DEFENSE BASE ACT

1. DEFENSE BASE ACT

2. Defense Base Act Defense Base Act (DBA) • History & Purpose • Where does it apply? • Who is covered? • Zone of Special Danger • War Hazards Compensation Act

3. Defense Base Act • History & Purpose • Defense Base Act, 42 U.S.C. Section 1651, et seq enacted by Congress in August 1941 • Extends the benefits payable under Longshoreman and Harbor Workers Compensation Act, 33 U.S.C. Section 901, et seq (LHWCA) • Original goal: To provide compensation for disability and death to civilians employed at American military bases outside the Continental U.S. • Scope of Act amended (after WW II) to include public work contracts with the U.S. government for building of non-military projects outside the U.S.

4. Defense Base Act • Where does it apply? • Today DBA covers the following employment activities: • Working for private employers on U.S. Military bases or on any lands used by the U.S. for military purposes outside of the United States, including those in U.S. Territories and possessions; • Working 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 United States; • Working on contracts approved and funded by the U.S. under the Foreign Assistant Act, generally providing for cash sale of military equipment, materials, and services to its allies, if the contract is performed outside of the United States; • Working for American employers providing welfare or similar services outside of the United States for the benefit of the Armed Forces, e.g. the USO.

5. Defense Base Act • Who is covered? • Any employee engaged in employment of contracts listed above regardless of nationality. • All employees of sub-contractors and their sub-ordinate contractors of the prime contractor. • The Prime Contractor is responsible for ensuring that the subcontractor has required DBA insurance. • If the subcontractor fails to secure DBA coverage, the prime contractor will be liable for and be required to secure the payment of such benefits. • If any employer fails to secure DBA they can face fines and imprisonment. • If the employer is a corporation and fails to secure DBA, the president, secretary and treasurer shall be severally and personally liable, jointly with the corporation, for any compensation or other benefits payable under the Act for injury or death which may occur to any of its employees.

6. Defense Base Act • Zone of Special Danger • DBA will provide compensation for injury or death of an employee arising out of and in the course of employment. • Zone of Special Danger Doctrine challenges this traditional concept of causal relationship. • Zone of Special Danger – U.S. Supreme Court in 1951 defined the scope of compensability under the Defense Base Act as follows: • The test of recovery is not a causal relation between the nature of employment of the injured person and the accident. Nor is it necessary that the employee be engaged at the time of the injury in activity of benefit to his employer. All that is required is that the “obligation or condition” of employment create the “zone of special danger” out of which the injury arose.

7. Defense Base Act • Zone of Special Danger (continued) • Reasonable Recreation • Injury from certain recreational activities while off-duty may be compensable. Courts have ruled that: • Employees working under the Defense Base Act, far away from their families and friends, in remote places where there are severely limited recreational and social activities, are in different circumstances from employees working at home. Personal activities of a social or recreational nature must be considered as incident to the overseas employment relationship. • The harsher or more remote the environment, the more likely a court will find compensability. • Despite broad interpretation of the courts – not a 24-hour cover.

8. War Hazards Compensation Act (WHCA) • War Hazards Compensation Act • Enacted at the request of the Secretary of War in December 1942. • Shortly after U.S. entry in WWII – most insurance carriers were reluctant to underwrite DBA exposures for employees exposed to the hazards of war or otherwise required to work in a war setting. • WHCA’s purpose to induce insurance carriers to provide DBA coverage for employees in hostile or war-like settings. • WHCA provides full reimbursement to the insurer of all paid compensation and medical benefits (including ALE) for losses from a “war risk hazard”. Reimbursement includes 15% handling fee and complete relief of future obligations (U.S. Government take over administration of claim) and is paid from the Employees’ Compensation Fund.

9. War Hazards Compensation Act (WHCA) • War Hazards Compensation Act (continued) • WHCA provides compensation to overseas employees of contractors and certain other employees for: • Injury or death due to a “war-risk hazard” • Detention by a hostile force or person • Three requirements for WHCA reimbursement: • Injured employee’s employment must come within the WHCA provision (e.g. DBA) • Injury must have occurred from a “war risk hazard” • The carrier must not have charged its insured a premium for war risks hazards

10. War Hazards Compensation Act (WHCA) • War Hazards Compensation Act (continued) • “War Risk Hazard” defined as a hazard arising during: • A war in which the U.S. is engaged • An armed conflict in which the U.S. is engaged – whether or not war has been declared • A war or armed conflict between military forces of any origin, occurring within any country in which a covered employee is serving • The hazard arises from: • Discharge of a missile, including liquids and gas or the use of weapons, explosives, or other noxious things by a hostile force or person • Action of a hostile force or person, including rebellion or insurrection against the U.S. or any of its allies

11. War Hazards Compensation Act (WHCA) • War Hazards Compensation Act (continued) • Hostile force or person is defined as: • A nation, a subject of a foreign nation, or any person serving a foreign nation engaged in; • A war against the United States or any of its allies; • Armed conflict, whether or not war has been declared against the United States or any of its allies; or • A war or armed conflict between military forces of any origin in any country in which a person covered by the WHCA is serving. • The statutory definition of war-risk hazard does not specifically address terrorist attacks but the term has been liberally interpreted to include any and all actions of insurgents, terrorists, rioters and proponents of violence directed toward American interests. • Quote from Department of Labor: “Our procedures specifically contemplate consideration of terrorist activity as a war risk hazard. Bottom line – Terrorist activity must be considered in conjunction with the definitions of “war-risk hazard” and “hostile force or individual.”