[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
 AFTER INJURY, THE BATTLE BEGINS: EVALUATING WORKERS' COMPENSATION FOR 
                   CIVILIAN CONTRACTORS IN WAR ZONES

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON DOMESTIC POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 18, 2009

                               __________

                           Serial No. 111-155

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri              TODD RUSSELL PLATTS, Pennsylvania
DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
JIM COOPER, Tennessee                LYNN A. WESTMORELAND, Georgia
GERALD E. CONNOLLY, Virginia         PATRICK T. McHENRY, North Carolina
MIKE QUIGLEY, Illinois               BRIAN P. BILBRAY, California
MARCY KAPTUR, Ohio                   JIM JORDAN, Ohio
ELEANOR HOLMES NORTON, District of   JEFF FLAKE, Arizona
    Columbia                         JEFF FORTENBERRY, Nebraska
PATRICK J. KENNEDY, Rhode Island     JASON CHAFFETZ, Utah
DANNY K. DAVIS, Illinois             AARON SCHOCK, Illinois
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

                    Subcommittee on Domestic Policy

                   DENNIS J. KUCINICH, Ohio, Chairman
ELIJAH E. CUMMINGS, Maryland         JIM JORDAN, Ohio
JOHN F. TIERNEY, Massachusetts       MARK E. SOUDER, Indiana
DIANE E. WATSON, California          DAN BURTON, Indiana
JIM COOPER, Tennessee                MICHAEL R. TURNER, Ohio
PATRICK J. KENNEDY, Rhode Island     JEFF FORTENBERRY, Nebraska
PETER WELCH, Vermont                 AARON SCHOCK, Illinois
BILL FOSTER, Illinois
                    Jaron R. Bourke, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 18, 2009....................................     1
Statement of:
    Harris, Seth D., Deputy Secretary, Department of Labor.......    18
    Newman, Timothy D., former civilian contractor in Iraq; Kevin 
      Smith, former civilian contractor in Iraq; John Woodson, 
      former civilian contractor in Iraq; Gary Pitts, Pitts and 
      Mills Attorneys At-Law; Major General George R. Fay, 
      executive vice president, Worldwide Property and Claim, CNA 
      Financial; and Kristian P. Moor, president, AIU Holdings, 
      Inc........................................................    39
        Fay, Major General George R..............................   129
        Moor, Kristian P.........................................   155
        Newman, Timothy D........................................    39
        Pitts, Gary..............................................   124
        Smith, Kevin.............................................    60
        Woodson, John............................................   121
Letters, statements, etc., submitted for the record by:
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    11
    Fay, Major General George R., executive vice president, 
      Worldwide Property and Claim, CNA Financial, prepared 
      statement of...............................................   131
    Harris, Seth D., Deputy Secretary, Department of Labor, 
      prepared statement of......................................    21
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio:
    Memo dated June 16, 2009.....................................   174
    Prepared statement of........................................     3
    Moor, Kristian P., president, AIU Holdings, Inc., prepared 
      statement of...............................................   156
    Newman, Timothy D., former civilian contractor in Iraq, 
      prepared statement of......................................    42
    Pitts, Gary, Pitts and Mills Attorneys At-Law, prepared 
      statement of...............................................   126
    Sanders, Hon. Bernard, a Senator in Congress from the State 
      of Vermont, prepared statement of..........................    16
    Schader, Charles R., president, Worldwide Claims, American 
      International Group, prepared statement of.................   160
    Smith, Kevin, former civilian contractor in Iraq, prepared 
      statement of...............................................    62
    Woodson, John, former civilian contractor in Iraq, prepared 
      statement of...............................................   122


 AFTER INJURY, THE BATTLE BEGINS: EVALUATING WORKERS' COMPENSATION FOR 
                   CIVILIAN CONTRACTORS IN WAR ZONES

                              ----------                              


                        THURSDAY, JUNE 18, 2009

                  House of Representatives,
                   Subcommittee on Domestic Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 6:45 p.m., in 
room 2154, Rayburn House Office Building, Hon. Dennis J. 
Kucinich (chairman of the subcommittee) presiding.
    Present: Representatives Kucinich, Cummings, Watson, and 
Jordan.
    Also present: Senator Sanders.
    Staff present: Jaron R. Bourke, staff director; Claire 
Coleman, counsel; Jean Gosa, clerk; Charisma Williams, staff 
assistant; Ron Stroman, chief of staff, full committee; Carla 
Hultberg, chief clerk, full committee; Jenny Thalheimer 
Rosenberg, press secretary, full committee; Adam Hodge, deputy 
press secretary, full committee; Jennifer Safavian, minority 
chief counsel for oversight and investigations; Dan 
Blankenburg, minority director of outreach and senior adviser; 
Adam Fromm, minority chief clerk and Member liaison; and Ashley 
Callen, minority counsel.
    Mr. Kucinich. The committee will come to order. First of 
all, I want to begin by thanking all the witnesses for their 
patience. We have had possibly an historic number of votes 
today, consecutively. We have been voting pretty much for the 
better part of 8\1/2\ hours. When there is a vote on in the 
House, it takes precedence over committee meetings.
    As important as this committee meeting is, we wanted to 
come back here to continue and not to ask you to try to make 
arrangements when many of you have already traveled a great 
distance. I have talked to many Members and since every Member 
has had a great deal of difficulty in their own schedules, we 
will have some Members who are going to be coming in and out.
    But in the interests of proceeding efficiently and getting 
to the witnesses, I am going to ask those Members who are here 
to limit their opening remarks, if they have any, to 2\1/2\ 
minutes. So without objection, opening remarks will be limited 
to 2\1/2\ minutes.
    Without objection, we will be joined by Senator Sanders. 
Welcome Senator.
    This is the Domestic Policy Subcommittee of Oversight and 
Government Reform. I am Dennis Kucinich, chairman of the 
committee. The title of today's hearing is, ``After Injury, the 
Battle Begins: Evaluating Workers' Compensation for Civilian 
Contractors in War Zones.''
    This hearing will evaluate workers' compensation insurance 
for Federal contractors working overseas under the Defense Base 
Act, a little known law passed in 1941 requiring all U.S. 
Government contractors and subcontractors to secure workers' 
compensation insurance for their employees.
    Today's hearing focuses on why the men and women who 
support our troops in Iraq and Afghanistan, many of whom are 
former members of the military who reentered the war zone based 
on a sense of patriotic duty or economic necessity, are coming 
home only to battle insurers which deny them the medical care 
and benefits that American taxpayers have paid for, and why the 
same system richly rewards the insurance carriers for doing so.
    Over 35,000 contractors have been killed or seriously 
wounded in Iraq and Afghanistan since 2002. In this 
subcommittee's investigation, we have heard story after story 
of injured workers coming home minus a limb or traumatized by 
war zone experiences seared into their psyche only to face the 
fight of their lives with their company's insurance carrier.
    AIG's record is of particular concern given the enormous 
Federal subsidies it receives. It is already well known that 
AIG awarded hundreds of millions in bonuses to top executives 
who have led the company over the abyss. What this hearing will 
establish is that the same company has refused to pay the 
prescribed benefits to injured contractors without first 
putting them through a protracted fight. CNA, which is a much 
smaller player in the Department of Defense DBA market, 
nevertheless distinguishes itself for the lengths to which it 
will go to deny injured contractors' benefits and to deny the 
existence of the phenomenon.
    This hearing will also demand to know where the Department 
of Labor has been since the start of the war to ensure injured 
workers are obtaining the benefits they deserve. The Department 
of Labor's Office of Workers Compensation Programs, which 
oversees the program, is drastically underfunded and 
understaffed. Its ability to oversee this exploding program has 
suffered as a result. But it is also clear that under the 
previous administration the Department of Labor took a hands-
off approach to overseeing the DBA program.
    We are going to look forward to hearing from Deputy 
Secretary of Labor Harris on how the Department of Labor 
intends to increase its oversight role and help improve the 
delivery of benefits to injured workers.
    I hope this hearing will serve as an impetus for the reform 
of the Defense Base Act. Now I am going to welcome and yield to 
our ranking member. I would just like to say thank you for 
being here.
    Before you arrived, Mr. Jordan, we did unanimous consent 
that all Members would have 2\1/2\ minutes, including us, in 
order to get to the witnesses. We welcomed without objection 
and under unanimous consent for Senator Sanders to join us.
    So we will go to you for 2\1/2\ minutes, Ranking Member 
Jordan from Ohio.
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

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    Mr. Jordan. Thank you, Mr. Chairman. I have a short 
statement that I will read fast.
    Thank you, Chairman Kucinich, for holding this hearing. I 
would like to especially thank the contractors who are here 
with us today for their service to our country. I look forward 
to their testimony.
    As the battlefield has evolved, contractors are 
indispensable. Without contractors in Iraq and Afghanistan our 
troops would not have the food, shelter, supplies, or 
technology necessary to complete their 21st century missions.
    Defense Base Act [DBA] insurance is statutorily mandated 
for contractors working on U.S. Government contracts overseas. 
In recent years we have seen costs increase as claims have 
increased. In a program as vast as DBA there are going to be 
failings. We need to do everything we can to correct those 
failings.
    I hope this hearing will provide us an opportunity to 
survey the DBA program as a whole. It would be preferable to 
bring all parties, the Department of Labor, the employees, the 
contractors, and the five insurance providers, to the table to 
discuss where reforms are needed. Today, however, we will hear 
from only two of the five providers and none of the employers.
    It is Congress's job to ensure the DOL has the resources 
and the statutory authority to educate contractors about DBA, 
facilitate information sharing between the contractors and the 
insurance companies, answer questions of statutory 
interpretation, adjudicate disputes in a timely manner, and 
oversee employee rehabilitation programs. I look forward to 
hearing what initiatives DOL has in place to make the DBA 
program more efficient.
    Finally, I would like to express my disappointment that the 
investigation leading up to this hearing has not been completed 
in a bipartisan manner. The Republicans on this committee were 
not included in any of the preparations or deliberations 
leading up to this hearing. Consequently, as we sit here today, 
we are not as well positioned to educate our Members about this 
topic and not in a position to pass judgment on either the 
legitimacy of the contractors' claims or the propriety of 
insurance providers' decisions. I hope we can work more closely 
together in the future.
    Again, thank you, Mr. Chairman. I look forward to the 
testimony.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Mr. Cummings for 2\1/2\ minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman. Thank you 
for holding this critically important hearing to examine 
workers' compensation for civilian contractors in war zones.
    I requested this hearing following the April 17th 
publication of an extremely troubling report by the Los Angeles 
Times in conjunction with ABC News and ProPublica that the 
health insurance claims of civilian contractors who 
participated in military operations in Iraq and Afghanistan are 
being consistently denied.
    As you know, Mr. Chairman, civilian contractors, many of 
whom are veterans themselves, are serving an increasingly 
important role in achieving our mission in Iraq and 
Afghanistan. These brave men and women were alongside our 
uniformed service members consistently displaying acts of 
heroism on behalf of the American people. Tragically, recent 
news reports indicate that our commitment to them does not 
parallel their commitment to their country. Just as there was 
public outrage over substandard conditions at the Walter Reed 
Medical Center, so too should we be appalled by the stories we 
hear today from civilian contractors who are injured on the 
battlefield and then abandoned here at home.
    As you know, Mr. Chairman, the Defense Base Act [DBA], 
requires contractors and subcontractors to purchase workers' 
compensation insurance for employees working overseas. The 
insurance purchased must cover medical care and disability 
payments for workers injured in the performance of job duties. 
It must also provide death benefits for the families of 
employees killed on the job. The cost of insurance premiums 
paid by the contracting firms are then built into the price of 
the contract between the contractor and the Federal Government.
    Right now, there are more than 31,000 current and 
continuing civilian injury claims as well as more than 1,400 
claims for death benefits. The American International Group 
[AIG], and other insurers have received some $1\1/2\ billion in 
premium payments while paying out $900 million in compensation 
and expenses. What a deal. According to the April 17th article, 
AIG is a primary insurer retained by contracting firms handling 
some 90 percent of civilian claims filed in war zones in 2007.
    I could go on but because of time, Mr. Chairman, I will 
submit my entire statement for the record.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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    Mr. Kucinich. Without objection, the gentleman's statement 
will be submitted to the record. I will submit my entire 
statement for the record as well.
    The Chair recognizes Senator Sanders from Vermont for 2\1/
2\ minutes.
    Senator Sanders. Thank you very much, Chairman Kucinich and 
Ranking Member Jordan. Thank you very much for the opportunity 
to say a few words. What we are looking at is an horrendous 
situation in two regards:
    Most importantly, men and women who have put their lives on 
the line in Iraq and Afghanistan, civilians working for private 
contractors who have been wounded, came home with the 
expectation that they would get the care and the benefits that 
they were entitled to. What we are seeing is time and time 
again large insurance companies like AIG are denying them the 
benefits that we have paid for as taxpayers. That is issue No. 
1.
    Issue No. 2 is that at a time when this country has record 
breaking deficit and an $11 trillion national debt, it is our 
obligation to make sure that taxpayers' money is well spent. I 
think any serious investigation of how money for workers' 
compensation, in terms of these private defense contractors, 
has been spent will indicate that there has been huge wartime 
profiteering. That is an abuse of taxpayers' money that is not 
acceptable.
    Clearly, under the last administration there was virtually 
no oversight in terms of the Department of Defense and the 
Department of Labor. So I think the time is long overdue for us 
to take a very hard look at the Defense Base Act and to make 
sure that all of those men and women who are hurting today get 
the care that they need. And we have to make sure that we are 
not continuing to waste billions of dollars of taxpayer money.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Bernard Sanders follows:]

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    Mr. Kucinich. Thank you very much, Senator Sanders.
    We are now going to go to our witnesses since there are no 
further comments from Members. I want to start by introducing 
the first panel. Seth Harris was sworn in as Deputy Secretary 
of Labor on May 26, 2009. You have an extensive background, 
which we will submit for the record, but in the interests of 
expediting this hearing we are going to go to your testimony.
    It is the policy, Mr. Harris, of the Committee on Oversight 
and Government Reform to swear in all witnesses before they 
testify. I ask that you would please rise and that you would 
raise your right hand.
    [Witness sworn.]
    Mr. Kucinich. Thank you. Let the record reflect that the 
witness answered in the affirmative.
    Mr. Harris, all witnesses were invited to give a 5-minute 
statement. I think it is a good idea that we try to stick to 
that. So, would you proceed with a 5-minute statement? In any 
event, your entire statement will be included in the record.
    We would like to hear from you and then we are going to 
immediately go to questions of you from the Members. Then after 
that we will go to the next panel.
    Thank you very much.

