A contractor wins its first overseas government contract. It already carries workers' compensation in its home state, has carried it for years, and reasonably assumes the policy travels with its employees.
It generally does not — at least not in a way that satisfies the Defense Base Act.
Two different systems
State workers' compensation operates under state law, with state-defined benefits, state agencies, and state dispute processes. The Defense Base Act operates under federal law, administered through the U.S. Department of Labor, with its own benefit structure and claims process.
A domestic policy written to satisfy state requirements is generally not written to satisfy a federal statutory obligation for overseas work. Some policies contain limited extensions for temporary foreign travel, but those extensions are typically narrow and rarely satisfy a DBA requirement for personnel deployed on a government contract.
Why it surfaces late
The requirement usually becomes visible when the prime contractor asks for a certificate of insurance naming DBA coverage. At that point the contractor discovers the gap with a mobilization date already on the calendar — which is the expensive version of finding out.
The better sequence is to identify the requirement when reviewing the contract, before award if possible, so placement happens on a normal timeline rather than an emergency one.
What to check in your contract
- Insurance requirement clauses specifying Defense Base Act coverage
- Flow-down provisions applying requirements to subcontractors at every tier
- Certificate and evidence-of-coverage requirements
- Countries of performance and any war-hazard considerations
- Whether locally hired or third-country national staff fall within scope
The subcontractor dimension
Primes carry real exposure when subcontractors are uninsured or underinsured. Verifying coverage down the chain is not administrative box-checking; it protects the prime from inheriting an obligation it did not price.
If you are a prime, the practical step is confirming that each subcontractor holds its own DBA coverage rather than assuming your policy or the government's arrangements will absorb the gap.