7 minute read
FEATURE STORY
DBA TBA
By: R.D. Gibson
Long gone are the days when a subject line reads “fwd: Fwd: FWD: fwd: Fwd: FWD: <insert extremely hyperbolic CHAIN LETTER subject title here>”. Sometimes it can be easy to look past all of the emails in an inbox. Luckily, a lot of unnecessary emails get swept to the side without so much as a filter. What happens if an important email gets thrown into the junk folder because your email simply does not recognize the address?
It can definitely be easy to overlook something that lands in your regular inbox, as well. Work emails pile up, automatic payment receipts pop up, and the “You have 13 minutes until this amazing sale is over!” emails clutter our daily inboxes.
A few months ago an important email notice was sent out by Guam Contractors Association President James Martinez. In it, he shared a special notice with the GCA Membership regarding the Defense Base Act. It stated how the Board was examining the requirement for DBA insurance for all prime contractors and sub-contractors with contracts signed on or after May 6, 2020.
Up until May 5, 2020 Guam had been exempted from DBA - nearly three to four decades. Thus was the birth of a task force created in the GCA to research options for its membership. According to the special notice from Martinez, it stated, one of the potential proposals was putting out an RFP for insurance companies that carry DBA insurance to consider an umbrella rate for the membership. “Our main goal is to reinstate the waiver for Guam contractors and sub-contractors or at the very least to reduce the adverse impacts on these companies, especially the smaller businesses/contractors who are not in a financial position to absorb this (sic) additional labor cost,” stated the notice.
Additionally, the notice stated that all federal contractors are required to carry DBA insurance for all contracts negotiated and signed on and after May 6, 2020.
The Defense Base Act
The U.S. Department of Labor website1 states the Defense Base Act “is an extension of the Longshore and Harbor Workers' Compensation Act (LHWCA) which provides disability compensation and medical benefits to employees and death benefits to eligible survivors of employees of U.S. government contractors who perform work overseas.”
Moreover, the DOL website describes the the extensive coverage of the DBA, which includes the following: • “Work for private employers on U.S.military bases, or on any lands used by the U.S. military purposes outside, including its territories and possessions; • “Work on public work contracts with any U.S. government agency, including construction and service contracts in connection with national defense or with war activities outside the U.S.; • “Work on contracts approved and funded by the U.S. under the Foreign Assistance Act; • “Work for American employers providing welfare or similar services outside the United States for the benefit of the Armed Services, like the USO; and • “Any injury or death occurring to any such employee during transportation to or from the place of employment, where the employer or the U.S. provides the transportation or the cost thereof.”
John A. Martone wrote a short piece about the DBA for The American Equity Underwriters, Inc. website2. In it, he wrote that up until 2020 “The DBA had previously been waived in its entirety with regard to DBA-covered contracts and work on U.S. military bases in Guam, both for local Guamanians (who are U.S. citizens) and for third-country nationals.” However, he added, “The new waiver provides that DBA coverage is only waived for third-country nationals.”
Further Martone stated the DOL always held a policy not to waive DBA coverage for US Citizens - partly to protect construction jobs for the US Citizens here in Guam. So, now a Guam contractor would need to purchase DBA insurance to cover all of their workers.
The Breakdown
Mike Cassidy, General Manager of Cassidy’s Associated Insurers, Inc. stated, “The Defense Base Act was originally put into place by congress to provide benefits to US military contractors who were working outside of the continental US.”
Ralph Schnabel, General Manager of Transpacific Insurance Brokers contributed stating, “The DBA was originally premised upon the idea of granting larger, more far-reaching benefits to employees of the government and government contractors working in dangerous and often hostile areas or even in active warzones such as Afghanistan, a situation that does not apply to Guam. “
Cassidy pointed to the 40-year waiver Guam had, which applied to all Department of Defense projects and all classes of employees including US citizens. Cassidy stated, “essentially, the waiver waived the applicability of DBA benefits to Guam” until May 2020.
He added, “Over the years, the Act was expanded to broaden coverage to those who qualify for benefits.”
https://www.dol.gov/agencies/owcp/dlhwc/lsdba#2 https://www.amequity.com/longshore-insider/article/how-do-defense-base-act-waivers-work
Cassidy expanded by explaining the DBA benefits are provided to employees injured on ‘Public Works Contracts’ - “basically work on base”. The new waiver issued by the U.S. Department of Labor only waives benefits to third country nationals and therefore now extends coverage to US Citizens, emphasized Cassidy. "Simply put, the new waiver essentially waives DBA benefits to third party nationals or H2’s and now extends coverage to US citizens & local hires.” Moreover he continued saying, “Prior to the waiver, US citizens, local hires, & H2’s would be covered for work related injuries by their Guam workers compensation policy which pays benefits defined by Guam Public Law 80 - the same way it is done in the 50 states.”
The only obstacle now for local contractors is purchasing DBA insurance to cover their employees to work on base Cassidy explained. He elaborated on the idea how employees who are injured off base do not qualify for DBA benefits, “so a Guam contractor with work on and off base would need 2 policies.” These two policies include the Guam Public Law 80 for work outside the fence, and the DBA policy for the work done inside. Additionally, Schnabel reinforced, “This means that contractor’s insurance premiums will rise by a significant percentage as Insurance companies charge higher premiums for DBA coverage as opposed to Guam Workers Compensation coverage.”
Cassidy added further it is possible to get one policy providing both benefits and how not all work on base qualifies as “Public Works Contracts”, which may not necessarily require DBA insurance.
This waiver arrived quickly and many were caught off guard Cassidy shared. “There was no explanation as to why the USDOL issued a new waiver.” He added, “This decision was made without any input from the local community on Guam.” Cassidy stated, “no one saw it coming, and more importantly no one had contemplated the requirement in their bids.” This led many with open bids to purchase coverage for something that was suddenly thrown at them, with no opportunity to adjust pricing on bids, which were already accepted by the US Government or prime contractors.
As the industry starts seeing more and more Federal contracts come into the island, especially for the Guam Military Buildup, Cassidy says the main implication is cost for these contracts will go up. “The contractor has to pay for insurance to cover this benefit and will pass this cost through to the Government.” But, Schnabel states it wouldn’t delay the military buildup.
Cassidy stated how this insurance coverage is available on island, but nestled in a ‘niche market’. Schnabel elaborated, “Another issue is that DBA coverage is highly specialized, and few insurance companies provide this on Guam making it more difficult and costly to secure this type of coverage.” As the benefit is new and specialized to the island, Cassidy suggests dealing with a carrier whose specialization includes adjusting DBA Claims. “As an employer, it’s your responsibility to ensure that claims are handled properly for injured workers,” stated Cassidy.
Though DBA is a ‘niche market’, there are already plans to work with existing carriers, Schnabel shared. He stated Transpacific Insurance Brokers is working with carriers to secure better terms for contractors who need the coverage and having DBA insurance carriers set roots on Guam.
As the wheels have already been greased and set in motion, it truly is only forward from here. Cassidy opined the “new waiver was unnecessary as there was already a mechanism in place (Guam’s workers compensation statute) to provide benefits to injured employees doing work on Guam.” As the industry moves forward it’s important to potentially anticipate changes, as well.
The future, like most things, is uncertain. To put things in perspective, it has been nearly two years since the exemption was lifted, and it remains in effect until May 5, 2025. As the world has learned in the last two years, everything can change in an instant. However, industries around the world have also learned preparation and flexibility are key. It might be time to check the filters in our inboxes, yes, even the SPAM folder.
