The insurance system, administered by the U.S. Department of Labor, once handled a few hundred claims a year. It expanded dramatically after the invasions of Afghanistan and Iraq because of the Pentagon's heavy reliance on civilian contract workers to drive fuel trucks, cook meals and provide other support services.
Interpreters in Iraq were covered by insurance purchased by their employer, first Titan Corp. and later L-3 Communications, a New York defense contractor that acquired Titan in 2005. L-3 paid AIG more than $20 million a year in premiums, according to corporate records.
Once a worker files an injury claim, the employer's insurer must begin paying benefits within two weeks or file a "notice of dispute."
Interpreters who suffered the worst injuries, such as loss of a limb or severe brain damage, typically received compensation relatively quickly. That is because they were treated at U.S. military facilities in Iraq, where staff members documented their injuries.
In other cases, AIG often had difficulty establishing to its satisfaction that interpreters' injuries or deaths were work-related. The company routinely filed notices of dispute while it investigated the claims.
"Even determining the facts of an accident -- the location and the circumstances -- can be a challenge," Charles Schader, AIG's president of worldwide claims, told a congressional panel in June. "Without sufficient information, examiners cannot make timely final determinations within 14 days."
To pay death benefits, AIG required police reports or other supporting documents, according to former L-3 officials. Internal L-3 records from 2005 show that AIG examiners sent to Iraq were able to find documentation deemed necessary for benefits in only half the cases examined.
"If you're missing one piece of documentation, you got denied," said Colleen Driscoll, who oversaw the handling of interpreters' insurance claims for L-3. "These guys get murdered coming and going to work, and AIG turns them down because they don't have a letter from the insurgents."
Driscoll, a former United Nations refugee official, left L-3 in 2007. She said the cause was a dispute with company executives over treatment of injured interpreters.
She and another former L-3 official, Jennifer Armstrong, said their experience suggested that 10% to 20% of the company's Iraqi workers who should have received benefits were denied.
Armstrong said that in one instance, a slain interpreter's widow and children had to live for months in the company's compound in the heavily fortified Green Zone in Baghdad while they waited for death benefits to be approved. It was too dangerous for the family to remain in their home, and they could not afford to relocate, she said.
"The Iraqis were looked at as second-class citizens," said Armstrong, who now works for another defense contractor. "It just became a business. When it became a business, you lost sight of the goal."
L-3 did not respond to requests for comment.
AIG arranged for many of the most severely wounded Iraqis to be transferred to Jordan, where medical facilities were better and interpreters did not face the risk of assassination.
Emad Hatabah, a Syrian-trained physician who had been medical director of AIG's Jordanian subsidiary, exercised broad authority over their care. A medical evacuation company that Hatabah owned transported interpreters from the war zone. He selected their doctors and arranged stays at hotels and rehabilitation clinics.
Once their treatment was concluded, Hatabah presented interpreters with settlement agreements providing for lump-sum payments, in return for which AIG would be released from further liability.
Several Iraqis said Hatabah pressed them to sign and told them that if they refused, they would be sent back to Iraq.