 STATEMENT OF SETH D. HARRIS, DEPUTY SECRETARY, DEPARTMENT OF 
                             LABOR

    Mr. Harris. Thank you, Mr. Chairman. Thank you, Congressman 
Jordan, Senator Sanders, Congressman Cummings, and the other 
members of the subcommittee. As the chairman said, my name is 
Seth Harris. I am the Deputy Secretary of Labor. As the Labor 
Department's Chief Operating Officer, I oversee the Office of 
Workers' Compensations Programs administration of the Defense 
Base Act. I am grateful for this opportunity to discuss the 
Department's role and responsibilities under the DBA and the 
values we bring to the discussion of how we might reform this 
important program.
    Let me begin by thanking Chairman Kucinich, Senator 
Sanders, and the other members of the Domestic Policy 
Subcommittee who played a leadership role on this issue. You 
have raised important issues about the operation of the DBA 
program and put the program on the path toward reform. Through 
your efforts and the diligent work of your staff, the issues 
are being explored and the program's problems are being brought 
to light.
    The Defense Base Act needs significant reform. The 
Department of Labor looks forward to working with you and other 
agencies of Government to diagnose honestly the problems in the 
program and to craft the right solutions to those problems.
    I would also like to take a moment to recognize and express 
my respect for the civilian contractors who will address you 
this evening and in the process represent thousands of others 
who were injured or killed while giving support to our armed 
services and civilian agencies. The Workers' Compensation 
program they relied on to care for them in their time of 
greatest need did not work as well as it should have. They 
deserve better. Now, we must build a better system for them and 
for future claimants.
    Mr. Chairman, the Department's goal is to reduce the 
consequences of work related injuries. Civilian contractors who 
work overseas in support of our military and civilian agencies 
should receive prompt and appropriate benefits to remedy the 
physical, psychological, and financial effects of injuries that 
happen in the course of their employment. Employees should know 
what benefits they may be entitled to and how to get them. 
Employers and their insurance carriers should have systems in 
place to respond to injury claims and voluntarily provide 
necessary medical benefits and monetary compensation for 
disability or death as quickly as possible. I look forward to 
working with you to build a Defense Base Act system that serves 
those values better than the system we have today.
    The Department of Labor recognizes that the DBA, under the 
extreme and evolving conditions in which it is now applied, is 
insufficient to meet the needs of its major participants. 
Written in 1941, the DBA was designed to protect a small cadre 
of American workers primarily engaged in engineering and 
construction work in Europe and the Pacific. Now, the program 
serves an enormous international work force engaged in nearly 
every imaginable type of occupation.
    They are employed by both American and foreign companies 
large and small. There are multiple layers of subcontracting. 
And to further complicate matters, contractors serve in distant 
countries with major language, culture, and infrastructure 
challenges. In many cases, they serve in war zones and face the 
persistent threat of grievous injury from new types of 
insidious attacks, sometimes with limited medical care 
availability and the added challenges of evacuation.
    The Department of Labor knows about these difficulties but 
we are trying to meet a complex 21st century challenge with a 
program from World War II. It simply isn't up to the task. 
Fundamental reform is needed. The Department has made every 
effort to implement the DBA fairly and effectively. However, it 
is my sense that even with additional resources, more modern 
technology, and redoubled effort by all concerned the 
Department's effort would be insufficient to overcome the 
systemic challenges now facing the DBA. We have already begun 
evaluating alternative approaches with the contracting 
agencies.
    The present structure of the DBA insurance program is 
characterized by severely limited competition in the insurance 
market, varying premium rates, procurement of insurance through 
widely divergent processes, and significant limitations on the 
ability to track and account for the contractors, 
subcontractors, and contract workers involved. These systemic 
problems raise serious questions about a whole range of issues.
    I have a long list of questions, Mr. Chairman, which we can 
come back to if you would like in questioning but I don't want 
to go over my time.
    The list of problems with the existing DBA program, along 
with others that are not on my list, is extensive and 
troublesome. However, the list of options to address these 
issues provides various paths to change and we believe 
improvement in the DBA program. We see four basic options with 
flexibilities within each:
    First, Congress could decide to leave the basic structure 
as is but revise specific sections of the law to clarify, 
strengthen, and reform identified weaknesses and define what is 
not clear.
    Second, Congress may decide to replace the existing system 
with an option for the contracting agencies to self insure 
their contracts instead of procuring private insurance or to 
remain in the private insurance system that currently exists.
    Third, Congress may decide that the entire Federal program 
should be self insured under one entity with no option for 
private insurance.
    Fourth, Congress may decide to simply leave the DBA statute 
as is but provide additional resources to strengthen the 
oversight, regulation, enforcement, and reporting processes.
    The most important step the Labor Department can now take 
is to work closely with this subcommittee and the contracting 
agencies to analyze these options and determine which will best 
serve the civilian contractor work force. We are committed to 
taking that step.
    Mr. Chairman, I look forward to your questions and those of 
the members of the panel.
    [The prepared statement of Mr. Harris follows:]

