Most contractors believe that their employees’ workers’ compensation policy extends to all overseas assignments. This is a misconception. Whenever an employee covered under a workers’ compensation policy steps foot onto foreign soil under a U.S. government contract, a different law applies, and, most of the time, the contractor finds out they are uninsured when a claim is filed.
Coverage for workers’ compensation and the Defense Base Act (DBA) operates within a U.S. domestic versus foreign country dichotomy, respectively. State administered workers’ compensation is applicable to work within U.S. territories. The DBA, which is a federal extension of the Longshore and Harbor Workers’ Compensation Act (LHWCA), applies to work related injuries of U.S. government contract employees working overseas. This is one of the most frequently asked questions we receive at Risk Reconnaissance LLC, and contractors are most surprised by the answer.
Understanding the Difference Between DBA and Workers’ Compensation
The jurisdictional distinction is the principal factor to consider with DBA vs. workers’ compensation. State workers’ compensation laws are applicable to employees injured within the territorial limits of the United States. The DBA is applicable to work related injuries of civilians employed on U.S. government contracts outside the United States and its territories.
When employment extends to foreign countries, the DBA law takes precedence over the state policy you have been renewing annually. A contractor with both domestic and foreign employees must have both systems in operation. State workers’ compensation covers employees working domestically. DBA insurance covers employees working on covered overseas contracts.
One policy cannot cover both situations. This gap is what a Contracting Officer, a prime contractor’s insurance compliance checklist, or an injured worker’s attorney would find. State workers’ compensation policies are written to comply with the law of the specific state and have no force of law outside the United States. They would not respond to an overseas DBA claim.
The LHWCA foundation is important because DBA benefits are calculated based on national formulas and averages as opposed to state specific schedules, and the claims process is through the Department of Labor’s Office of Workers’ Compensation Programs (OWCP), and not a state workers’ compensation board.
One detail that catches contractors off guard is that “overseas” under the DBA covers work on U.S. bases in foreign countries. Operations that feel similar to domestic installations, legally, trigger DBA coverage.
GovCon Scenarios That Trigger DBA Coverage
The DBA does not cover all overseas work. It covers certain categories of covered employment associated with U.S. government contracts, military operations, or foreign assistance programs. Understanding which contract types produce the obligation is the first step for any contractor assessing their coverage.
Work performed by private employer employees on U.S. military bases or on lands used for military purposes outside the U.S. invokes the DBA. So do public works contracts performed on foreign soil by U.S. government agencies for the prosecution of wars or for defense of the U.S.
A logistics company working at a DoD base in the Middle East, a staffing company working on a USAID project in sub Saharan Africa, or a security company working under a DoD task order in a contingency environment, all qualify as covered employment under the DBA.
DBA coverage also extends to the subcontractors of covered prime contracts. This is the detail that often catches small GovCon firms by surprise: coverage is not based on the employee’s nationality. Employees of U.S. firms working on a covered contract, as well as Third Country Nationals and host nation locals, are all covered under the DBA.
If your company is delivering a contract and hires local staff to support the work, those employees are covered, and a DBA insurance obligation is not impacted by their citizenship.
How Benefits Under the DBA Compare to Standard Workers’ Compensation Benefits
The next question, once it is determined that coverage under the DBA applies, is how payment under the DBA compares to a standard workers’ compensation payment.
DBA benefits contain a federal formula which applies uniformly to all cases. In many states, the amount provided under workers’ compensation is lower, time limitations on benefits are shorter, and obtaining needed medical care is more complicated. In most cases, the DBA benefits are more worker friendly, especially for contractors working in hostile environments.
For the injured employee, DBA offers full choice medical provider and compensatory treatment for associated costs. Many state workers’ compensation systems place restrictions on cost, treatment, or duration of treatment that DBA does not.
For an employee injured at an overseas job site, where access to treatment is difficult, this is an important distinction.
DBA provides temporary total disability at two thirds of average weekly earnings limited by the federal maximum adjusted for the cost of living. For the period of October 2025 through September 2026, this federal maximum is set at $2,082.70.
Most state workers’ compensation systems have lower caps or shorter payment periods.
For permanent total disability where the loss is considered permanent, DBA offers lifetime benefits, which is unlike most state systems.
For death benefits under DBA, if there is one dependent, then one half average weekly earnings are provided while in the case of more than one dependent, two thirds are provided, with both limited by the federal maximum.
State workers’ compensation systems have a great deal of variation regarding death benefits depending on the dependents and duration.
For workers in contingency situations, the stability of the federal death benefit structure offers a great deal of security for employees and their dependents.
