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Returning War Contractors Face Second Battle, Against AIG

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Enacted by Congress as America was arming for World War II in early 1941, the Defense Base Act mandates that defense contractors purchase workers’ compensation insurance for civilian workers in overseas war zones. “When Congress set this up in the World War II era, they must have known that the insurance companies were gonna be difficult to deal with,” Pitts says.

Today, Pitts says, AIG owns about 85 percent of the policies on the contractors in Iraq and Afghanistan, and he says they have been difficult to deal with in the extreme, even if they have gotten somewhat more amenable to their clients in the last couple of years. Pitts says they are more willing to settle cases than they used to be. Before the financial crash and the subsequent taxpayer bailout of AIG, Pitts says, they took virtually every single injured claimant to court, no matter how clear-cut it was that AIG needed to pay out.

“But they are still looking for a deal, obviously,” Pitts says. “But the litigation continues.”

For its part, AIG defends its business practices. In response to our query, AIG spokesman Matthew Gallagher sent the following ­statement:

“AIG is committed to handling every claim professionally, ethically and fairly. We provide the highest level of service to our customers and claimants, which includes the prompt adjudication and payment of claims. We do not disclose information about individual claimants or cases.”

Pitts explains a typical case. “Say you are working for Fluor in Afghanistan and you get hit with a mortar shell,” he says. “If you have a significant injury, you will be sent home, but if you need to be stabilized first, you will be sent to a military hospital in Landstuhl, Germany. Then you will be sent home, and the workers’ compensation carrier [often AIG subsidiary Chartis] and the Department of Labor will be notified of your injury. After that, your employer is out of the picture, and it’s you and your insurance company. There’s usually a big lag time. AIG will have an investigator come out and get your statement, take your photo, get a medical release, collect whatever medical papers you might have.”

Pitts says that AIG would then “very often” deny the case even with all the evidence. “And then it’s up to you to come up with more evidence supporting the fact that you suffered your injury overseas, and then we will have a prima facie case, a case based truly on its face,” he says. “Once we have that, we can request an informal conference with the Department of Labor. They’ll give us recommendations in your favor.”

According to Enzweiler, that step was utterly useless. He says the DoL’s claims adjuster wrote letters in favor of his claim to AIG and several of its subsidiaries. “The letters said, ‘You have to pay Terry Enzweiler because he was hurt on the job. According to the law, according to the insurance, you owe it to him.’ And AIG gets these letters and they can just go, ‘Pfft. Go pound sand. The only person we have to listen to is an administrative law judge.’”

Which is the next step Pitts must take. “At that point, the insurance company has 14 days to either comply or we’ll be on the way to a federal administrative law judge,” he continues. “There are 48 of them around the country hearing these kind of cases. You have to wait your turn for a trial. After that, you have to wait for your decision.”

All of this takes a long time, obviously. Enzweiler says he almost lost everything. Were it not for an Illinois state homeowners’ program, the worst would have befallen his family. “Otherwise, my wife, me and two kids would have gone to a homeless shelter.”

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