Brian S. Smith is an insurance professional with the Insurance Office of America in Atlanta, GA. He incorporates a process called “Risk Reconnaissance” which is a comprehensive method of uncovering corporate risks and insurable gaps. His work has a focus on government & defense contractors, specializing in Defense Base Act insurance. In addition to blogging, Brian hosts the Risk GovCon Podcast and is one of the founders of Atlanta GovCon.

Yes, DBA Insurance needed in Puerto Rico!  In 2017, Hurricane Maria struck the island of Puerto Rico causing significant infrastructure damage rendering everyday life-sustaining activities useless. From electrical power, freshwater availability, and communication systems, nearly everything ground to a halt. After two years, parts of Puerto Rico have yet to fully recover. The efforts to repair, replace, and maintain those activities were placed on the shoulders of a variety of U.S. Government contractors. From electrical line workers, logisticians, emergency responders, water suppliers, clean up and remediation teams, and many others that simply cannot be mentioned due to the scope of work, each required insurance coverage under the Defense Base Act. (

Sure DBA Insurance is required, but…

Push back from some government contractors on the mandate of securing DBA Insurance was immediate. Even today, others may be non-compliant under their agreed contracts to provide the necessary insurance under the Defense Base Act; a situation historically not uncommon for U.S. government contract work in Puerto Rico.  Because Puerto Rico is a U.S. Territory, many believe a similar insurance status as that of the United States. Although a U.S. Territory, Puerto Rico falls under the guidelines of the Defense Base Act as a foreign entity regarding adherence to the Act. Such misconceptions have led some U.S. Government Contractor business owners to assume insurance requirements the same as in the United States.


Video Introduction from Author, Brian S. Smith


Ignorance is bliss – Not so fast when it comes to DBA Insurance needed in Puerto Rico

Ignorance is not bliss when managing the contract with the KO if non-compliance is uncovered. Although insurance may be mistakenly purchased with the Puerto Rico plan, Defense Base Act insurance may not be backdated to ensure compliance to the start date of the contract.

From 10/1/2017 thru 9/30/2018, Puerto Rico ranks at the number 11 spot among nations covered under the Act with a total of 40 claims compared to Afghanistan (1) and Iraq (2), the number of claims is far less than the 3,920 reported from these two nations combined.

Nonetheless, the number of claims will likely rise as injuries sustained, yet not reported will add to the total. Called Incurred but not reported (IBNR) these claims will only add the aforementioned 40 claims with efforts on rebuilding still underway.

Over the past 15 years, I have discussed with many contractors, why and how DBA Insurance is needed in Puerto Rico. Some were adamantly opposed to the coverage with their Puerto Rican operations. Reasons varied, but most common was cost. Others stemmed from a lack of awareness, poor guidance, or inappropriately placed coverage of an insurance professional assuming workers’ compensation protection and compliance through the Puerto Rico state program.

From the cost perspective, insurance premiums associated with any contract must be considered during the proposal stage. Without accounting for risk costs, contract profitability may suffer. In some cases, impacting overall expenses to the point of breaking even on a contract expected to produce 5% to 10% profit.  Misplacement of insurance through the Puerto Rico state plan is another area of potential contractual non-compliance. Here, the state program is assumed a reasonable substitution by some government contractors for the Defense Base Act. However, this assumption is wrong. The benefits afforded under the Defense Base Act differ from those of the state program and considered unacceptable due to a lack of waived status by the U.S. Department of Labor.

The Defense Base Act passed in 1941 is intended to support the needs of those engaged in activities supporting the warfighter or in this case the basic life-sustaining humanitarian needs of our fellow citizens.

5 points to consider when engaging OCONUS operations, regarding DBA insurance needed in Puerto Rico:

• Read through the contract language under insurance requirements.
• If Defense Base Act Insurance is not mentioned within the insurance section, verify on the U.S. Department of Labor website for countries requiring Act compliance.
• Check with your insurance professional for DBA coverage quotes.
• Ask your insurance professional specifically for rates, not simply premium, when discussing costs to ensure proposal preparation is accurate.
• If seeking DBA insurance, review the attached application for items needed in securing a quote early in the proposal stages.


Contact your commercial insurance professional for details on the Defense Base Act insurance requirements. You may find the rates to actually be better than local workers’ compensation programs and certainly less expensive than any fine that may be imposed if not purchased and required.

Brian S. Smith is a commercial insurance broker with the Insurance Office of America in Atlanta, GA. Brian is dedicated to government & defense contractors that support the WARFIGHTER with a specialty in Defense Base Act Insurance.