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Labor Dept.'s Botched Oversight of Injured War Contractors

Civilian workers injured in war zones are routinely neglected at home.

| Thu Dec. 17, 2009 8:44 PM EST


The Labor Department has not done much better overseeing insurance carriers.

Under the Defense Base Act, it is illegal to intentionally falsify claims information. Violators face five years in prison or a $10,000 fine. Yet the government has rarely enforced the provision, according to interviews and federal records.

Insurance experts and claims attorneys said the lack of enforcement opens the door to abuse by insurance carriers. Civilian contractors have been forced to spend months, and sometimes years trying to get benefits restored after having payments cut on false grounds submitted by carriers, according to court records, injured workers and their attorneys.

Terry Marshall suffered back and hip injuries in May 2005 when he fell from the top of his truck while working for defense contractor KBR at a U.S. base in Iraq.

His hip shattered, he went through years of surgeries and rehabilitation. KBR’s workers compensation carrier, American International Group, faithfully paid Marshall’s medical bills and disability payments.

Then, this March, Marshall was surprised when AIG cut off his disability payments without warning. AIG told the Labor Dept. that Marshall had failed to attend a doctor’s appointment arranged by the firm.

The problem? AIG itself had cancelled the appointment, according to an email Marshall received from his case manager.

In an Feb. 2009 email, Terry Marshall is informed that AIG has canceled his medical appointment.

In this Mar. 24, 2009 Labor Dept. form, AIG cancels Terry Marshall's benefits, claiming that he had failed to attend the medical appointment, which they had canceled.

Marshall appealed his case to the Labor Dept., which instructed AIG to reinstate his benefits. "There would appear to be no basis for the employer/carrier to have terminated" benefits, a Labor claims examiner wrote to AIG in April.

AIG simply ignored the notice, which carries no legal weight. Marshall is now in the final stages of negotiating a settlement agreement with the carrier.

AIG "can punch in anything it wants, and the Department of Labor accepts it," said Marshall, 53, of Springville, UT. "I have to go in and prove that I’m innocent."

AIG declined to respond to questions about individual cases. But the company denied making false statements. It noted that it had never been sanctioned by the Labor Department for such a violation.

"We do not make false statements to the federal government on (Defense Base Act) claims," the company said in response to written questions. "Our claims personnel are held to the highest standard in handling claims ethically, professionally and fairly."

If true, Fred Busse, 44, has a hard time understanding AIG’s handling of his claim. Earlier this year, AIG refused to provide Busse medical and disability payments for a neck injury he suffered while riding in a truck in Iraq in 2007.

Busse "never reported this alleged injury to employer," an AIG attorney told a Labor Department judge to explain why the company was denying the claim.

Yet Busse’s employer, KBR, had sent Busse to a doctor in Kuwait to examine his neck, according to court records. And AIG had sent an investigator to Busse’s house, where Busse recounted his neck injury, records show.

Perhaps most puzzling of all, a Labor department judge explicitly noted Busse’s neck injury: Busse "injured his neck in an automobile accident," the judge wrote in a decision involving a separate injury that Busse had suffered.

More than two years after hurting his neck–diagnosed by KBR’s doctors, noted by AIG’s investigators and litigated by a federal judge—Busse finally won his case earlier this month. A Labor department judge ruled that AIG must pay for Busse’s neck treatment and disability wages, records show. "No medical evidence disputes claimant suffered a neck injury during his employment in Iraq for employer," Judge Clement Kennington wrote in his decision.

"They’re doing this to everybody," Busse said. "They’re just trying to get rid of you is what they’re doing. Period. They’re trying to dismiss you."

Gillelan, the former attorney for the Labor Department, said that Labor officials have a duty to report instances of fraud—when committed either by claimants or insurance carriers.

Over the years, however, staff has been cut back and successive Democratic and Republican administrations have emphasized "compliance assistance" over enforcement.

"They no longer have the personnel to be proactive," Gillelan said. "They can’t even be reactive."

Hallmark, the Labor official, said that today’s system depends heavily on checks and balances between workers and insurance carriers. Claimants’ attorneys and unions battle in court with insurance carriers, employers and their attorneys.

"This is an insurance-driven program. It presumes that the parties have access to the mechanisms for resolving disputes," he said.

Hallmark acknowledged, however, that Iraq and Afghanistan lack the components which help protect worker rights. There are no unions for contract employees. Nor are there many attorneys who specialize in Defense Base Act cases.

"There are limits to what we can actually do in a foreign location that’s in the middle of a war," Hallmark said.

Richard Philemon learned about the Labor department’s limits the hard way. He was driving a fuel truck for KBR in northern Iraq in October 2006 when he was hit by a roadside bomb. He jumped out of the burning truck, his face, chest and arms on fire.

"I looked like a Roman candle," Philemon said. "I was surrounded by flames."

After returning to the U.S. for initial treatment for his burns, Philemon flew back to the Philippines, his home. He repeatedly asked to be treated at Filipino medical centers. AIG adjusters told him he had to return to the U.S., but never paid for his flights, court records show.

After several trips to the U.S., Philemon decided to start treatment in the Philippines. In September 2007, he began seeing a rehabilitation specialist and a psychiatrist, who diagnosed him as suffering from post traumatic stress disorder, or PTSD. He also hired an attorney to force AIG to pay for his care in the Philippines.

Three months later, AIG cut off his disability and medical benefits. The company told the government that Philemon had "apparently abandoned medical care," according to federal records–even though Philemon was seeing doctors regularly.

Philemon spent the next year living off money from relatives as he waited for his case to wind through the system. Finally, this February, a judge ordered AIG to pay Philemon’s disability, starting from the cut off date in December 2007.

"We put our lives in danger for our military. We supply them with water, food, ammunition, housing. And yet, we’re screwed," said Philemon, an Air Force veteran. "I almost give my life for my country and I get treated like dirt?

"Something’s not right with that picture," he said.

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