Back From Iraq, Injured War-Zone Workers Fight Insurance Giant AIG, Face Financial Ruin

But Herr said that the claims were "exceedingly complex," and blamed the 60-year-old law governing civilian contractor insurance, the Defense Base Act, for part of the delay in resolving the claims." Said Herr, "Resolution under an act that is ill-suited for its purpose makes timely conclusion that much more complicated."

The ABC News investigation found that the injured workers' cases often took months, and sometimes years, to go through the Department of Labor's administrative judicial process. Even when the judge ruled in favor of the worker, AIG did not always pay promptly.

In December of 2008, an administrative law judge ordered AIG to reinstate and pay back pay to Kevin Smith, another injured truck driver, after the insurer contested his claim and cut off his benefits for months. Smith says that AIG started sending him his disability checks after the ruling, but has still not paid the $91,000 in back pay, penalty and interest payments the DOL said it still owed him.

Smith says he has had to pay hundreds of dollars out of pocket for psychological therapy to treat his PTSD because AIG has not approved any of his psychologists.

Herr said AIG does not ordinarily comment on individual claims but stated "in this instance, we paid and are continuing to pay all medical and disability claims that are due and payable to Mr. Smith and Mr. Carlisle under this program." Herr invited the two men to have their attorneys contact AIG's chief claims officer, Charles Schader, if there was "any continuing disagreement regarding that conclusion."

Smith and Carlisle's cases also illustrate the shortcomings of the World War II-era system for handling claims of those civilian workers who say they were psychologically traumatized after experiencing IED attacks and insurgent ambushes.

Carlisle says he has suffered from depression and anxiety since returning from Iraq in 2008. As a naval veteran, he has been able to see a local Veteran Affairs psychiatrist to treat his psychological symptoms, but he says that many of the other traumatized drivers have nowhere to turn for help.

The injured truck drivers expressed frustration that officials and lawmakers in Washington have not done anything to fix the system in the months since a Congressional hearing examined the problems.

At the hearing last June, the deputy secretary of the Department of Labor called for "fundamental reform" of the law governing insurance claims by civilian contractors, the Defense Base Act, that was first enacted in 1941 and originally designed for claims from only hundreds, not thousands, of contractors.

"Tinkering around the edges is not going to work here," said Seth Harris, the number-two official in the DOL, to lawmakers on the House Government Oversight and Reform committee.

At the same hearing AIG's Schader testified that the company had done its best to handle the contractor claims under a law he described as "ill-suited" for handling the complexities of the injuries faced by today's war-zone workers. For the post-traumatic stress claims, AIG specifically recommended "interagency cooperation" between the DOL and the Department of Veterans Affairs for the diagnosis, prognosis and treatment of post-traumatic stress disorder.

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