The insurance program for civilian contractors is roughly equivalent to the workers' compensation programs in which U.S. companies buy insurance to cover workplace injuries.
The high denial rate is partly due to government rules that give insurers only 14 days to decide the validity of a claim. Insurers often reject first and investigate later.
Those case-by-case investigations are usually resolved through mediation. When the two sides can't agree - as has happened in more than 1,000 cases - the dispute winds up in court. Workers win such appeals in 75 percent of cases, records show, but the process can last months or years.
Kevin Smith, 38, a truck driver from Abilene, Texas, was severely injured when his supply convoy was ambushed by insurgents outside Baghdad in 2004.
A round pierced his unarmored truck, shattering his left leg. He underwent a series of surgeries and a painful rehabilitation. Back home in Texas, he suffered nightmares and flashbacks. He awoke one night to hear the washing machine thumping and for a moment thought it was insurgent gunfire. A psychologist diagnosed him with post-traumatic stress disorder.
Months later, AIG - the insurance carrier for Smith's employer, defense contractor KBR - stopped paying Smith's medical bills, saying his recovery was complete. In November 2007, AIG also stopped disability payments to Smith, although its own hired expert had agreed that he was partially disabled.
With medical bills piling up and a wife and baby to support, Smith went back to work driving a truck, though he said he was in pain and woozy from medications.
In December 2008 - 4 1/2 years after he was injured in Iraq - an administrative law judge for the Labor Department ordered AIG to pay all Smith's medical bills and disability payments.
Judge C. Richard Avery ruled that the insurer had failed "to offer any medical evidence" supporting its position that Smith's PTSD was not caused by the convoy attack. Smith, the judge said, "has shown extraordinary effort in returning to work against the recommendations of his treating physicians and in spite of considerable physical pain." AIG has appealed. It has yet to pay Smith's outstanding medical bills.
"We don't want million-dollar bonuses. We want what we deserve. That's it," Smith said. "Anybody, anybody that goes into a war situation and does something for their country deserves some kind of honor, some kind of dignity." AIG declined to comment on individual cases. But the company defended its overall handling of war zone claims.
AIG initially said it paid 90 percent of contractors' claims without protest. Questioned about the Times-ProPublica findings, the insurer then said that "the vast majority" are paid without dispute "when the proper supporting medical evidence has been received."
