"Federal law requires all U.S. government contractors and subcontractors to secure workers' compensation insurance for their employees, even if working abroad," notes Robert P. Hartwig, Ph.D., CPCU, president the Insurance Information Institute in New York. "The Defense Base Act, passed in the early 1940′s, specifically addresses this issue."

That Act takes on extra significance today, as many jobs in our current overseas conflicts have been outsourced. Civilian contractors often are taking the place of troops – building infrastructure, handling security, performing administrative tasks, and the like. While the Act protects the government from injury claims, "ultimately the cost is borne by the government," Hartwig says. "Obviously, if you are Halliburton, you factor these insurance costs into your bid."

According to the US Department of Labor, the Defense Base Act, established in 1941 and amended over the years, covers the following employment activities: