by T. Christian Miller, ProPublica, Sep. 27, 2011, 10:11 a.m.
Private contractors injured while working for the U.S. government in Iraq and Afghanistan filed a class action lawsuit  in federal court on Monday, claiming that corporations and insurance companies had unfairly denied them medical treatment and disability payments.
The suit, filed in district court in Washington, D.C., claims that private contracting firms and their insurers routinely lied, cheated and threatened injured workers, while ignoring a federal law requiring compensation for such employees. Attorneys for the workers are seeking $2 billion in damages.
The suit is largely based on the Defense Base Act, an obscure law that creates a workers-compensation system for federal contract employees working overseas. Financed by taxpayers, the system was rarely used until the wars in Iraq and Afghanistan, the most privatized conflicts in American history.
Hundreds of thousands of civilians working for federal contractors have been deployed to war zones to deliver mail, cook meals and act as security guards for U.S. soldiers and diplomats. As of June 2011, more than 53,000 civilians have filed claims for injuries in the war zones. Almost 2,500 contract employees have been killed, according to figures  kept by the Department of Labor, which oversees the system.
An investigation by ProPublica, the Los Angeles Times and ABC2019s 20/20  into the Defense Base Act system found major flaws, including private contractors left without medical care and lax federal oversight. Some Afghan, Iraqi and other foreign workers for U.S. companies were provided with no care at all.
The lawsuit, believed to be the first of its kind, charges that major insurance corporations such as AIG and large federal contractors such as Houston-based KBR deliberately flouted the law, thereby defrauding taxpayers and boosting their profits. In interviews and at congressional hearings, AIG and KBR have denied such allegations and said they fully complied with the law. They blamed problems in the delivery of care and benefits on the chaos of the war zones.