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Holocaust Aid Statute Is Upheld

Courts: Reversing a trial judge's ruling, 9th Circuit says state law aiding victims in seeking redress from insurers is constitutional.


A federal appeals court ruled Monday that a California law designed to aid Holocaust victims seeking compensation from insurance companies is constitutional, paving the way for potentially thousands of claims.

The decision by the U.S. 9th Circuit Court of Appeals marked the first time a higher federal court has upheld such a state statute, according to Century City attorney Frank Kaplan, who is special counsel to the California Insurance Commission on Holocaust issues.

"This decision is a huge development for Holocaust survivors in California and all over the country," said David Lash, executive director of Bet Tzedek Legal Services in Los Angeles. "The ruling allows survivors to get at the truth," he said.

Injunction Issued

The appellate court reversed a trial judge's ruling that the Holocaust Victim Insurance Relief Act of 1999 violated due process rights of insurers. The judge had issued an injunction two years ago barring the state Insurance Commission from enforcing the statute.

The law, written by former Assemblyman Wally Knox (D-Los Angeles), requires any insurer doing business in California to disclose information about any policies sold in Europe from 1920 to 1945.

European insurers, many with California affiliates, have been accused in recent years of failing to honor valid policies issued during the Holocaust. Most lack records to substantiate their claims because the paperwork was confiscated or lost when the Nazis uprooted millions of people and forced them into concentration camps during World War II.

Knox pushed for disclosure of information that could be critical in determining the validity of claims.

If the insurer fails to provide information, the state can revoke the insurer's license.

The law also extended the statute of limitations for filing claims on such policies until the end of 2010.

Several insurers challenged the statute, contending that the law interfered with the federal government's control of foreign affairs, violated due process of law, the Constitution's equal protection clause and European data privacy statutes.

Among the companies contesting the law are Gerling Global Reinsurance Corp. and several of its affiliates--Assicurazioni Generali, Winterthur International America Insurance Co., America Underwriters Insurance Co. and several others--as well as the American Insurance Assn.

The companies recruited William H. Webster, a former federal appeals court judge and former head of the Central Intelligence Agency, as well as Kenneth S. Geller, one of the nation's top appellate lawyers, to present their case. The U.S. Justice Department, which has expressed concern that new state laws seeking to help Holocaust victims could worsen U.S. relations with other countries, weighed in on behalf of the insurers.

But in its 3-0 ruling, a 9th Circuit panel rejected all the companies' major contentions.

The court held that California can require the companies to make disclosures about the policies at issue "even though the required information may be in the hands of a related entity that is in a foreign country," such as the California company's parent firm or subsidiary.

In her opinion, Judge Susan P. Graber said that state statutes and regulations "routinely require multinational insurance companies, banks and the like to disclose foreign activities and transactions engaged in by them and their parent and affiliate companies."

Graber's opinion, which was joined by Judges Alfred T. Goodwin and Richard A. Paez, also noted that the law did not seek to regulate the foreign affiliates of the California licensed companies. Nor does the statute seek to compel compensation--only to require information, Graber wrote.

"Both the demands and the sanctions of the statute fall solely on California insurers," Graber wrote.

The 9th Circuit panel also emphasized that the California law is different in significant respects from a Florida law on the same issue that was struck down last year by a federal appeals court in Atlanta.

Kaplan, special counsel to California Insurance Commissioner Harry Low, said that he was "very pleased with the ruling."

"We hope and expect that the insurance companies will now comply with the statute and promptly provide the information that survivors have been seeking for 55 years," Kaplan said.

Assessing Claims

Once insurers provide the information, 20,000 Holocaust survivors in the state and thousands of heirs will be able to assess whether they have a legitimate claim, Kaplan said.

Nicole Mahrt, a representative for the American Insurance Assn., said: "We're reviewing the ruling and considering our options."

The companies also contended that the California law was preempted when the U.S. and German governments opened negotiations to resolve the claims of Holocaust victims.

The negotiations led to a $5-billion fund that would compensate victims of slave and forced labor and other claims, including insurance.

In addition, the companies noted that an International Commission on Holocaust Era Insurance Claims, headed by former U.S. Secretary of State Lawrence Eagleburger, had been created to settle these cases.

But Holocaust victims and their advocates say the commission has been ineffective in resolving claims and has spent millions more on administrative costs than it has generated in claims payments to victims.

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