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    Mr. Kucinich. I thank the gentleman. We are going to now 
move to questions from Members.
    I would just ask the witness and all other witnesses who 
will come in other panels that when you are asked questions by 
Members, please answer the question directly. Be as succinct as 
you can in the interest of trying to get as much of the 
information that you have available to members of this 
committee.
    I would like to begin by talking about the Office of 
Workers' Compensation. I understand this Office has been 
underfunded for the past 8 years. But does the Department of 
Labor really maintain records showing insurance coverage with 
such advanced technology as this 3x5 card? It says here this 
form was last updated in 1976. Is this the way you keep records 
there?
    Mr. Harris. Yes, Mr. Chairman. You are right that card 
dates from the Ford administration.
    Mr. Kucinich. Is it time to upgrade the system?
    Mr. Harris. It is time to upgrade that system and we are 
going to fix that. We have a plan that we are ready to 
implement and we are going to fix that system.
    That is the card on which we receive information from the 
insurers about who they have covered. We have a long stack of 
those cards that we use to get this information.
    Mr. Kucinich. Would you agree that if you have a lot of 
claims, wouldn't it be important to the claimants to be able to 
have their data into a reliable and sophisticated data 
collection system?
    Mr. Harris. I think that is right. But let me say, that 
card isn't for claimant data. That card is for insurers' 
coverage of employers.
    Mr. Kucinich. So you are saying, you are committing that 
you are going to update it?
    Mr. Harris. We are going to fix it. Absolutely, yes.
    Mr. Kucinich. Now, I want to ask you also, your staff has 
made some disconcerting statements about the Department of 
Labor's authority to enforce DBA requirements. One staff member 
referred to the Department of Labor in these terms, that you 
are ``at best a score keeper, not really a referee.'' We know 
the difference between a score keeper an a referee. Another 
staffer said that Congress intended the DBA program to be self 
executing where DOL only sits back and watches and jumps in 
when something goes bad.
    Do these comments represent accurately the current 
administration's view about its responsibility for DBA workers' 
compensation insurance?
    Mr. Harris. No.
    Mr. Kucinich. Will you change DOL's policy and culture so 
that the Department of Labor exercises more authority?
    Mr. Harris. Well, the statute defines the scope of our 
authority. The descriptions that you just repeated from members 
of my staff, and I would be curious to know who they are, by 
the way, I don't think accurately capture what our statutory 
role is.
    Mr. Kucinich. But the Department of Labor has a poor record 
of overseeing DBA insurance. That is a legacy you do not want 
to repeat, I take it?
    Mr. Harris. Well, I don't want us to do a poor job. That is 
certainly true, Mr. Chairman.
    Mr. Kucinich. Are you going to assure this subcommittee 
that you are going to conduct a top to bottom review of the 
Department's of Labor role in administering the DBA insurance?
    Mr. Harris. Well, I think the most productive thing we can 
do, Mr. Chairman, is to work with you to fundamentally change 
the program. I think that there are a lot of administrative 
reforms we could make and we should do those. But let me say, 
the program is not designed for the circumstances that we are 
in right now. What we need is fundamental reform.
    I think more resources, better technology, better systems 
might improve the circumstances somewhat. But let me say, for 
the folks who are going to be testifying on your next panel, I 
am not sure any of those processes would have changed the 
outcome in their particular cases. It is the system that we 
have, a system that depends upon private insurance, that is an 
adversarial system, like many workers' compensation systems, 
unfortunately, and a system that results too often in 
adjudication that takes months and months and months and 
months.
    Mr. Kucinich. But it is true if you are working with old 
technology, that can slow down claims. If you have insurance 
companies that don't want to pay the claims and a technology 
that slows down the claims, you are going to have frustration 
in the first case of people not getting their case in front 
quickly enough and in the second case of just the insurers not 
wanting to pay. That is the concern that we have.
    Mr. Harris. Well, I share the concern that the 
technological problems or the systems that we are currently 
using result in some delay. But let me say, I don't think that 
is where the bulk of the delay in this system comes in. It is 
when you end up in an adversarial relationship between the 
insurer and the claimant.
    Mr. Kucinich. Let me talk about that, if I may, because my 
time is running out to ask you questions. What are the 
limitations in the DBA that prevent the Department of Labor 
from playing an active watchdog role?
    The act specifically states that the Department of Labor 
may ``provide persons covered by this act with legal assistance 
in processing a claim.'' On DOL's Web site it states, 
``Department of Labor administers the Defense Base Act ensuring 
that workers' compensation benefits are provided for covered 
employees promptly and correctly.'' Please, if you could 
respond briefly?
    Mr. Harris. Yes. The role of the Labor Department is to 
process these claims; when there are disputes to mediate 
between the insurer and the claimant; to cajole, pressure, beg, 
or beat about the head and neck the insurers who are denying 
claims; and to get to settlement as quickly as possible.
    We are not, however, an arbitrator or a judge. There is an 
adjudicative process that follows. When the Office of Workers' 
Compensation Programs advocates on behalf of a claimant and the 
insurer still refuses to pay, we end up with a referral into 
adjudication. That is where I think the delays come in.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
the Minority Leader, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman. Mr. Harris, did I get 
that right when the chairman introduced you that you have been 
on the job 3 weeks?
    Mr. Harris. It seems a lot longer but yes. It has been 
about 3 weeks.
    Mr. Jordan. Well, Mr. Chairman, some of the line of your 
questioning I think was right on target. This is the second 
hearing I think we have had in 6 weeks which dealt with a 
program at the Department of Labor. Nothing against Mr. Harris, 
but he has been on the job 3 weeks. I think 6 weeks ago when we 
had the hearing on the H-2B Program we had no one from the 
Department of Labor here to talk about what was going on there 
and the lack of oversight that they had there. This is serious.
    Mr. Harris, in your testimony you talked about four 
approaches that would help improve this entire operation. I 
just jotted them down because I didn't have your testimony 
directly in front of me. You said one was to kind of define, 
clarify, refine how the current system works. I think the other 
one you said was to allow employers to self insure. The third 
option was to have the entire system in some kind of self 
insurance. Then the fourth one was more dollars. More resources 
I think was your term. Walk me through those real quickly. 
Which do you advocate and which do you think makes the most 
sense? Give me your thoughts on those.
    Mr. Harris. I thank you for that question. Let me just, if 
I could, modify your description of the second option a little 
bit. It would be the contracting agencies that would have the 
option of self insuring rather than employers. There is some 
self insurance by employers here that are not insured.
    Each of these options serves different purposes and 
accomplishes different results. So the question is what 
problems are we most interested in trying to solve. If the 
principal problem that we are trying to solve is that this is 
an insurance market that doesn't have enough participants, a 
uniform self insurance system might well be the way to go.
    But we need to engage with the contracting agencies. The 
Department of Defense is going to come forward with a report in 
July. We need to engage with them to try and winnow down these 
four. But I think that what we are trying to suggest to the 
committee is that these are four options with variations within 
each of them that I think that the committee should be thinking 
about as it considers legislation.
    Mr. Jordan. But the question, I guess, is which one do you 
advocate?
    Mr. Harris. We are not advocating for any of the four just 
yet. We need to engage the contracting agencies before we are 
prepared to do that.
    Mr. Jordan. The study is coming back when, next month?
    Mr. Harris. My understanding is that the Defense Department 
is going to be reporting on July 13th about this program and 
about the scope of contracting.
    Mr. Jordan. We will look forward to that study. When the 
United States first went into Iraq and Afghanistan, many of the 
defense contractors, especially subcontractors, were unaware of 
the requirement to get the DBA insurance. What is the 
Department doing now to make sure they are aware of that 
requirement?
    Mr. Harris. We are working with the contracting agencies. 
Let me just say, the Defense Department, the State Department, 
and USAID are right now working on trying to develop a 
comprehensive data base of contractors. One of the problems 
that we have had is that we don't know who all the contractors, 
subcontractors, and sub-subcontractors are. All of them are 
supposed to be insured. So we are working with them in trying 
to develop that data base.
    But we are also working with them to try and get 
information out to the contractors and subcontractors. That is 
a very, very difficult task because often you have foreign 
subcontractors working for American contracting companies. 
Frankly, that has been one of the biggest challenges. There are 
contractors in this system that are not insured.
    Mr. Jordan. But I assume there is some kind of formal 
education process that takes place on the front end. How does 
it work?
    Mr. Harris. That is a fair question. I am afraid I am not 
going to be able to give you an answer that I don't know. I 
will be able to get you more information about that, but I 
can't describe the way in which we educate contractors as they 
enter the system. But my staff will get you some more 
information about that.
    Mr. Jordan. Let me do a related question, then. DynCorp 
created what they refer to as the Civilian Police Employee 
Assistance Program which informs employees about preparations 
they need to make prior to going to Iraq and Afghanistan. Then, 
in the event of injury, CPEAP officials act as an intermediary 
between the insurance company and the employee. Is this a good 
idea, this kind of an approach? Do you think it is a good idea?
    Mr. Harris. Where the employer provides an intermediary 
with the insurer? I don't know. I am not familiar with that 
program so I don't know how well it works. I think anything 
that gets insurers to respond more quickly and gets those 
benefits paid, the compensation and the medical benefits paid 
more quickly is a good idea.
    But let me just say, I think that sort of tinkering around 
the edges is not going to work here. I think that we need to 
really look at fundamentally changing this program. The system 
is certainly not geared for the number of contractors that we 
have right now. When this program was created we were talking 
in the numbers of hundreds. Now we are talking in the 
thousands, 15,000 I believe in the last fiscal year. That is a 
lot of claims for a system that is not built to manage that 
quantity of claims. So individual programs here and there may 
benefit but as I said before, I think we need to look at 
fundamental reform.
    Mr. Jordan. Thank you, Mr. Chairman. Thank you.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Mr. Cummings of Maryland.
    Mr. Cummings. Mr. Harris, let me ask you this: You said 
there was limited competition. In other words, there were 
limited numbers of insurance companies doing this?
    Mr. Harris. That is true. My understanding is that the 
three large insurance companies have about 90 percent of this 
market: AIG, CNA, and ACE. I believe that AIG has 80 percent of 
the Defense market. That is not very much competition. I 
believe the State Department has a sole source relationship 
with CNA.
    Mr. Cummings. OK. All right, let me tell you where I am 
going. Let me guide you to where I want you to go. They can't 
lose with these contracts, can they? They cannot lose. As I 
understand it, the way this DBA is structured, they cannot 
lose. In other words, insurance companies cannot lose. Am I 
right? They are going to get paid the big time.
    Mr. Harris. I think that is right.
    Mr. Cummings. Then why is there limited competition? I 
don't understand that. Corporations usually operate based on 
profit. You are telling me that three companies, they cannot 
lose. So why is there limited competition? I am not knocking 
you; I am just curious.
    Mr. Harris. I think that is an excellent question. I am not 
sure I am the right person to answer it. We were actually 
talking about this earlier today in preparation for the 
hearing. I think one part of it is that the barriers to entry 
into the market are pretty high. For example, AIG has a very 
extensive system of offices, and Arabic speaking folks in 
Kuwait and I believe in Iraq. In order to get started up in 
this market and to be able to compete in the market, I think it 
would cost a lot of money to get in. That may well be it. But I 
don't want to represent myself as an insurance market expert.
    Mr. Cummings. I understand, but you are going to have to do 
that. You are going to have to become an expert because you are 
sitting here telling us that you believe that reform is 
necessary. I do appreciate you saying that. Thank you for 
coming in here and not trying to snow us. But this is the key: 
If we are going to change this system, we need to change it 
soon.
    In a few minutes some people are going to come up here and 
they are going to talk about their personal tragedies. The one 
thing that Chairman Kucinich will tell you is that one of the 
things that we try to do is get Government to work for the 
people. A commitment made is a commitment that has to be kept. 
It is part of our responsibility, when you come in here and 
tell us that something is wrong and needs to be corrected and 
then after you testify people who are victims of the system 
come up and tell us how they have been victimized, then if it 
is not changed we become a part of the conspiracy of failure 
and mediocrity.
    So now the question becomes what is the timetable on all of 
these changes that you are talking about? You have been kind 
enough to come in here and tell us that things are wrong. But 
words don't put one dime in the pockets of these people who 
have suffered, whose families have suffered, and whose 
surviving loved ones are suffering. Can you give us some 
timetables so we are not doing this same thing next year at 
this time?
    Mr. Harris. Well, let me say that I agree with everything 
you just said. I hope that we are not here next year talking 
about this. I hope we are here next year talking about how to 
implement a new program.
    Mr. Cummings. The urgency of now.
    Mr. Harris. I agree with you completely. But let me also 
say the timing is up to you. Congress needs to reform this 
program. The Labor Department can't do it. There are changes 
that we can make but the fundamental reform that is needed is 
up to you.
    Mr. Cummings. Good. So, you are the one who is in the 
Department. What do you think would be the most effective way 
for us to address what you have already seen in the Department? 
Will we have the support, if we do what you suggest, of this 
administration? After all, the President is probably going to 
have to sign whatever we do.
    Mr. Harris. I don't want to represent that the President is 
going to sign whatever you do. But we need to have more 
discussion with the contracting agencies. We are dedicated to 
doing that quickly. We are going to get this report from the 
Defense Department next month. Congress dictated that they do 
it and they are doing it. Then we are going to hopefully come 
to you with a proposal.
    I have tried to give you four ideas that you can begin 
working on immediately to try and assess how they match up with 
solving the problems that exist in this program. So I think we 
should get started with that discussion right away about how to 
get to a bill. But I must say, because we need to have some 
more discussion within the administration about which of these 
choices we want you to make, I want you to go ahead and get 
started.
    We are going to come to you hopefully with an answer soon. 
But I can't tell you exactly when that is going to happen. 
Hopefully soon.
    Mr. Cummings. Do you think this profit margin of 40 percent 
is reasonable or do you think that is a bit high?
    Mr. Harris. I am not an insurance regulator so I am not 
really in a position to say.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Senator Sanders.
    Senator Sanders. Thank you, Mr. Chairman. As I understand 
it, and you tell me if I am wrong, somewhere between 80 and 90 
percent of the business that KBR let out for insurance seemed 
to go to AIG. Does that sound right to you?
    Mr. Harris. I don't know the specifics of KBR's business. I 
was speaking with Congressman Cummings about the market as a 
whole and the Defense Department market. But I can't speak to 
KBR.
    Senator Sanders. That is my understanding, that the 
overwhelming amount of business from KBR went to AIG. Picking 
up on Mr. Cummings's point, above and beyond the terrible 
treatment that people who have put their lives on the line to 
defend this country have received, it does seem to me at least 
a little bit strange that workers' compensation companies 
providing insurance in Iraq and Afghanistan have made 
underwriting profits of $600 million on some $1\1/2\ billion in 
premiums. I don't think you have to be an insurance expert to 
suggest that may be war profiteering. Does that sound right to 
you?
    Mr. Harris. It sounds like a lot of money to me. Again, 
just getting back to the Labor Department's role here, we are 
not insurance regulators. That is not our role in this system. 
Congress didn't give us that authority, so I am just not in a 
position to say.
    Senator Sanders. We are playing with American taxpayers' 
dollars that in this case go from the taxpayers to the DOD, go 
from the DOD to KBR, and go from KBR to AIG. What I think the 
taxpayers and the Government of the United States expect is 
that when people in fact get hurt, they get justice. When they 
need medical help, when their families need death benefits, 
they get it and they get it in a prompt manner.
    Now, in my view, and I don't want to get into a partisan 
argument but I think the Bush administration will go down in 
history as one of the most incompetent administrations. You 
guys are new on the job but I hope very much, picking up from 
what Congressman Cummings just said, it is important that we 
turn the page on this issue. It is important that you work with 
Congress to give us your ideas so that No. 1, we have a cost 
effective program and are not wasting billions of dollars, and 
No. 2, more importantly, that when people get hurt on the job 
representing the needs of the United States of America, they 
get prompt and just compensation. Does that sound fair enough?
    Mr. Harris. I agree with you. Let me go a little further. 
You have my commitment that we are going to work with you to 
fix this program.
    Senator Sanders. Thank you very much.
    Mr. Kucinich. I thank Senator Sanders. The Chair recognizes 
the gentlelady from California, Congresswoman Watson.
    Ms. Watson of California. Thank you, Mr. Chairman, for 
holding this very significant hearing. I want to thank Mr. 
Harris for waiting all these hours while we played in the 
sandbox on the floor. I think it is very, very important that 
we hear from you, the Department of Labor.
    We had no idea when this new administration group started 
that we would have this kind of unemployment. But a good friend 
of the people is now over there, Hilda Solis, and I know her 
staff will do an excellent job in trying to straighten this 
out.
    According to data from the Labor Department and anecdotal 
evidence from Federal contractors working overseas, the 
workers' compensation system currently in place is 
characterized by a high denial rate. You probably talked about 
this before I came to the committee, but it is characterized by 
a high denial rate for those requesting compensation while the 
insurance providers have benefited from significantly higher 
profits than those typically earned by conventional workers' 
compensation insurers. This conflict is perpetuated by a 
seeming lack of comprehensive oversight of the system, and I 
hope that is something that we will try to iron out, with 
oversight duties fragmented between the Department of Labor, 
the Department of Defense, and the Department of Justice.
    So what kind of communication has there been? I think you 
have only been there on the job 2 weeks?
    Mr. Harris. About 3\1/2\ weeks, ma'am.
    Ms. Watson of California. About 3\1/2\ weeks. You have 
picked up a lot. So what kind of communication has there been 
between the Department of Labor and the Department of Defense 
to control the high premiums paid to insurance companies and to 
ensure Federal contractors are receiving adequate care?
    Mr. Harris. We have been in discussion with the Defense 
Department about reforming this program and the study that they 
are undertaking.
    The Labor Department has no authority over premiums in this 
system. That is determined by the contracting agency that 
establishes the contracting relationship with the employer and 
establishes the relationship with the insurer. So we have no 
mechanism by which we can control those costs or regulate those 
costs.
    Ms. Watson of California. But as long as you are talking to 
each other, I would hope that you would mention that this is a 
serious problem, that our committee has questioned it, and to 
expect more questions from us. Can you pass that on?
    Mr. Harris. I will.
    Ms. Watson of California. Can you tell me why the 
Department of Labor only referred one case, and this is 
probably before you arrived, one case to the Department of 
Justice for prosecution of an insurance carrier knowingly 
making a false statement for the purpose of reducing or denying 
benefits to an injured contractor despite evidence that such 
instances have occurred on numerous occasions? If you have not 
been there long enough to know about this case, I wish you 
could get back to us and let us know what happened under the 
last administration to reduce the number of cases that would go 
for prosecution. With that I will yield back my time, Mr. 
Chairman.
    Mr. Kucinich. I thank the gentlelady. I want to thank Mr. 
Harris for his presence here. This committee is adamant about 
making sure that the Department of Labor reforms its position 
on these matters to make sure that those who were injured are 
able to receive the compensation that they are entitled to. The 
committee thanks you. We will be in touch with you.
    At this time we are going to call the second panel. We are 
combining the second and the third panel. I would like everyone 
to come forward. While you are coming forward I would like to 
take this opportunity, just to move expeditiously to put the 
witnesses in place, while you are coming forward, I am going to 
read some of the biographies because we are going to keep 
moving this along.
    I also want to take the opportunity to thank those from the 
media who are here for their patience in waiting, the 
reporters, the cameramen, the technicians, and the producers, 
and for your role in helping to communicate this hearing to the 
general public. So thank you very much for your presence.
    While the panel is getting into place, I want to talk about 
who we are going to be hearing from.
    Mr. Timothy Newman, welcome. He was a former civilian 
contractor in Iraq for DynCorp. In 2004 he joined the U.S. 
Department of State CivPol mission to Iraq as part of the 
Global War on Terror. He spent 15 months in greater Baghdad 
training the Iraqi police forces and protecting fellow mission 
officers until on September 2, 2005 he was severely injured by 
a roadside bomb. Mr. Newman lost his right leg and sustained 
several other major injuries. Upon returning home, he worked 
with DynCorp to develop a program to better care for injured 
contractors.
    Mr. Kevin Smith is a former civilian contractor who worked 
as a truck driver for KBR in Iraq. Mr. Smith was severely 
injured when his supply convoy was ambushed by insurgents 
outside Baghdad in 2004.
    John Woodson is also a former truck driver for KBR in Iraq. 
Prior to going to Iraq he was a construction supervisor in 
Houston, TX working with cranes in the rigging industry. He 
also worked in aerospace, commercial, and petrochemical fields 
for 25 years. On October 28, 2004 John Woodson was hit by an 
IED, losing his leg and most of his eyesight.
    Gary B. Pitts is an attorney who has been handling U.S. 
Department of Labor cases for the last 30 years. Since the war 
began 6 years ago, he has been representing more civilian 
contractors wounded, injured, or ill from the war zone than any 
other attorney in the country. He has had over 300 ongoing 
Defense Base Act cases at all times for the last 4 years from 
all parts of our country. He is the owner of Pitts and Mills in 
Houston, TX. He served in the Army National Guard for 12 years 
and was a Captain.
    General George Fay is executive vice president of Worldwide 
Property and Claim of CNA. He is responsible for claims, 
strategies, and operations for CNA's Property and Casualty 
Operations worldwide. He is also a member of CNA's Operating 
Committee. Before joining CNA in July 2006, General Fay was 
executive vice president and chief services officer at the 
Chubb Corp. where he spent more than 30 years in claims, 
operations, and administration holding positions of increasing 
responsibility. He is also a retired Major General from the 
U.S. Army Reserves.
    Kristian P. Moor is AIG's executive vice president and 
president of AIU Holdings, Inc. He is responsible for worldwide 
general insurance companies of AIU Holdings, Inc., a leading 
global property and casualty holding company. He is also an 
executive vice president of American International Group, Inc. 
Prior to the formation of AIU Holdings, Inc., Mr. Moor was 
president and chief executive officer of AIG's Property 
Casualty Group.
    Finally, Charles R. Schader is going to be joining Mr. Moor 
for questions from Members. He is president of Worldwide 
Claims, American International Group. As president of AIG's 
Worldwide Claims operation, Mr. Schader has substantial 
experience in addressing claims under the Defense Base Act and 
War Hazards Compensation Act.
    I would like all of the witnesses who are either going to 
be making a statement, answering questions, or both to rise. It 
is the policy of our Committee on Oversight and Government 
Reform to swear all witnesses in before they testify. I would 
ask that each of you raise your right hands.
    [Witnesses sworn.]
    Mr. Kucinich. Let the record reflect that each of the 
witnesses answered in the affirmative. You may be seated.
    As with the first panel, I ask that each witness give an 
oral summary of his testimony and to keep this summary under 5 
minutes in duration. Your entire testimony will be included in 
the record of this hearing.
    I would like to begin with Mr. Newman. Thank you very much 
for being here.
    To those who are here as contractors and have served, I 
think it is appropriate on behalf of the subcommittee to also 
say thank you for serving the United States of America.
    You may continue.

