave them exposed as the coverage does not extend to sickness. Where the “Zone of Special Danger” provision is considered, your expats and TCNs have broader around-the-clock coverage and coverage may be extended in this circumstance. Do not forget that the DBA is, at its foundation, an extension of the US-based workers’ compensation policy and is intended to provide life, medical, disability, and evacuation benefits for work-related injuries and deaths, not sickness.
While some of the underwriters replied that each claim would be treated on a case-by-case basis, most clarified that medical quarantine and other costs would be covered if COVID-19 was contracted during the course and scope of employment. However, the onus is then on the company to provide documentation to prove this is the case and that the disease was not contracted outside of the project site or employment related activities.
If an insured person is being quarantined with no symptoms or a preventative evacuation is requested with no symptoms, these benefits will not be covered. If the policy includes local nationals, the same benefits should extend, except evacuation which is typically excluded for this class of employee. However, it will also be harder to prove that the disease was contracted during the course of employment as many in this class commute to/from the worksite.
Clements has a client that recently quarantined their entire contract workforce for 14 days because two employees exhibited symptoms of COVID-19. The insurer has asked them to complete the LS202 form but also wants specific data on any testing that may have been administered before proceeding with the claims process.
2. Existing terms and conditions may make it difficult for companies to get premium refunds
Most DBA policies have high minimum earned premiums that require most of the annual premium to be paid in advance. Companies could find themselves exposed if their contracts are canceled or suspended due to COVID-19 outbreaks, especially if they have a newly instated DBA policy.
Will there be any relief in premium refunds, especially if the government refuses to reimburse them for the full policy amount? Most underwriters we approached have not offered any guarantees of flexibility but because of our expertise and strategic relationships we expect this to change as the situation develops.
3. Evacuations will most likely continue to be complex and difficult to manage
Medical evacuation as it relates to COVID-19 should be covered, however, due to government intervention, the evacuation providers are having to abide by local government procedures. The embedded evacuation providers are serving as a supportive role in coordination and can jump in to offer assistance when needed or requested from the governments. In some cases, we have heard employees are deciding to stay in place as their home countries are experiencing larger outbreaks and feel the host country is better prepared.
One of our markets was involved with an evacuation of a covered person suspected of contracting COVID-19. The crisis response consultant was working diligently to get the individual evacuated, but the military stepped in to take over. Ultimately a company that specializes in biocontainment evacuations was used. In this case it took close coordination between the insurer, the crisis response consultant, the government, and another third-party company.
4. Ensure your contract personnel have access to the DBA provider’s 24/7 hotline
The hotline number can be found within the conditions of your policy. Most policies with an evacuation benefit require that the evacuation be coordinated through the embedded crisis response consultant so that the costs are covered by the insurance. Furthermore, insureds can seek guidance on processing claims and additional information by contacting their insurer or their broker.
Clements is working around the clock to ensure our clients fully understand their insurance coverage and are clear about any gaps in their existing portfolio. We will continue to speak with underwriters and monitor how the situation evolves over the next few months.
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How DBA Insurance Works
All U.S. government contractors and subcontractors working abroad are required to have Defense Base Act (DBA) workers’ compensation insurance to cover employees’ injury, illness, or death. But how does one acquire this type of specialized insurance?
The infographic below showcases how the DBA insurance market works. It then walks you through the process of getting the best price quote for your needs.
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