What FAR 52.228-3 Requires of Contractors
DBA insurance is an obligation for contracts for services performed outside the United States. It is built into the Federal Acquisition Regulation.
Contractors are required to provide workers’ compensation type benefits to covered employees during contract performance as per FAR 52.228-3. The Contracting Officer includes this clause in contracts. It is not advisory language.
Principal contractors are required to ensure compliance of their subcontractors. Therefore, DBA insurance relates to teaming agreements and not just prime contracts.
If a subcontractor performs covered work on your overseas contract without DBA insurance, your exposure would not be eliminated.
The obligation would rest on the subcontractor.
The DBA and the War Hazards Compensation Act (WHCA) work together to provide a cost recovery remedy, and not substitute one for the other. A qualifying DBA claim enables a paying employer or insurance carrier to recover the cost from the federal government when a compensable injury resulted from a war risk hazard, hostile fire, discharge of a weapon, or detention by a hostile force.
WHCA does not eliminate the requirement for contractors to have DBA insurance.
Contractors potentially also face contract remedies such as a stop work order, withholding progress payments, a cure notice, and termination for default.
There may also be civil actions against the contractor for the non provision of DBA. Common law provides a claim to employees or their heirs to sue for contractual noncompliance, which can be a financial and legal exposure beyond the scope of the contract.
How to Avoid Missing Deadlines and Common DBA Claims Mistakes
The OWCP manages the claims process for DBA compensation claims. There are strict deadlines and particular forms that must be completed. Missing a deadline makes it much more difficult, and sometimes impossible, to correct the situation.
Key Timelines
There are three key deadlines that determine how a DBA claim may be processed:
• The work related injury must be reported to the employer by the employee within 30 days.
• An employer is required to report a lost time injury to OWCP by completing Form LS 202 within 10 days from the date of the reported injury.
• A formal claim (Form LS 203) must be completed and submitted to OWCP within 1 year from the date of injury or the last compensation payment.
How the DBA Claims Process Works
Once a claim is filed, the carrier reviews the claim and provides a decision which is either to approve or deny the claim.
If a claim is disputed, the claim will progress through the informal procedures at OWCP. If a dispute is not resolved, the matter will be heard by an Administrative Law Judge (ALJ).
The decision of the ALJ may be appealed to the Benefits Review Board and, on occasion, to federal court.
Common Mistakes That Affect DBA Claims
The mistakes that most commonly result in delays or denials of claims are:
• Missing filing deadlines
• Providing inadequate or insufficient medical documentation
• Providing records that are contradictory or do not sufficiently demonstrate a relationship between the condition and covered employment
Compared to domestic workers’ compensation claims processes, DBA claims are more complicated, both legally and procedurally.
Brokers who can navigate the DBA claims process will give contractors a competitive advantage when a claim is still up for debate. Waiting until the claim process has started is already too late.
Getting the Right Coverage Mix for Your Contract Portfolio
Contractors that perform both domestic and international work need two separate systems active at the same time: domestic workers’ compensation and overseas DBA insurance.
Contractors who are new to international work often assume one policy will take care of both, or that a domestic workers’ compensation carrier will extend coverage to an international job site without a DBA policy.
This is where the gap occurs.
Most coverage gaps happen during a transition. A task order is processed for work outside of the United States. A subcontractor is added to a task order for work performed outside the United States. A contract is executed and work is performed in a different country than previously.
Unless a contractor does a systematic review of contracts to account for these changes, employees may be performing covered work, but there may not be a DBA policy in effect, and the contractor may not be aware of this until it is too late.
I focus on the needs of government and defense contractors and assess their contract portfolio to determine which employees and work assignments may be considered covered work, and design an insurance program for both the domestic and international work performed by the contractor.
We have hands on experience in GovCon, so we evaluate task orders and subcontracts with the mindset of an auditing contractor. There is no point in explaining what a NAICS code is, deciphering what is included in a performance work statement, or analyzing a prime contractor’s insurance exhibit.
DBA insurance depends on each contractor winning an overseas contract, especially when a contractor adds a subcontractor or expands the geographic scope of a task order. Proper program design includes DBA insurance and may provide coverage as task order performance expands.
Why Reviewing DBA Coverage Before Overseas Work Begins Matters
The difference between the Defense Base Act and State Workers Compensation is the difference between insurance for your domestic contracted employees and those employees working under the auspices of a contracted effort for the U.S. government overseas.
The differences include the structures for claims and benefits, as well as the Federal Acquisition Regulations.
Make sure the coverage you have does not create a compliance issue with a Contracting Officer and does not leave an injured overseas employee without recourse.
If any part of your contract work is overseas, you must contact a broker to review your coverage. This should happen before you fulfill a contract task order, not after.