STATEMENTS OF TIMOTHY D. NEWMAN, FORMER CIVILIAN CONTRACTOR IN 
  IRAQ; KEVIN SMITH, FORMER CIVILIAN CONTRACTOR IN IRAQ; JOHN 
WOODSON, FORMER CIVILIAN CONTRACTOR IN IRAQ; GARY PITTS, PITTS 
   AND MILLS ATTORNEYS AT-LAW; MAJOR GENERAL GEORGE R. FAY, 
  EXECUTIVE VICE PRESIDENT, WORLDWIDE PROPERTY AND CLAIM, CNA 
 FINANCIAL; AND KRISTIAN P. MOOR, PRESIDENT, AIU HOLDINGS, INC.

                 STATEMENT OF TIMOTHY D. NEWMAN

    Mr. Newman. Thank you. My name is Timothy Newman. I was 
injured in Iraq in 2005 while working for DynCorp as a civilian 
contractor. Since my injury, I have personally endured the 
effects of an outdated Defense Base Act and also advocated for 
other injured contractors through their ordeals.
    I grew up in Charleston, South Carolina. I joined the 
Marine Corps at 17 and became a South Carolina Police Officer 
at 22. After September 11th, I volunteered for the Civilian 
Policing Mission through DynCorp International with the State 
Department.
    I landed in Iraq on July 4, 2004 and hit the ground 
running, literally. I served with the State Department training 
unit that worked to train the existing Iraqi forces. We 
traveled the BIAP highway several times per day and my unit 
actually moved over 3,000 passengers without any injuries until 
September 2, 2005.
    Just after leaving our compound, my vehicle was hit by a 
roadside bomb. The blast completely blew through the driver 
section of my vehicle. My navigator and friend of 20 years, 
Leon Vince Kimbrell, was killed instantly. The shrapnel and the 
blast tore off my right leg, shattered my left leg, almost 
severed my left wrist, and sent shrapnel through my lungs, 
intestines, and chest. I was blown completely out of the 
vehicle and found myself with a useless body on a dirty Baghdad 
street. I dragged myself down the street until my team rescued 
me and delivered me to the Combat Surgical Hospital in the 
International Zone within 20 minutes of the attack.
    I spent the next 22 days in a medically induced coma and 
woke up in the U.S. Military Hospital in Landshul, Germany. 
This is where my personal story with the DBA begins. My initial 
care was amazing and my treatment by CNA was good. I was 
appointed a local case manager who expedited my care and worked 
with the hospital. My care did not begin to fail until I left 
the hospital.
    In February 2006 I was ready to start walking on a 
prosthetic leg. By October I was disillusioned with the absence 
and lack of communication by my former employer, DynCorp, so I 
wrote a letter to the CEO. In a few weeks I received a phone 
call inviting me to Texas to talk about my complaint. I went to 
Texas with a shiny new leg and met my former bosses. The 
meeting ended with a decision to start a program of employee 
care. I also left with a part time job to start the new 
program.
    We made great headway in caring for our employees and 
started associations and programs to help them. We had far less 
success with our insurance carriers. The actions that we 
received from the insurance carriers and companies were simply 
lip service. Other than limited support for some of our 
programs, they did nothing to make the process easier on our 
side or theirs. It was typical double talk and empty promises. 
After 2 years of fighting, I left the program late last year.
    In 2007, my treating physician recommended I get a Power 
Knee system, a true bionic leg that acts in place and 
supplements the muscles that I lost. The legal battle for this 
leg took over a year and a half and resulted in me getting the 
system 557 days after it was initially requested. The 
Administrative Law Judge that concluded the Power Knee was both 
reasonable and medically necessary found or CNA's experts, that 
``neither physicians have opined with any degree of certainty 
that the Power Knee prosthetic will not address the claimant's 
need'' and that both ``have little knowledge regarding the 
claimant's medical status and regular daily activities and have 
no firsthand knowledge of the Power Knee prosthetic.''
    In October 2008, 1 month after leaving Dyncorp, my biweekly 
compensation checks began arriving but were only half of what 
the amount should be. After weeks of no communication, CNA 
claimed that while I was employed by Dyncorp I was overpaid. So 
without warning or discussion, they cut my compensation to 
recoup their funds. Of course, their assumption of what I made 
was baseless. At the time they did not even have my pay records 
from Dyncorp. I suffered through financial hardships for no 
real reason. My legal counsel requested a hearing on this 
dispute. It is now June and our hearing is set for August, 
almost a full year after the problem started.
    In the 3\1/2\ years since my injury, I have met and tried 
to help so many people who were damaged in our national 
defense. I have personally talked three friends out of suicide. 
Each of them suffered greatly from Post-Traumatic Stress 
Disorder but their biggest battle was the one they were having 
with their insurance carrier to get real care for their 
problems. I know of more than one friend that did take his own 
life.
    I have helped and supported a friend facing double 
amputation for war injuries while the carrier said it was not 
medically necessary. I have helped a man who had an RPG go 
straight through him twice who was denied help, support, or 
communication from his insurance carrier. I have seen friends 
with blast related hearing loss be denied help and be forced to 
buy their own hearing aids while their cases went to court. I 
can continue on and on.
    I am not an expert but I am a victim with common sense who 
has seen failures of our current system. In my experience, the 
single biggest cause of these failures is the insurance 
carriers' practice of seeking profit in every way possible from 
our fight for national survival instead of becoming part of the 
forces united against our enemies. When this act was written by 
Congress, they sought to provide an expedited workers' 
compensation system for war effort workers. Once the DBA 
carriers hijacked the system and saw it as a source of profit, 
the program was lost.
    I would like to personally thank you for your interest in 
this issue. Thank you for your commitment to making a 
difference and your service to all of us. I am happy to answer 
your questions.
    [The prepared statement of Mr. Newman follows:]

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    Mr. Kucinich. Thank you, Mr. Newman. Mr. Smith, you may 
proceed. I would ask that you hold the mic close enough so we 
can hear your testimony. Thank you, sir.

                    STATEMENT OF KEVIN SMITH

    Mr. Smith. Thank you, Mr. Chairman. Gentlemen and women of 
the committee, I appreciate you all having me here today. This 
has been a long time coming and I am proud to be here.
    My experience with AIG has been traumatic at best. I 
thought everything was fine at first. Then, as I needed more 
treatment, things began to get tougher. I couldn't get 
treatments my doctor recommended like medication and sleep 
studies so I did without or I paid for myself. This has greatly 
hindered my continuity of care, thereby increasing the time it 
has taken me to achieve the goals dictated by my medical 
providers.
    The trauma associated with the PTSD is nothing, I mean 
nothing, compared to the trauma myself and my family has had to 
cope with because of AIG's blatant incompetence and egregious 
behavior.
    In two separate instances AIG has stopped paying my 
indemnity. The first time was in November 2005 and then again 
in November 2007. In November 2005, the benefits were 
reinstated but it took several months before I started 
receiving my checks again. Then I had to fight to get the 
checks I had missed.
    I started investigating and was alarmed to find out that my 
doctor had not been paid for procedures or office visits from 
2004. Although AIG would approve the treatment, they would not 
pay. So the doctor that saved my leg and possibly my life was 
considering not treating me any longer.
    In November 2007, AIG completely stopped paying all 
benefits, including medical, that I am supposed to receive for 
life according to the DBA. They refused to pay for another 
surgery needed on my knee or any other doctor's care. They 
would not even pay for medication I was taking for the PTSD. 
Basically, they completely ignored the fact that I had been 
diagnosed with PTSD as a result of my experience in Iraq. They 
have used some of the most ridiculous excuses trying to defend 
their position. To top it all off, they tried to say they had 
overpaid me by $23,406.60.
    I had to endure a long, grueling battle to reinstate the 
benefits that should have never been stopped. During this time, 
my family and I still had to live so I was forced to return to 
work in a job that exacerbated my injuries to my leg and the 
PTSD.
    They stopped benefits based solely on the fact that the 
schedule on my leg was paid out without considering that I was 
still being seen by a psychologist which, I might add, they 
approved. They obviously knew they had no legal grounds to drop 
me but I guess that is part of the game they play in order to 
wear people down so they will no longer have the will to fight.
    My attorney put in a request for an informal hearing with 
the DOL, the Department of Labor, which was denied. We appealed 
that and got our hearing in which the hearing officer found in 
favor of me and ordered that the benefits be reinstated. But in 
AIG's normal fashion, they acted with impunity and continued to 
deny benefits.
    We then requested a formal hearing with an Administrative 
Law Judge and were heard on July 30, 2007. Judge C. Richard 
Avery found that I should in fact receive all benefits and back 
pay with interest plus all out of pocket expenses and that all 
the doctors be paid. AIG has still failed to comply with this 
order entirely. They have not called and approved my treatment 
for PTSD. They have denied payment for medications. They have 
just now made a partial payment to my doctor for services 
rendered back in 2004. I want to point out the partial 
payments, ladies and gentlemen. They only paid less than half 
in most cases and never, I repeat never, have they paid in 
full.
    In summary, I have provided this committee with facts that 
I have backed up with evidence of AIG's downright criminal 
handling of cases of American men and women who put their lives 
in peril for this great country. All personnel serving in a 
hostile foreign land must be taken care of when they return 
home, whether they served in the military or as a civilian 
contractor. We did what most people would not do. Therefore, we 
should all be considered by our country as the heroes we are. A 
large portion of the contractors, like myself, were veterans of 
numerous hostile engagements and volunteered to go to Iraq for 
the chance to once again serve their country. We demand that we 
receive the care that was promised us and that we deserve.
    Listen, we are not asking for millions of dollars in 
bonuses. We are not asking for lavish parties or even parades. 
We want what we are entitled to under the Defense Base Act like 
medical care, disability pay, and retraining if necessary.
    Thank you.
    [The prepared statement of Mr. Smith follows:]

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    Mr. Kucinich. I thank Mr. Smith. The Chair recognizes Mr. 
Woodson for 5 minutes. I would just ask you to make sure that 
mic is close to you so we can hear your testimony.

