Starr Companies: DBA coverage protects overseas workers, though avoiding coverage 'gaps' also critical
DBA coverage, a statutory line of insurance for corporations that receive contracts from the U.S. government to perform work abroad, is a Federal form of workers compensation coverage, according to Starr Companies' Shane McCaffrey, Profit Center Manager in charge of DBA and foreign casualty insurance for U.S. based multinationals.
Under the Defense Base Act regulations, covered employees include those who work for private employers on U.S. military bases or on any lands used by the U.S. for military purposes outside of the U.S., including those in U.S. territories and possessions excluding Guam.
For the past decade of a 30-year insurance career, McCaffrey has focused on DBA coverage. Since joining Starr in January 2012, his main task is helping to provide firms of all sizes that do work abroad for the U.S. government with a seamless solution that ties together the company's DBA product with accident & health, kidnap and ransom, claims, and medical evacuation coverage capabilities.
"From major contractors with thousands of employees on the ground to small consulting business firms, there are challenges associated with underwriting this line of business," said McCaffrey, who is located in Starr's New York City office. "Most of all, companies need to know what DBA coverage is and what it's not."
McCaffrey explained until 2001, DBA was a seldom understood, specialized coverage, but when those two military events occurred, demand for the coverage suddenly surged. He added that the compensation benefit represents a very robust and valuable product for both employers and injured workers. He also said that permanent total disability and death benefits may be payable for life, and are subject to annual cost of living adjustments. Death benefits, however, may be paid only to the surviving spouse or children, or if no surviving spouse or children exist, to dependent parents.
Despite its generous benefits, he noted, it is important to stress that DBA coverage is not a panacea for contractors when it comes to taking care of their employees overseas.
For example, McCaffrey said some employers that contract for the coverage may mistakenly believe it's a coverage that solves all problems and issues. Yet, while DBA-based benefits would transfer to a surviving spouse and/or children, today's realities can create potential gaps in coverage.
"In 2012, there are many more varied social and family relationships than existed in 1941, so employees may not be able to direct a death benefit to their desired survivors under the law," he said. Also, many of the people taking these jobs are retired military, so they are not young. They generally work under stressful conditions and have general health problems that fall outside coverage, medical conditions such as high blood pressure, diabetes and asthma.
"Those types of medical issues come into play and many are not part of DBA," McCaffrey said. "Many things may not be work related, and that is significant. DBA is a great benefit, but there are a lot of things employers need to consider."
McCaffrey said that today's U.S. military's private contractors have been transformed into a much more diverse, complex group, especially growing in areas such as aviation (pilots), technology, language translation, etc. It's no longer just about construction and security.
As a result, while DBA had been a small market with limited types of jobs in the mix, the two new war zones of the early 2000s changed the way the military operated on a large scale. In essence, many of the support functions of the military have become privatized except for core professional and combat related activities, McCaffrey said.
Of course, in recent years, with the withdrawal of troops from Iraq, the DBA market has shrunk overall from its peak a few years ago. Still, even with the market contracting, it should not recede to pre-2001 levels.
In fact, being a full-service carrier means DBA fits perfectly into the Starr Companies product mix. McCaffrey stressed the idea that contractors who are in the market or already buying DBA coverage need to look at the broad coverage picture. They should consider providing supplemental coverage, including accident & health, kidnap and ransom, and medical evacuation. Also, a strong claims services track record is especially important for those working in such potentially dangerous assignments.
Starr works with Gallagher Bassett, a leading claims organization, as its partner to facilitate a timely response to each incident. Starr's own claims account executives also monitor the claim process from start to resolution in DBA's highly regulated scenario.
"We offer a strong overlay of claim services and coverage," McCaffrey said. "Under these conditions, there is no such thing as a small claim. Naturally, there is much concern from company executives when something goes wrong in a military zone. It is critical for a carrier to communicate and make the claim process as painless and fair as possible."
McCaffrey said a "holistic" package of coverage is needed apart from DBA, to cover gaps that are obvious.
"We are well-positioned to quote accident & health, kidnap and ransom, medical evacuation and any other necessary coverage," he said. "We are a single place for contractors and their brokers to purchase these coverages. Only DBA coverage is mandatory, but the rest are critical as well."
Additionally, Starr can assist with the potential coverage gaps arising out of subcontractors. Prime contractors are liable for the DBA benefits for any subcontractors they hire, should such subcontractors fail to pay statutory claims. Starr offers programs to insure DBA business for subcontractors.
"Our philosophy is to engage insureds and their brokers, and ensure any potential gaps are avoided," McCaffrey concluded. "Many competitors either don't offer the additional coverage or are only interested in the 'safer' business. We have an appetite for DBA coverage and related business around the world, no matter where it is."
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June 27, 2012
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