Workers' Compensation: Two Endorsements, Two Traps

NJCRIB adopts NAFIA and OFAC sanctions endorsements for 2027, reshaping where claims are filed and paid.

On September 21, 2026, the Compensation Rating and Inspection Bureau [NJCRIB] issued Circular No. 2525, announcing Department of Banking and Insurance approval of two endorsements effective January 1, 2027: the Non-Appropriated Fund Instrumentalities Act [NAFIA] Coverage Endorsement (WC 00 01 08 A) and the New Jersey Prohibited Coverage Trade or Economic Sanctions Endorsement (WC 29 06 06).

The Circular reads like underwriting housekeeping. It is not. One endorsement moves injured workers into a federal claims system. The other gives a carrier a contractual basis to decline to pay a claim.

What the Circular Does

The NAFIA endorsement applies when coverage is required for employees subject to the Non-Appropriated Fund Instrumentalities Act, 5 U.S.C. §§ 8171-8173. It redefines "Workers' Compensation Law" to include NAFIA, treats the scheduled location as an Item 3.A state, and makes Part Two exclusion 8, the employers liability exclusion for federal compensation exposures, inapplicable to NAFIA work.

The optional sanctions endorsement adds a Section Six condition: the carrier will not provide coverage or pay any claim to the extent doing so would violate or expose it to a sanction, prohibition, or restriction under applicable law.

The NAFIA Endorsement: A Federal Claim Inside a New Jersey Policy

Nonappropriated fund instrumentalities are the exchanges, clubs, and recreation operations on military installations. The Supreme Court held in Standard Oil Co. v. Johnson, 316 U.S. 481 (1942), that post exchanges are arms of the federal government. New Jersey hosts Joint Base McGuire-Dix-Lakehurst, Picatinny Arsenal, and Naval Weapons Station Earle.

Under 5 U.S.C. § 8171, the Longshore and Harbor Workers' Compensation Act covers injury or death of a NAFIA employee inside the continental United States, and under 5 U.S.C. § 8173, that liability is exclusive, displacing state compensation and federal tort remedies. Federal regulations prescribe a comparable carrier endorsement at 20 C.F.R. § 704.451.

How it changes the claim

The forum changes. The claim belongs before a Department of Labor district director, not the Division of Workers' Compensation. In Vilanova v. United States, 851 F.2d 1 (1st Cir. 1988), a Navy club custodian who settled his compensation claim was barred from suing under the Federal Tort Claims Act.
The clock runs faster. New Jersey allows two years to file a claim petition, N.J.S.A. 34:15-51. The LHWCA generally requires a claim within one year of injury or the last payment made without an award, 33 U.S.C. § 913(a), and two years from awareness in occupational disease cases.
Third-party settlements become a minefield. In Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992), the Court held that settling for less than the compensation entitlement, without prior written approval of the employer and carrier, forfeits all future compensation and medical benefits under 33 U.S.C. § 933(g), even when no benefits were being paid.
Bad-faith remedies narrow. Atkinson v. Gates, McDonald & Co., 838 F.2d 808 (5th Cir. 1988), held state-law bad-faith claims preempted, leaving the Act's penalty and fee-shifting provisions as the worker's only leverage.
Identify the paymaster first. One installation hosts three systems: FECA for appropriated fund civil servants, the LHWCA for NAFI employees, and New Jersey law for contractors' employees.
The Sanctions Endorsement: When the Carrier Says It Cannot Pay
Treasury Depaftment's Office of Foreign Assets Control [OFAC] has addressed workers' compensation by name. OFAC FAQ 64 states that when an insurer knows a covered person is blocked, coverage of that person is blocked and the claim cannot be paid without OFAC authorization. OFAC's insurance industry FAQs, amended November 13, 2024, also assert preemption of conflicting state insurance regulation.

How it changes the claim

Blocking is not forfeiture. The claim is frozen, not extinguished, and payment runs through an OFAC license. Judges of compensation may enter awards payable upon authorization rather than dismissing claims.
The policy changes, the statute does not. The endorsement governs the insurance contract, not the Workers' Compensation Act. The employer's statutory obligation survives.
Dependency claims are the pressure point. Expect invocation where a surviving spouse, child, or parent lives in a sanctioned jurisdiction, or where payment must reach a foreign provider or bank. A blocked benefit may freeze the counsel fee.
Watch "expose us to" and "applicable law." The form reaches more than plainly prohibited payments, and it does not say United States law. Demand the sanctions program and any OFAC correspondence.

A Practice Checklist for 2027

Request the complete policy with every endorsement. Confirm the employing entity on every installation injury, and calendar the one-year LHWCA deadline beside the two-year deadline under N.J.S.A. 34:15-51. Get written approval before settling a third-party case, as Cowart requires. Make a carrier invoking WC 29 06 06 prove the sanction.

The Bottom Line

Circular No. 2525 will not generate headlines, but it will generate litigation. The NAFIA endorsement moves injured workers into a federal system with shorter deadlines and harsher forfeitures. The sanctions endorsement imports foreign-policy law into a New Jersey claim file. Read both before January 1, 2027.

Sources

1. NJCRIB, Circular No. 2525, Adoption of Two New Endorsements: WC 00 01 08 A and WC 29 06 06 (Sept. 21, 2026) (NJCRIB Bulletins and Circulars library)

2. 5 U.S.C. §§ 8171-8173, Employees of Nonappropriated Fund Instrumentalities

3. 20 C.F.R. §§ 704.401, 704.451, Nonappropriated Fund Instrumentalities Act; NFIA endorsement

4. 33 U.S.C. § 913, Filing of claims (LHWCA)

5. N.J.S.A. 34:15-51, as amended by P.L. 2001, c. 94

6. U.S. Dep't of the Treasury, OFAC, FAQ 64 (updated Nov. 13, 2024)

7. U.S. Dep't of the Treasury, OFAC, Compliance for the Insurance Industry FAQs 61-65, 68, 69, 102-104

8. U.S. Dep't of the Treasury, OFAC, Issuance of New and Amended Insurance-related Frequently Asked Questions (Nov. 13, 2024)

9. Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992)

10. Vilanova v. United States, 851 F.2d 1 (1st Cir. 1988)

11. Atkinson v. Gates, McDonald & Co., 838 F.2d 808 (5th Cir. 1988)

12. Standard Oil Co. v. Johnson, 316 U.S. 481 (1942)

Recommended Citation

Jon L. Gelman, Two Endorsements, Two Traps, Workers' Compensation, workers-compensation.blogspot.com (Sept. 22, 2026), https://workers-compensation.blogspot.com/2026/09/two-endorsements-two-traps.html.