                   STATEMENT OF JOHN WOODSON

    Mr. Woodson. My two colleagues here have covered quite a 
bit here and said a lot. Thank you all for having me here, 
having all of us here. I would like to thank each and every one 
of you for inviting me today to share my experiences with you.
    My name is John Woodson. Prior to going to Iraq, I was a 
construction supervisor in Houston, TX working with cranes in 
the rigging industry. I worked in the aerospace, commercial, 
and petrochemical fields, investing 25 years of my life.
    In late 2003, KBR representatives contacted me asking if I 
had thoughts about going to Iraq and helping to rebuild the 
country. To me, that was a great opportunity to provide my 
contribution to this country so I left in June 2004 to go to 
Iraq. Unfortunately, I was blown up by an IED blast on October 
28, 2004. Now, here we are in June 2009, 5 years later, and I 
am still wondering why events have happened the way they have.
    After waking up from a medically induced coma at the 
Methodist Hospital in Houston, TX, I was sent to a 
rehabilitation facility called TIRR. There I was visited by 
James Hile from AIG. He was a representative, adjuster, and 
investigator working for AIG Insurance. After seeing my 
condition, he stated that there wouldn't be any problem because 
AIG was going to take care of my life and everything involved. 
That statement shortly turned out to be untrue because the 
first problem quickly arose.
    The first problem was my money. Nothing was being deposited 
into my account. My wife, brother, and daughter then spoke with 
Mr. Hile about the issue. He told them that the situation would 
be looked into. Several weeks later, I did receive a deposit 
but the weekly average was lower than what had been spoken 
about.
    At that point I called AIG Insurance and spoke to Jim 
McIntire, who refused to talk to me. He flatly said to me, 
``hire an attorney and AIG will discuss the issue with them.'' 
At first, I wanted to believe that it was just a small 
misunderstanding because it was a new account. But the reality 
soon sank in.
    The result would be larger than I could even imagine. The 
conflict that started then is still going on today. Every 
aspect is a disagreement, a complex and infinite process from 
medical, money, pharmaceuticals, and transportation 
standpoints. Even the Department of Labor in Houston has not 
been any help. I am just naming a few on the list. It is really 
too long to write.
    Ladies and gentlemen, due to my vision impairment, speaking 
about this matter would be much easier on me. It would be much 
more conducive.
    As of April 24, 2009, my case has been turned over to the 
U.S. Government. I still haven't noticed much of an 
improvement. In conclusion, I ask why. Where has the oversight 
been? Who is in charge of this operation?
    [The prepared statement of Mr. Woodson follows:]

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    Mr. Kucinich. Mr. Woodson, thank you very much for your 
testimony. The Chair recognizes Mr. Pitts.

                    STATEMENT OF GARY PITTS

    Mr. Pitts. Thank you, Chairman Kucinich, Ranking Member 
Jordan, Congresswoman Watson, and Congressman Cummings. Thank 
you for starting this process. I thank you for your interest 
and attention to these brave men and women who go over there 
and fill in for what the Army used to do.
    I have had the opportunity, the privilege, of representing 
hundreds of them. Based on that experience and on 30 years of 
operating before the Department of Labor, here are my five 
recommendations to make this system work more quickly and 
better:
    First of all, there hasn't been any additional funding 
since the war began for the Office of Workers' Compensation 
Programs or the Office of Administrative Law Judges. Whereas 
AIG, for example, had three adjustors in 2004 in Dallas that 
handle these cases, now they have about 30. That is a tenfold 
increase. There has been no increase at the Department of 
Labor.
    For example, OALJ could use some video conferencing 
equipment. That sounds pretty mundane but that could help a 
lot. It would maybe cost $200,000 to outfit all of them with 
video conferencing equipment. Right now we have to do a 
circuit. We are like the old West. We go to the claimant. The 
judge does, I go, and the defense attorney goes. If we had 
video conferencing equipment outfitted with the judges, we 
could have those conferences done more quickly. We could move 
this process along. It would save money from having to send the 
judge there and back, and it would save his time.
    The second thing I would suggest is that on PTSD, it is 
taking about a year or a year and a half to work through the 
system before somebody can get treatment. The Army, in 
contrast, they tell people what the symptoms are before they 
leave the theater. They check back up on them 2 or 3 months 
later. Contractors don't have any of that. They get back, they 
start having symptoms, their family sends them to get some 
help, and they enter the process of litigating their case. This 
is a wasteful system like it is because the litigation costs 
are eventually going to get put off on the taxpayer. I am 
trying to work myself out of some work here.
    All these people should immediately be able to go to the 
VA. They are coming out of the war zone. They should just go to 
the VA. The VA is set up for taking care of PTSD. Just let them 
go there and get in line with everybody else for the group 
therapy. There is less chance of them hurting themselves or 
hurting people around them. That is economical, it is 
efficient, and it is an exception. There will be some people 
who say well, they are not in the military so they shouldn't be 
able to go to the VA. This is an exception. They are right 
there next to our soldiers. The enemy doesn't distinguish them 
from our soldiers. If they have PTSD uniquely situated coming 
from the war zone, just let them go to the VA.
    The third thing is there is presently no requirement that, 
if one of these men is killed over there, that the widow 
acknowledge that there is such a thing as death benefits or 
that there is a possibility of death benefits under the act. 
This applies to the surviving spouse since there are also 
ladies over there. That could be easily remedied. Just 
basically the employer would have the obligation to get a one 
page acknowledgment from the widow saying I understand there is 
the possibility that I may be entitled to death benefits under 
the Defense Base Act. They ought to be able to attach that to 
their paperwork in order to get paid or they don't get paid by 
the Government or they don't get a new contract.
    This should be able to be enforced quickly so we don't have 
the anomaly of some lady in a small part of the country with a 
house full of children and her breadwinner is dead going on 
Government relief because she hasn't figured out what the 
Defense Base Act is and how to fill out the right form to file 
it with a New York office within a year, the statute of 
limitations. So that is a little gap that could be taken care 
of.
    The fourth thing I would suggest is there is now really no 
stick for the Administrative Law Judge. Let me point out and 
make this clear, nobody can make the insurance company do 
anything except the judge. The Department of Labor has no power 
to make them do anything. They can give informal 
recommendations, which we have to have in order to have the 
case come up to be assigned to one of the 40 or so 
Administrative Law Judges that hear these cases. But we have to 
go through this process and litigate these issues in order to 
get resolution.
    Now they will do what the judge tells them to. They have 
to. Well, we have some problems sometimes even with that. 
However, the judge is really the only one who can make them do 
things.
    So we can beef up the OALJ. They used to have like 100 
judges to do the Black Lung docket. They need some extra ones. 
You can see from my paper, the trials have gone from 95 in 2005 
to about 578 scheduled this year. It is a fivefold increase. 
They need some help and additional funding.
    Anyway, what I am suggesting is the judge needs a stick. At 
this point, all he can do is make them do what they should have 
done to begin with, plus they have to pay my time for having 
held them down and making them do something and they have to 
pay interest. But it is at short term Treasury rates. So these 
gentlemen, if they go through litigation and the judge says, 
like Judge Avery did in Mr. Smith's case, you have to pay this, 
they also only have to pay like half of 1 percent. That is the 
interest they have to pay. So the judge should be able assess a 
15 percent penalty, a 10 percent penalty, or whatever for a 
frivolous defense.
    In addition, they can profit by 20 C.F.R. 61.104. They can 
add a 15 percent handling fee for litigating a War Hazards Act 
claim. So if they are hurt from enemy action, they can profit 
by litigating it. That needs to change.
    [The prepared statement of Mr. Pitts follows:]

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    Mr. Kucinich. Thank you very much, Mr. Pitts. We now hear 
from General Fay. You may proceed.

            STATEMENT OF MAJOR GENERAL GEORGE R. FAY

    General Fay. Thank you, Mr. Chairman. Thank you, Ranking 
Member Jordan and distinguished members of the subcommittee. 
Thank you for the opportunity to appear before you today on 
behalf of CNA Insurance. I am George Fay, Executive Vice 
President of Worldwide Property and Claim for CNA Financial 
Corp. I have more than 30 years of experience in the insurance 
industry.
    I retired from the U.S. Army Reserves as a major general in 
May 2008 after 38 years of service, including almost 4 years on 
active duty in support of the Global War on Terrorism and 
Operation Iraqi Freedom. During those 4 years, I served in many 
parts of the world, including Iraq and Afghanistan, side by 
side with defense contractors in every location.
    I share the subcommittee's view that civilian workers in 
Afghanistan, Iraq, and elsewhere around the world are 
performing a crucial service for this country and that they 
deserve fair treatment in the administration of insurance 
claims. I understand well the sacrifices being made by the men 
and women who support our military operations abroad. I am 
pleased to be part of the CNA family that takes great pride in 
supporting those that make such great sacrifices.
    CNA understands that this hearing focuses on two categories 
of concern under the Defense Base Act, claims handling and 
underwriting gains.
    With regard to claims handling, I would like to address 
some errors that were made in the majority staff's June 16, 
2009 memorandum addressed to the subcommittee. The memorandum 
implies that CNA has a record of unnecessarily pushing claims 
to administrative rulings. This is misleading. In fact, of the 
approximately 5,500 claims that have been filed, CNA believes 
that fewer than 20 of those claims, less than 0.4 percent, have 
gone to administrative rulings. Of those cases, CNA has lost 
only a handful. Even in the cases that CNA has lost, there was 
never a finding that CNA acted in bad faith or advocated 
frivolous positions.
    CNA's experience is consistent with the written statement 
of Seth Harris, who you just heard from before as the Deputy 
Secretary of the Department of Labor. It noted that the DOL has 
found no deliberate intent to delay claims handling. His 
statement is borne out by the numbers I have set forth in my 
written statement.
    We are contacting insured workers and their companies 
within 24 hours 86 percent of the time. Despite the strict, we 
believe too strict, requirement to make a compensability 
determination within 14 days, we have been able to make that 
determination within those 14 days 75 percent of the time.
    Related to the underwriting concern, it should be noted 
that the overall CNA DBA underwriting gain from 2002 to 2008 
was only 14 percent. Moreover, CNA's role in the at large part 
of the business on which the subcommittee is focusing today has 
been minuscule since 2006 with only about 3 percent of the 
market share.
    In contrast, CNA is currently the only provider of the 
widely praised program contracts which are awarded through a 
bidding process. In 2008, Chairman Waxman lauded this process 
and highlighted CNA's presence in the market. We concur with 
those who suggest that the program contracts are the solution 
to the DBA underwriting concerns.
    CNA would be happy to work with the subcommittee to improve 
the process governing DBA contracts. Therefore, Mr. Chairman, I 
thank you for the opportunity to discuss these issues today. I 
would be pleased to answer any questions that the subcommittee 
has.
    [The prepared statement of General Fay follows:]

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    Mr. Kucinich. I thank the gentleman. Mr. Moor, you may 
proceed. Please bring that mic close so every member of the 
committee can hear your testimony. Thank you.

                 STATEMENT OF KRISTIAN P. MOOR

    Mr. Moor. Mr. Chairman, Ranking Member Jordan, and members 
of the subcommittee, thank you for the invitation to appear 
before you today. AIG is pleased to participate in this hearing 
examining Defense Base Act [DBA], insurance for Federal 
contractors working overseas. Given the importance of this 
issue, AIG looks forward to working with the subcommittee on 
ways to improve the DBA program to ensure proper coverage for 
contractors.
    The DBA program is one of the many lines of coverage 
offered by AIG's General Insurance. In order to provide the 
subcommittee with a better understanding of AIG's participation 
in the DBA program, I am joined today by Charles Schader, 
President of AIG's Worldwide Claims. Mr. Schader has 25 years 
of experience in insurance claims management, including 
extensive experience with the DBA program. He has provided 
testimony for the record that outlines AIG's participation in 
the program and identifies several areas where we think the 
program can be improved.
    AIG has had a long and proud history of providing DBA 
coverage. While other insurers participate in the DBA program, 
no other insurer has created a center of excellence for the 
care of injured workers comparable to ours. AIG has also made 
significant investments in our claims management process to 
facilitate our participation in the DBA program.
    AIG now has claims professionals located in six global 
offices that are equipped to handle unique regional and local 
needs. As but one example, the Dubai office staff is fluent in 
four languages. It has developed expertise in overcoming 
geographic and cultural obstacles, paying benefits in country 
in local currencies, and conducting investigations in the 
Middle East to locate claimants while obtaining witness 
statements and verifying dependency.
    As Mr. Schader has identified in his written statement, AIG 
believes that there are three key areas where the DBA program 
can be improved through a combination of legislative and 
regulatory reform. The first would be providing detailed, 
accurate status reports to claimants instead of the LS 207 
Contraversion Notice. The second would be rationalizing and 
simplifying the calculation of average weekly wage. The third 
and final area would be interagency cooperation on the 
diagnosis, prognosis, and treatment of Post-Traumatic Stress 
Disorder.
    Thank you again for the opportunity to participate in 
today's hearing. We look forward to answering any questions the 
subcommittee may have. In particular, Mr. Schader will be able 
to speak in greater detail regarding the DBA practices.
    [The prepared statement of Mr. Moor follows:]

