1 CNA International – US Operations 2005 DBA/USACE Review International – U.S. Operations USL&H - DBA Business December 9, 2005

2 CNA International – US Operations 2005 DBA/USACE Review DBA Definition The U.S. Government requires that U.S. and foreign national employees hired by contractors and subcontractors to work on international government contracts be protected by Defense Base Act (DBA) coverage, regardless of their assignment and/or location. The DBA is a separate act that provides Workers Compensation using the benefit level of Longshore and Harbor Workers’ Compensation Act which provides disability compensation and medical benefits to employees and death benefits to eligible survivors. DBA claims require that:  The injuries arise in the course of employment;  Medical treatment is by a licensed physician;  Medical bills and records must be submitted in support of the claim.

3 CNA International – US Operations 2005 DBA/USACE Review DBA Definition History of Act: Passed August 16, 1941 Originally intended to cover WC for persons employed at military installations outside the United states Subsequently amended over the years to provide cover for employee working outside the United States on a government contract Covers all employees regardless of nationality and includes all sub-contractors Can apply for and receive waivers for certain foreign nationals – Department of Labor has sole jurisdiction – Must provide alternate cover equal to act (no war exclusion) – Will never waive for U.S. Nationals, U.S. legal residents (green cards) or employees physically hired in the U.S. Benefits follow those of USL&H Cannot charge for War Hazard – Government self - insures Limited numbers of companies write cover Open rating Under some circumstances a special license may be required from OFAC

4 CNA International – US Operations 2005 DBA/USACE Review DBA - Background DBA claims are reported to the Dept. of Labor, but do not get reimbursed to us unless they qualify as war hazard claims. War Hazard claims are DBA claims involving injuries sustained as a result of a hostile or terrorist act. War Hazard claims are reimbursed to us by the Dept. of Labor providing we file the appropriate forms and submit the required documentation (medical bills/records). Dept. of Labor has established a special DBA War Hazard Claims office in Cleveland, OH to expedite the processing of these claims and the potential reimbursement of each submitted eligible claim.

5 CNA International – US Operations 2005 DBA/USACE Review DBA - Background War Hazards Compensation Act Passed December 2, 1942 Government self insures – Department of Labor – office in Cleveland Recoveries must follow specific requirements Maximum Medical Improvement (MMI) Death

6 CNA International – US Operations 2005 DBA/USACE Review DBA - Background Special provisions : A waiver of this cover for local and third country nationals is available upon application to the Department of Labor. Such waivers are routinely granted subject to the following: –1. No waiver is granted for U.S. citizens, no matter where hired. –2. No waiver is granted for U.S. legal residents (green card holders), no matter where hired. –3. No waiver is granted for anyone of any nationality who is physically hired in the United States. When waivers are granted, they are always subject to the proviso that the contractor provides a WC programs with benefits equal to local laws. In the case of Iraq and Afghanistan, since no local laws exist, locals are subject to DBA provisions. Since benefits are keyed to actual wages, rates for locals of these countries are usually lower than charged for U.S. citizens. There are also special provisions for handling claims involving locals and Third Country Nationals. These provisions are favorable to the insuring company and allow for special settlement procedures.

7 CNA International – US Operations 2005 DBA/USACE Review DBA – What do we look for? We require an application for each risk. We require prior experience. We require Statement of Work (SOW) on all but classified contracts. We can access WC exp. mod factor. We order D&B on U.S. contractors. If insuring a foreign based firm, we require payment in advance before binding.

8 CNA International – US Operations 2005 DBA/USACE Review Defense Base Act DEFENSE BASE ACT BEST PRACTICES All new accounts will have a completed application and a statement of work. The application should be signed by the Insured if possible/practical. If application shows that the nature of work is classified, the account should be referred to Chicago for discussion and approval. All DBA files will contain proper documentation of the logic or method used to determine the price. Where possible, all new and renewal accounts will have prior experience (loss runs) in file, including domestic loss runs and foreign if any. 3 years experience is minimum required. Interstate or intrastate modifications should be obtained. All new and renewal accounts will have comments in the account summary concerning prior loss experience including relevant domestic experience. D&B information and/or other financial information is to be obtained on all accounts and commented on the risk summary report. Formal quote letters should be specific as to operations to be covered. Referral to a specific contract by number or name is the preferred method. All expiring policies will have a voluntary audit report completed and premium adjustments done. Time frame for receipt of audit is 90 days after expiration or renewal of an account. Underwriters/assistants will request voluntary audit at the time of renewal using a specific form. Under some circumstances, a special license from OFAC may be needed.

9 CNA International – US Operations 2005 DBA/USACE Review Defense Base Act Procedures for Non-Payment Cancellations Cancellation for Non Payment Premium must be received by the date indicated on the cancellation notice or the policy will be cancelled. If the premium is received on or before the date indicated on the cancellation notice the policy will reinstated with no lapse in coverage. If the premium is received after the date indicated on the cancellation notice the policy will not be reinstated. Instead a new policy will be put into effect on the date the premium is received by the agent or broker. Repeat offenders Those insured's who are continually late with payment and receive 2 or more cancellation notices for non-payment will have to remit premium prior to the issuance of a policy. The earliest date that a policy will be put in force is the date that the premium is received by the agent or broker. Outstanding premium No policies will be issued for insured's with any outstanding premiums due

10 CNA International – US Operations 2005 DBA/USACE Review Defense Base Act Why write USL&H foreign exposure vs. domestic exposure? War Hazard related claims are reimbursable + 15% for expenses While benefit levels are similar, the actual exposure is not. Generally, USL&H exposures bring to mind heavy labor in or around shipyards and water. DBA covers all occupations, whether an office worker in Germany or a truck driver in Egypt. Not as litigious as domestic WC Generally, the incentive to return to work is greater in DBA. Many employees are at a greater wage or salary than they would be in similar occupations in the USA and they are generally anxious to return to work. Why are we comfortable? Backed by the US Gov’t.