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    [The prepared statement of Mr. Schader follows:]
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    Mr. Kucinich. I thank the gentleman for his testimony.
    General Fay, I was interested in your testimony. There 
seems to be a variance, according to staff, from your prepared 
testimony to what you presented to this committee in that you 
quoted from an internal committee document that hadn't been 
released. That was really the property of this committee. I 
just wondered where did you get your information from?
    General Fay. I was given that by a member of our staff, 
sir, but I don't know where exactly they----
    Mr. Kucinich. What was the name of the member of your staff 
that gave that to you? You remember you are under oath. Who 
gave it to you?
    General Fay. Yes. I got it from our Head of Legislative 
Affairs.
    Mr. Kucinich. Is your Head of Legislative Affairs here 
right now?
    General Fay. Yes, she is.
    Mr. Kucinich. Who is that? Would they identify themselves? 
Would you like to come to the committee table? Do you want to 
identify yourself?
    Ms. Davis. My name is Heather Davis.
    Mr. Kucinich. Would you like to be sworn? Do you have an 
attorney here?
    Ms. Davis. No. I mean, we have several attorneys on staff. 
I am not an attorney.
    Mr. Kucinich. OK. Would you raise your right hand?
    [Witness sworn.]
    Mr. Kucinich. I was referencing an internal document that 
had not been released that was quoted by General Fay. He said 
that you gave him that information. Is that correct?
    Ms. Davis. To be completely honest, I was working with our 
parent company lobbyist, Loews Corp., Mr. Watson. It was either 
he or I that gave it to him.
    Mr. Kucinich. Where did the document come from? Mr. Fay 
said he got it from you. Where did you get it from?
    Ms. Davis. I want to make sure I am clear. We were doing a 
lot of visits on the Hill. Steve, do you recall where it came 
from?
    Mr. Watson. It came from a committee staff member.
    Mr. Kucinich. Committee staff? Which committee staff, the 
Democratic committee staff?
    Mr. Watson. I don't believe so.
    Mr. Kucinich. This is tangential to the purpose of this 
hearing. But you are going to be subject to further questions 
from our attorneys where that document came from. It is really 
somewhat unprecedented for information that has not been 
released to the public to be in the hands of a witness who then 
uses it to criticize a committee report. This is something that 
we are going to find out, who gave you that. Then we will deal 
with that as an internal committee matter.
    Yes, Mr. Jordan.
    Mr. Jordan. Mr. Chairman, I have just checked with the 
staff that is present here. They indicated that they did not 
give that document out. I certainly didn't and don't know of 
anyone on our staff that did.
    This is highly unusual, too, that we are bringing in people 
from the audience who haven't been cleared and who we didn't 
know were going to be witnesses.
    Mr. Kucinich. No, I didn't expect that General Fay would be 
giving testimony that would reference an internal report, and 
then say that he himself did not know where that came from and 
refer to someone else. That is why we did it.
    Now, we are not going to change the subject of this 
questioning. But I just want you to know, General Fay, and I 
want the gentlelady to know and the people in the audience who 
are involved, that you are going to be subject to further 
questioning about this. Thank you very much. You are dismissed.
    [The information referred to follows:]

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    Mr. Kucinich. General Fay, we have heard from these 
witnesses, from Mr. Newman, Mr. Smith, and Mr. Woodson, all 
about their problems in getting paid by various people. Mr. 
Newman is the one that had the experience directly with CNA. 
Would you provide for this committee your internal documents 
with respect to what your strategies are for denial to increase 
your corporate profits?
    General Fay. We have no such documents that have that kind 
of a strategy. I wouldn't be associated with a company that had 
such a strategy.
    Mr. Kucinich. So you are saying that you don't make money 
denying claims?
    General Fay. That is not exactly what I said. I said, Mr. 
Chairman----
    Mr. Kucinich. Do you agree with that statement? Does CNA 
make money denying claims?
    General Fay. That is not what we are in the business to do. 
We are in the business to insure people for the risks that we 
are insuring. When the claims are legitimate claims according 
to whatever the insurance policy is that we issued to them, 
then we pay them. We pay them promptly. We pay them according 
to the law. And we take great pride in doing that.
    Mr. Kucinich. We have testimony that contradicts that. My 
time has expired but I want to indicate we are going to have a 
second round. We are going to come back to General Fay and Mr. 
Moor about the testimony that we are hearing about your claim 
denials and whether or not you have a conscious strategy as a 
business to deny claims to people who have been injured or 
killed in a war.
    The Chair recognizes the gentleman, Mr. Jordan.
    Mr. Jordan. I thank the chairman. Let me just begin by 
thanking all our witnesses, in particular those of you who have 
been serving our country in a war zone. We certainly appreciate 
your sacrifice.
    Mr. Pitts, you talked about in your testimony problems both 
with insurers and with the Department of Labor. You had, I 
thought, some good, practical recommendations in your 
testimony. Put families on notice that there would be a death 
benefit in the event that tragedy took place. I think in point 
No. 4 you talk about frivolous claims.
    Mr. Pitts. Actually frivolous defenses. We have always 
heard about frivolous claims for 10 years but this is a 
frivolous defense.
    Mr. Jordan. The claimant brings a frivolous case but you 
also have bad behavior on the part of insurers.
    Mr. Pitts. Yes.
    Mr. Jordan. Just as a general question, where is the bigger 
problem? Is it the lack of oversight? Is it the Government or 
is it the insurers? You have brought I think you said hundreds 
of cases. Where do you see the real concern?
    Mr. Pitts. There is a defect in the law that needs to be 
changed. It wouldn't be difficult. Here is what it is: Under 
the present Code of Federal Regulations, and this is my fifth 
point, an insurance carrier, not necessarily these gentlemen, 
but any insurance carrier is in a position where amorally, 
whatever, it is in their interest to litigate a War Hazards Act 
case. Under 20 C.F.R. 61.104 they get their litigation costs 
back. They get their attorneys' fees back and they get to add 
15 percent. You can't get 15 percent in a CD now. You can't get 
15 percent assured in the stock market. It is a great deal.
    So let us say we have a PTSD case. This has happened, where 
the claimant's doctor said he has PTSD from the war zone and 
the insurance company doctor agreed he has PTSD from the war 
zone. Nonetheless, the case was litigated all the way to 
completion. There was a judicial finding that yes, this guy has 
PTSD from the war zone. Within 6 weeks, the War Hazards Act 
bureaucracy had picked it up and said OK, now you are going to 
get all your money back. All those litigation costs that the 
defense had plus they get to add 15 percent. So if it costs 
$20,000, they get how much? So not only do they have the 
opportunity to defeat the claim, they drag it out. Who is 
suffering in this is the guy with PTSD or other kinds of 
injuries.
    So about half of these cases are because of enemy action. 
They are probably going to get picked up by the War Hazards Act 
eventually. So if that was modified so they get a handling fee 
of short term interest rates, which is what these men get, they 
get about a half of 1 percent. So if that is what they got, and 
it would fluctuate with times, that would be more appropriate. 
But as it is, there is a built in incentive for the carrier to 
profit from litigation.
    Mr. Jordan. How many cases did you say you had handled? I 
think you said 100?
    Mr. Pitts. Well, I have more than 300 going on at any one 
time over the last 4 years.
    Mr. Jordan. How many of those cases are PTSD?
    Mr. Pitts. About 20 percent, which is about the same ratio 
as the soldiers coming out of the war zone. My most frequent 
demographic is a truck driver hit by a roadside bomb.
    Mr. Jordan. You were critical in your testimony of the 
Department of Labor. As I said in my first round with Mr. 
Harris, this is the second hearing that has dealt with the 
Department of Labor. This is the first time we have had someone 
from the Department of Labor come and testify and the person 
they send has been on the job 3 weeks. With something this 
important, you would think they would send someone, nothing 
against Mr. Harris, but send someone who has been on the job a 
little longer and had a little bit more experience with the 
critical program. So tell me about your concerns with how the 
Department of Labor has failed to handle their responsibility.
    Mr. Pitts. I think both the Department of Labor Office of 
Workers' Compensation Program, which is only about, I don't 
know, 200 or 250 people or so in the country that do this 
stuff, and the Office of Administrative Law Judges, which is 
about 40 judges and their staff, have done a great job with the 
resources they have. The system is not set up so that the OWCP 
gets to tell anybody anything. They can give recommendations. 
But if a carrier can litigate and profit off of it, it doesn't 
do anything.
    They give the recommendations; they are ignored. We go into 
litigation and it takes about a year or so to finally get a 
judicial decision to enforce. During that time, they are 
hanging onto the money. And if it is a War Hazards Act claim, 
they get to get some money, plus the 15 percent. So I think 
that has been the problem.
    If you take that profit motive out of it, that incentive 
psychologically, subconsciously, or whatever, if you take that 
out of it and if they can get hit for some penalty of 10 
percent or 15 percent for a frivolous defense, found by a judge 
that this is a frivolous defense, if they can get hit by 10 or 
15 percent, it hits their pocketbook. I think that would be 
reasonable.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Mr. Cummings from Maryland. You may proceed for 5 minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman. As I sit 
here and I listen to all of this, it seems that we are talking 
in two different universes. We have one with these gentlemen 
who have been harmed and who continue to suffer. Then we have 
the insurance companies that sound as if they are operating the 
greatest operation in the world and doing every single thing 
that they can for these gentlemen. It is a sharp contrast.
    To Mr. Moor, according to Los Angeles Times ProPublica 
story, AIG stopped paying disability benefits to a civilian 
contractor whose leg was shattered by an insurgent ambush in 
Baghdad and who suffered from PTSD even though some of your own 
experts diagnosed him as partially disabled. Further, some 4\1/
2\ years later in 2008, an Administrative Law Judge ruled that 
AIG had failed to offer medical evidence to support its 
position that the contractor's PTSD was not caused by the 
convoy attack. The article, which was published in April of 
this year, states that AIG has still not paid Mr. Smith's 
outstanding medical bills as ordered, I suppose pending AIG's 
appeal.
    My question is this: On what basis is such a determination 
made? If not on the opinion of AIG's own medical experts, how 
is the legitimacy of a claim determined? How many claims has 
AIG denied in which your own expert has sided with the insured?
    Mr. Moor. Congressman Cummings, Mr. Schader would be much 
more qualified.
    Mr. Cummings. We want to hear what he has to say. Nice and 
loud, please, sir. I want to hear you and these gentlemen want 
to hear you, too.
    Mr. Schader. We do agree that there are many changes in 
this system that would help in its administration and provide a 
better product faster and quicker. There should be clearer 
rules for those people who have been hurt overseas as severely 
as these individuals have been.
    I want to make it very clear on behalf of myself as well as 
of my company that we really do owe them a debt. This is not 
anything vindictive nor a corporate policy of denial. It is a 
question of administering programs under an act that is ill-
suited.
    I have in my written statement submitted at least three 
fairly detailed areas of reform that would help. I think 
increasing Labor Department oversight and administration would 
be of great assistance. Making it more like a State workman's 
compensation agency would help.
    There are some claims that are very, very complex here. We 
have provided some files to the committee. It is hard almost to 
the point of impossibility in the few minutes we have to go 
through the steps of Mr. Smith's claim piece by piece to show 
why what we did was right under the benefit levels and the 
rules that we have to deal with. I have offered to meet with 
the committee or the staff of the committee. I will bring in 
any member of my staff to go through those with you and I would 
be more than happy to do so. If it would aid in the reform of 
the system and how the benefit levels are calculated, I would 
be more than happy to do that.
    Mr. Cummings. Let me ask you this, the aim of workman's 
compensation is basically no fault. Is that right? In other 
words, it is so that the worker can recover once they have an 
accident or a problem, is that right?
    Mr. Schader. I absolutely agree with that.
    Mr. Cummings. So basically what is happening here is that 
the insurance is for the purpose of moving a claimant along so 
that they may be compensated quickly so that the claimant 
doesn't have to end up having to file suit. That is what 
workman's compensation was all about. When I was in the State 
legislature, I was an expert on workman's compensation. I know 
the Federal may be a little bit different. It seems to me as if 
AIG is doing just the very opposite of what workman's 
compensation was supposed to do. It was supposed to expedite 
claims. It was supposed to give people like Mr. Smith an 
opportunity to be able to get well and to move forward.
    But before you go on and since I have Mr. Smith here, Mr. 
Smith, what do you think of this testimony? I am just curious. 
This is your case.
    Mr. Smith. Thank you, sir.
    Mr. Kucinich. The time has expired but the gentleman may 
respond to the question. Take the time that you need.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Chairman and Mr. Cummings. AIG 
pointed out increasing the funding for the Department of Labor, 
increasing that area. My question to you, sir, is what good 
would that do? You don't listen to what they say anyway. I have 
documented proof where AIG has ignored the recommendations of 
the Department of Labor. Then we have to continue to go through 
litigation again and again and again and again. So the 
Department of Labor is fine, sir. Your company is not.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Kucinich. We will permit AIG to respond briefly.
    Mr. Schader. We have not been sitting on Mr. Smith's claim, 
refusing to pay, and making arbitrary decisions.
    Mr. Kucinich. Mr. Smith.
    Mr. Smith. Sir, I have documentation otherwise.
    Mr. Kucinich. Do you want to submit documentation to this 
committee?
    Mr. Smith. It is in my statement.
    Mr. Kucinich. OK. Mr. Schader.
    Mr. Schader. I would like to add that we have paid over 
$500,000 on Mr. Smith's case in medical and indemnity to date. 
There are no medical bills outstanding today.
    Mr. Kucinich. Was that the total of your bills, Mr. Smith?
    Mr. Schader. That is indemnity as well.
    Mr. Smith. So, sir. That was not the total. That is a 
falsification. They have not paid my doctors in full. They have 
paid what they thought was acceptable. I have proof, I have 
documentation where they paid for services on a particular 
date. When they cut the check to the doctor, it was less than 
half and in some cases just a small percentage of what was 
actually owed. If he wants to ask me about it, I have that 
documentation and I will provide that to the committee.
    Mr. Kucinich. Now, do you have that documentation, Mr. 
Schader?
    Mr. Schader. I don't have it and I would be more than happy 
arrange a meeting with Mr. Smith.
    Mr. Kucinich. Do you want to give it to him right now? Do 
you have copies of that? If that is in the record, since Mr. 
Smith is referencing it, Mr. Schader is entitled to copies of 
it.
    Mr. Smith. I would like to add in addition----
    Mr. Kucinich. If you want to examine those, examine them 
and if you want to comment on them later you will be permitted 
to do that.
    Mr. Schader. Thank you.
    Mr. Kucinich. OK, so we are going to move on. You will get 
a chance to respond. But I think you ought to examine the 
documents that he gives you and then you can respond. We will 
make sure you get the chance to do that. We are going to go to 
the second round of questions, here.
    Mr. Smith. Mr. Chairman, I apologize to the committee. I 
will make that available within the next 24 hours.
    Mr. Kucinich. You are saying you don't have it with you 
right now?
    Mr. Smith. No, sir. I left it in the hotel room.
    Mr. Kucinich. Please make it available and then we will get 
it to Mr. Schader. Then we will send further questions from the 
subcommittee to you so that you have a chance to answer them in 
light of what Mr. Smith has said. Is that fair?
    Mr. Schader. We would be more than happy to do that. Yes, 
absolutely.
    Mr. Smith. Thank you.
    Mr. Kucinich. OK, I want to get back to the line of 
questioning that I was working on. General Fay, you testified 
that CNA's average yearly profits for all of its Defense Base 
Act insurance from 2002 to 2007 was----
    Excuse me and I apologize. The gentlelady from California, 
Ms. Watson, is entitled to 5 minutes of questions. I want to 
thank the gentlelady. Please proceed.
    Ms. Watson of California. Thank you so much, Mr. Chairman. 
I know you are on a roll here.
    Mr. Kucinich. No, the gentlelady is entitled to 5 minutes. 
Go ahead, please go ahead.
    Ms. Watson of California. You are going down the same line 
I would go down. But I want to thank the gentleman who had been 
out protecting our country for coming here in such a civil way 
and explaining what has happened to you. I think it is 
reprehensible that the insurance companies would hold up or 
delay. I think your kinds of cases should be No. 1. To have to 
come here and testify in public to get the insurance company to 
take a deeper look at your request I think is just an injustice 
to those of you who have been securing our own country. So 
thank you for being here. Thank you for your patience.
    Listening to your testimony, if you cannot be compensated 
for your wounds both emotional and physical, I don't suspect 
contractors' families get any compensation for what they have 
suffered. I will direct this to Mr. Pitts. I know that in our 
U.S. Government contractors and subcontractors law there was no 
reference to a contractor's family members or dependents except 
for the instance of compensation benefits for survivors of 
covered workers who were killed on the job. Is there any way to 
assist the families and the loved ones of these victims?
    Mr. Pitts. Beyond the death benefits, Congresswoman?
    Ms. Watson of California. Yes, beyond the death benefits. 
Those that are alive.
    Mr. Pitts. Well, I think if their husbands were taken care 
of correctly, that would be the best benefit.
    Ms. Watson of California. But there is no benefit?
    Mr. Pitts. No, there is no benefit. Unless a contractor 
dies as a result of his work over there, there are no benefits 
that go to the surviving spouse or the minor children.
    Ms. Watson of California. So they would have to seek 
private insurance. When these gentlemen come home, there is 
care that has to be given. There are services that have to be 
given, food, clothing, and shelter. So there is no way for them 
to be covered for these expenses?
    Mr. Pitts. In rare instances there have been cases where I 
have been able to get some compensation for, let us say, a wife 
that has to leave her job to come home to take care of her 
husband because he is so badly injured he can't take care of 
himself. So there have been cases where we have been able to 
get compensation through the judges to do that.
    Ms. Watson of California. I was listening very closely to 
your recommendations of how we should close these gaps. Mr. 
Chairman, we might from this subcommittee and our hearings want 
to recommend legislation and policy that will not only cover 
the victims themselves but their families as well. I don't care 
whether they have to work and come home, it still is a burden 
on them to have someone who has not been compensated for their 
illnesses. Their providers have not been compensated fully yet. 
So I think that this is something, Mr. Chairman, that could 
grow out of the testimony here.
    I would think that all of those recommendations that you 
made should include compensation. I think they were in your 
testimony, the recommendations, Mr. Pitts?
    Mr. Pitts. Yes, it is the second one about making sure the 
widow knows that there is such a thing as the Defense Base Act 
and that she may have a claim for her family. I am afraid 
otherwise there are going to be some real injustices out there 
because they just don't know any better.
    If you are in a small town in Texas, your husband is a 
truck driver. He goes to work to support the troops over there. 
He dies. So what is the chance that you are going to figure out 
there is such a thing as the Defense Base Act and to fill out 
the right death claim to file it with the New York office in a 
timely way?
    That is just a gap that shouldn't be. The employer should 
have some obligation to get her acknowledgment she has been 
told about this. I think that is reasonable.
    Ms. Watson of California. The gentlemen to your left, are 
they your clients?
    Mr. Pitts. No. Toby Cole, who is an attorney in Houston 
also.
    Ms. Watson of California. What I would like to see you do, 
and you gentlemen, too, is recommend to us how we can better 
the system so that benefits can reach out to the people they 
are intended to. These are contractors. They might not have 
been fighting but they were in theater. We owe them that.
    I have been with insurance companies and there is a point 
at which they just kick you out because your claims have been 
too large. I have been through that myself. But we want to 
improve the system. Particularly with this bogus war that we 
fought over in Iraq, these gentlemen went over to assist. They 
shouldn't be treated like this after their severe injuries.
    So this hearing is to collect the information. I hope, Mr. 
Chairman, that we will end up with some recommendations to put 
into a policy. With that, I yield back. I already have the red 
light. Thank you, Mr. Chairman.
    Mr. Kucinich. The Chair will begin the second round of 
questioning for 5 minutes.
    Ms. Watson of California. Would you yield for just a 
second?
    Mr. Kucinich. I yield to the gentlelady.
    Ms. Watson of California. You were consulting with staff. I 
would hope that out of our hearings would grow some policy that 
we can give to the full committee dealing with insurance and 
insurance claims and so on.
    Mr. Kucinich. Our role as a Committee on Oversight and 
Government Reform, we do oversight and reform. So we will work 
with the gentlelady, with the Ranking Member Jordan, with Mr. 
Cummings, and with every member of this committee because we do 
want to change this. There is no question about it. But before 
you change it, so that you know the direction you are going, 
you have to find out what happened. We have to do some 
forensics here and the forensics may not be pretty.
    General Fay, you have testified that CNA's average yearly 
profits for all its Defense Base Act insurance from 2002 to 
2007 was 14.6 percent and only 9 percent from 2009. Isn't it 
true, however, that you have failed to mention that CNA's 
profits for all of its Department of Defense Defense Base Act 
business, where CNA contracts directly with Defense 
contractors, the business under scrutiny today, that those 
profits are over 50 percent per year? That is based on 
documents that were produced for this committee and I believe 
were obtained from you.
    General Fay. Yes, chairman. The truth of the matter, the 
facts are that on non-program business, we at CNA agree with 
all the recommendations that is the line of business that 
should be changed. In fact, the DBA program should be written 
under a program business.
    Mr. Kucinich. But when you said 14 percent, I just want to 
clarify the record here because it is about numbers. You gave 
some numbers in your testimony. You said it is only 14 percent. 
Isn't that the profit number for all of your DBA business 
including the single risk pool programs with agencies other 
than DOD?
    General Fay. Yes, that is correct. It is all of them taken 
together.
    Mr. Kucinich. Thank you. OK. I just want to make sure that 
we put that in the record. Without objection, we will enter the 
record statement and the records from CNA which state that a 
projected combined ratio for profit was 50 percent.
    General Fay. That is on the non-program business only. That 
is only 3 percent of the market.
    Mr. Kucinich. Thank you. That is the subject of this 
hearing. You are getting 50 percent profit. We are hearing some 
witnesses who may give us an idea why you have 50 percent 
profit.
    General Fay. We agree it should be changed.
    Mr. Kucinich. Now with AIG, Mr. Schader, you have touted 
AIG's handling of your PTSD claims in your testimony and in 
documents provided to the subcommittee. Yet are you aware that 
AIG has repeatedly utilized the expert testimony of a 
psychiatrist to review and ultimately reject PTSD claims of 
insured civilian contractors who were injured who freely and 
repeatedly admits both under oath and to reporters that he is 
neither an expert on PTSD nor on MMPI-2?
    Mr. Schader. No, I am not sure who you are referring to.
    Mr. Kucinich. Actually, are you an expert on PTSD?
    Mr. Schader. No, I am not. As a matter of fact, there is 
one thing I do want to say about that. I had talked to the 
Labor Department about 2\1/2\ years ago about sharing and 
reaching out for expert assistance from the VA, who I think 
does have the best cadre of experts. I do want to say, it may 
surprise Mr. Pitts, but I actually endorse completely his 
recommendation on the handling of PTSD cases.
    Mr. Kucinich. Mr. Pitts, have you had experience with Dr. 
Griffith?
    Mr. Pitts. Yes.
    Mr. Kucinich. Do you want to tell us about that experience?
    Mr. Pitts. Basically, the vast majority of people that he 
has seen he says don't have PTSD. He has reservations about 
whether there is such a thing.
    Mr. Kucinich. Did he repeatedly find, in your experience, 
that claimants were malingerers?
    Mr. Pitts. Normally.
    Mr. Kucinich. Do they use real experts in evaluating PTSD?
    Mr. Pitts. Dr. Griffith has said that he is not an expert 
in the MMPI-2, which is the Minnesota Multiphasic Personality 
Inventory. It is sort of a psychological battery that the 
courts are relying on.
    Mr. Kucinich. Do you employ Dr. Griffith, Mr. Schader?
    Mr. Schader. Yes, we do.
    Mr. Kucinich. Don't you think you should be employing a 
real expert in this illness rather than a self described non-
expert?
    Mr. Schader. I would like the opportunity to send to the 
committee Dr. Griffith's credentials. I don't agree that he is 
not an expert in this area.
    Mr. Kucinich. Is he a skeptic of mental illness?
    Mr. Schader. I don't believe so.
    Mr. Kucinich. Then how do you explain the number of denials 
that you have had in claims for PTSD?
    Mr. Schader. PTSD is a very difficult phenomenon to 
diagnose and prescribe treatment for. Even when it exists, it 
doesn't always prohibit or inhibit somebody from holding 
gainful employment.
    Mr. Kucinich. This subcommittee, if it hasn't already, will 
ask AIG for its records on the rate of denials of claims for 
PTSD. We will also ask both CNA and AIG for information, 
internal documents, memoranda, and emails relating to the 
relationship between your claim denials and your profits. So 
you will be getting a formal letter from the committee. I just 
want to let you know right now that will be coming.
    The Chair recognizes the gentleman from Ohio, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman. Mr. Moor or Mr. 
Schader, what percentage of the claims that you receive are 
PTSD claims?
    Mr. Schader. We don't have precise numbers on that because 
we don't track that as a characteristic. I would estimate it at 
about 20 percent of the serious cases.
    Mr. Jordan. The same percent that Mr. Pitts said for the 
type of cases he brings. So is that consistent with you, too, 
Mr. Fay?
    General Fay. I am sorry but I really do not know what the 
percentage is. I just know that on those very few cases that 
went to Administrative Law Judges only two of them were PTSD. 
We prevailed in one and the claimant prevailed in one.
    Mr. Jordan. OK. Let me change gears here. One of the 
questions I have in front of me, it has been alleged that 
companies are denying claims for fear that they will not be 
reimbursed under the War Hazards Compensation Act. Is there any 
truth to that? Have you had any situations where the Government 
hasn't reimbursed you for a war related injury?
    Mr. Schader. We have submitted about $42 million of claims 
that we had paid before certification under the War Hazards 
Compensation Act. To this date we have only received $3 
million.
    Mr. Jordan. Wow. Has that impacted your decision in how you 
have handled the claims that come in front of you?
    Mr. Schader. No.
    Mr. Jordan. Mr. Pitts.
    Mr. Pitts. The War Hazards Act people are actually a small 
group. We are talking four or five people in Ohio. Their job is 
basically to protect the taxpayer from bad War Hazards Act 
claims. So they are sort of skeptics. If there is a gray area, 
they are going to deny the claim, or there is an impetus to. 
That makes sense; that is their job.
    However, PTSD by its nature you could say is fuzzy. So it 
is something that would make sense if you were an insurance 
company. You have this fuzzy claim and you want to get your 
money back. Drag it out. Litigate it. If you lose, there is 
going to be a judicial holding that this is from the war. Then 
you know you are going to get your money back. Then you also 
get to turn in your attorneys' fees and get the 15 percent. So 
that is what is going on, I mean from my point of view. That is 
my opinion.
    Mr. Jordan. Mr. Pitts, let me stick with you on an issue 
that I brought up earlier and that I think coincides with your 
testimony. You suggest employers get a signed, written 
statement and put families on notice about DBA benefits. 
Dyncorp has this Civilian Police Employee Assistance Program. 
What are your thoughts on that kind of a program? Is that 
something we should encourage and the Department of Labor 
should encourage with contractors the Government is doing 
business with?
    Mr. Pitts. KBR also has the Employee Assistance Program to 
some part of the war, I think, where they were paying for like 
eight visits or something to a psychologist. I am not sure if 
they are still doing that. I see so many people. OK, so in some 
instances they were doing something like that. Dyncorp, I have 
to say, was proactive about PTSD and some of the other things. 
I really think they deserve some credit for that.
    Mr. Jordan. Mr. Newman, would you like to comment?
    Mr. Newman. Yes, sir. We started a simple Employee 
Assistance Program for several reasons. It was to bridge the 
gap with the insurance carriers because we thought the gap was 
bridgeable. In reality, even the requests that we would make of 
the insurance carriers oftentimes were totally ignored.
    But I was discussing with a colleague, actually from 
Dyncorp--he was here earlier today--about that issue of almost 
a national Employee Assistance Program or something to that 
effect or of encouraging the employers, not the insurance 
companies, to have that type of program.
    At Dyncorp we have a psychological staff that, regardless 
of whether it is a covered claim or what, they still provide 
some psychological services for Post-Traumatic Stress.
    I do want to comment on Post-Traumatic Stress. I disagree 
that it is fuzzy. It is pretty clear when you actually see it.
    Mr. Pitts. Can I clarify that on the fuzzy? What I mean is 
legally fuzzy in the sense that the insurance company can 
always say well, it is personal problems. How do we know it 
comes from the war? They are afraid that the War Hazards people 
are going to see it as fuzzy and deny their claim. So it hedges 
their bets tremendously to just go ahead and litigate all that 
stuff out, which is bad on the country. It increases costs. It 
is just wrong. But that is why structurally it is happening.
    Mr. Newman. Yes, sir. I want to apologize to Mr. Pitts for 
referring you to his comment of fuzzy. I was more referring to 
the comments of malingering, etc.
    Mr. Jordan. I knew what you meant. It is just the lawyers 
who get nervous. I knew what you meant. [Laughter.]
    Thank you, Mr. Chairman.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
Mr. Cummings for 5 minutes.
    Mr. Cummings. Mr. Chairman, I don't think I am going to use 
all my time. I just want to say to you, Mr. Newman, Mr. Smith, 
and Mr. Woodson, I want to thank you for your service. 
Sometimes I think people can get confused and not do everything 
that they are supposed to do for people who give so much. We 
have to straighten out this mess. You heard Mr. Seth Harris say 
that we have major problems and that they need to be corrected. 
You even heard some of these witnesses imply that, at least.
    I know how you feel, Mr. Pitts, but I know how some of my 
other witnesses feel, too. We have to straighten this out. We 
are going to do that. Because we can't be in a situation where 
you continue to suffer and get no real relief and the beat goes 
on. The AIGs of the world continue to get their bonuses and go 
on their junkets. The CNAs, no matter what the General may say, 
goes on doing their thing. But then you are left to suffer. We 
can do better than that.
    We are a better country than that, particularly when you 
consider the fact that the hard earned dollars of our 
constituents are paying into these insurance companies and they 
cannot lose. You understand that. The way this thing is 
structured, they can't lose. It makes it almost criminal, the 
idea that get our money. That is No. 1. Then they are supposed 
to take care of you and if they don't then they don't. Then you 
suffer and they get rich. Boy, what a game. What a game.
    So in some kind of way, we have to turn this around. We 
have a very committed chairman of our full committee, Mr. 
Towns. We have a very dedicated and hard working and just a 
strong chairman of this subcommittee, Mr. Kucinich. I know we 
will have our rankings hopefully joining in. Because this is an 
American problem. This is not Republican and Democrat. This is 
American.
    I mean, if you are talking about being patriotic, this 
country takes care of its own. We have become the great country 
that we are because of our moral authority, not so much the 
military authority. It may back up the moral, but it is the 
moral authority. One part of moral authority is that you take 
care of your own, period.
    So I want to thank you for your testimony. Mr. Chairman, I 
will yield back on that.
    Mr. Kucinich. I thank the gentleman. The Chair recognizes 
the gentlelady.
    Ms. Watson of California. Mr. Chairman, I just have to read 
part of my opening statement because I think it goes right to 
the reason why we had this hearing.
    In 2008, there were 200,000 civilian contractors in Iraq 
and Afghanistan. There were more civilian contractors than 
there were U.S. troops in both combat theaters combined. The 
contractors' presence in these combat zones goes primarily 
under the radar. Very little is reported on the number of 
injuries they sustain due to the service they provide in aiding 
the Federal Government in its mission. As of June 2008, more 
than 1,350 contractors have died in Iraq and Afghanistan. There 
were another 29,000 injured. More than 8,300 of those were 
serious, permanent injuries.
    So as the number of Defense Base Act claims for 
compensation due to injury of death of a contractor rises, the 
payments on the amount of compensation, the benefits paid per 
claim have dropped to their lowest level since 2003. I am 
wondering how this can be with the high levels of injuries that 
are being sustained by contractors themselves.
    Mr. Smith, I don't understand ``ignored.'' How could they 
ignore the claim? Could you explain what you mean by 
``ignored?''
    Mr. Smith. Yes, ma'am. The Department of Labor would make a 
finding at an informal hearing. That is the first step in the 
process of litigation. I am sorry, ma'am, but I don't know any 
other way to put it. They absolutely ignore the Department of 
Labor findings.
    Ms. Watson of California. The Department of Labor then?
    Mr. Smith. Yes, ma'am.
    Ms. Watson of California. I want you to know Secretary 
Solis said there is a new sheriff in town.
    Mr. Smith. Yes, ma'am. I understand that and I am proud to 
hear that. I thank this committee for stepping up and taking 
the ball. But in my case, that is exactly what has happened. In 
my opening statement, I have the proof in the documentation.
    Ms. Watson of California. Yes, well I hope that you will 
share those papers and your documentation with Mr. Schader and 
Mr. Moor.
    Mr. Smith. Yes, ma'am. I will provide that to this 
committee.
    Ms. Watson of California. Thank you. As soon as possible.
    Mr. Smith. Within 24 hours, ma'am.
    Ms. Watson of California. Thank you. With that, I will 
defer the rest of my time, Mr. Chairman, to you.
    Mr. Kucinich. I thank the gentlelady. The committee has 
submitted for the record information that AIG had a net earned 
premium from the Government of $1.3 billion from 2002 to 2007 
and underwriting gains of $500 million, a 38 percent gain.
    Now, Mr. Woodson, you lost a leg and you lost almost all of 
your eyesight?
    Mr. Woodson. I lost the sight of my left eye, three fourths 
of my right, and I lost my left leg. At the present time, I am 
using a magnifier to try to read. AIG will not even pay for the 
glasses that the doctor ordered back in April.
    Mr. Kucinich. Net earned premium of $1.3 billion and 
underwriting gains of $500 million, a 38 percent gain. Mr. 
Moor, when you hear this, do you feel any sense of regret or 
concern about what Mr. Woodson has gone through? How does this 
make you feel?
    Mr. Moor. Mr. Chairman, there is no doubt that when you 
hear something like this, with any of these gentlemen, and know 
what they have done in serving the country that you do have a 
feeling toward them. My job is to make sure that we are doing 
everything that we possibly should do and that we are obligated 
to do under the current regulations in the laws to provide the 
right care for these individuals. That is what Mr. Schader----
    Mr. Kucinich. You are telling Mr. Woodson that you did 
everything you could for him. Is that what you are telling him? 
Is that your testimony?
    Mr. Moor. I haven't personally done everything I can for 
him. I don't know.
    Mr. Kucinich. Has your company, AIG, done everything it 
could? Is that your testimony?
    Mr. Schader. The answer is yes. It is everything that we 
could have done. Just as an example, and I don't know where the 
communication is failing, but on the glasses prescription that 
was written and submitted to us on April 28, 2009, it was 
approved the same day.
    Mr. Woodson. They have never paid for it. They still have 
the glasses.
    Mr. Kucinich. Mr. Woodson, you say they never paid for it?
    Mr. Woodson. They never have paid for it.
    Mr. Kucinich. See, this is the reason why we brought these 
witnesses here. These are people who are part of the hundreds 
of thousands of contractors who are insured through a variety 
of companies with the Government making sure that you get money 
to pay claims. What happens when insurance companies don't pay 
claims? Typically, their profits are higher. That is our 
concern here.
    Our concern as a committee is Mr. Newman, who lost a leg; 
Mr. Smith, who suffers from PTSD; and Mr. Woodson, who lost 
most of his eyesight and has a prosthetic leg. Each and every 
one of them represents not just the three of them but stands 
for many more who served America as private contractors, who 
were injured and sometimes killed, and who cannot get any 
justice. Look, if you are the insurance company and you deny a 
claim, they are already at a disadvantage to fight you. If you 
defer paying a claim, you can drag it out.
    How long did it take you, Mr. Newman, to get your new 
prosthetic leg?
    Mr. Newman. The newest one, it took over 550 days.
    Mr. Kucinich. Over 550 days. Is that acceptable? It can't 
be acceptable.
    The committee is going to go further into this, I just want 
you to know. We are going to have to move on to votes here. 
Every person here who was asked to testify will be continuing 
to stay in touch with the committee and the committee with you. 
You all will be given a chance to get your testimony into the 
record of this hearing. But we are going to pursue this more.
    These three gentlemen, with the grievous injuries that they 
have suffered, came here in front of a congressional committee 
and took an oath to their testimony. Then we find out that 
there is this disconnect between payment of their claims and 
satisfying them so their lives can be made whole.
    Let me just tell you something, you gentlemen, General Fay, 
Mr. Moor, and Mr. Schader, you are going to walk out of here 
with your two natural legs. You are going to walk out of here 
not needing assistance to see where you are going. You are 
going to go home and you won't be troubled by flashbacks about 
combat. You don't have to contend with what these gentlemen 
have had to contend with and what many others who served the 
country as contractors have had to contend with. So that is why 
we are holding these hearings. This isn't about you personally, 
but you stand for institutions that we have to find a way to 
make more responsive.
    The gentlelady's time has expired. I am going to just wrap 
this committee meeting up, putting into the record that CNA's 
net earned premiums from 2002 to 2007 were $110,722,000. Their 
underwriting claims were $58 million. Their percent of gain was 
53 percent. We have others that are involved, too.
    I want to put into the record this memorandum from staff. 
It is an exchange regarding the source of a majority memorandum 
that was referenced by Mr. Fay in his testimony. This committee 
operates under rules of the House and the rules are pretty 
strict with respect to the gathering of information and the 
production of records.
    Major General Fay, a witness for CNA, made explicit 
reference to the majority staff's memorandum to Members, which 
is a non-public document prepared for subcommittee members in 
advance of a hearing. Chairman Kucinich, and this was prepared 
by the staff here just now, asked General Fay how he obtained a 
copy of the committee memorandum. General Fay responded that a 
member of his legislative staff provided it to him. She and a 
colleague were identified and approached the witness table. 
Heather Davis was sworn in.
    When asked how she obtained the majority's memorandum, Ms. 
Davis said that General Fay may have been in error and that the 
source to him of the memorandum was either herself or her male 
colleague. She said that she obtained the memorandum from 
committee staff. She was asked if it was a Democratic committee 
staff member who provided the memo. The male colleague 
responded that it was not a Democratic committee staff member 
who gave the committee memorandum to CNA.
    While this is essentially an internal matter, it was made 
external because of the fact that you, General Fay, received 
information that rightfully should not have been in your 
possession. We will investigate that further. Our attorneys 
will be in touch with you and your staff regarding this matter.
    I also want to say that in response, and by the way, I want 
the majority staff to know that I showed Mr. Jordan these 
remarks that I am about to read into the record, in response to 
the comment of the ranking member, I would like to correct the 
record. The majority has extended the customary accommodations 
to the minority including the subject of the hearing, a 
detailed briefing memorandum on the subject matter, the contact 
information of all witnesses, and the right to invite a 
witness.
    If the minority had difficulty preparing its Members for 
this hearing in spite of this considerable assistance, then we 
look forward to working with you to try to find out how we can 
make this work for you. We value your cooperation and we want 
to make sure that you have every opportunity to prepare for 
these hearings in a way that you feel is important for those 
that you serve. I value you greatly, the work of the staff on 
both sides.
    I want to thank each and every witness here. As difficult 
as it was for CNA and for AIG to be here, we do need your help 
in trying to straighten this out.
    This is not simply a private sector matter. I just spent 
the last 6 years trying to get the Defense Finance and 
Accounting Service from a privatization program that Lockheed 
Martin had that was similarly denying people their claims for 
whatever reason. So this is something that we see some systemic 
problems with. In our detailed conversations with Lockheed 
Martin, we found that the best solution for them was simply to 
give the business back to the Government, which I think they 
were glad to do because they weren't making money on it. At 
least, they weren't making as much money as you are.
    I want to thank again Mr. Newman, Mr. Smith, and Mr. 
Woodson for your service to the country. Your presence here 
represents a lot of people who were private contractors who 
served. I think that everyone here, whatever their position on 
this dais and whatever their position in the audience, 
appreciates that you served and appreciates the price that you 
paid. I think everybody is going to take a renewed interest. I 
would hope that a renewed interest is going to be taken in your 
situation but then expands to the larger question. Mr. Pitts, 
thank you for your service as well.
    Again, I want to thank the witnesses. We will be in touch 
with all of you.
    Ms. Watson of California. Would you yield for a second?
    Mr. Kucinich. I will yield to the gentlelady, of course.
    Ms. Watson of California. The reason why I read some 
paragraphs from my opening statement is because I stated some 
of the numbers. We will submit that, too, to go along with the 
report so we will have the numbers.
    Mr. Kucinich. The record of this hearing will remain open 
for five legislative days. The gentlelady's submission will be 
valued and gratefully received. I just want to make sure that I 
submitted this for the record, this calculation of profits that 
is from CNA.
    Ms. Watson of California. Thank you. I yield back.
    Mr. Kucinich. I thank the gentlelady. I also thank her for 
her willingness to work with us in crafting a legislative 
solution. The representative from the Department of Labor said 
it is really up to us. We really do have a responsibility here 
to look at this legislatively. We are going to.
    This is the Domestic Policy Subcommittee. I am Dennis 
Kucinich, chairman of the subcommittee. It is a Subcommittee of 
Oversight and Government Reform. This has been a hearing that 
has dealt with the issues of claims not being paid, the reasons 
why that could happen, and what could be done in the future to 
rectify that. I want to once again thank all the witnesses for 
their appearance. We will continue to be in touch with you.
    This committee stands adjourned. Thank you.
    [Whereupon, at 9 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
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