Senate Panel OKs Measure to Aid Holocaust Claims

A state Senate committee Tuesday unanimously approved a bill to strengthen the power of California regulators to suspend the licenses of insurance companies that fail to honor valid claims lodged by Holocaust survivors and the heirs of Jews murdered in World War II-era genocide.

Even as the committee approved the bill by Sen. Tom Hayden (D-Los Angeles), however, a potentially serious controversy has emerged over a proposal to form an international commission to resolve billions of dollars of such insurance claims.

The rift pits California Insurance Commissioner Chuck Quackenbush and his counterpart from New York, Neil Levin, against other insurance regulatory officials from around the country.

Those officials, led by Washington state Insurance Commissioner Deborah Senn, contend that the two men were exceeding their authority last week when they announced the establishment of the commission after a meeting with four large European insurers and two Jewish organizations that work on Holocaust-related reparations issues.

Senn, who heads a national task force of 27 state insurance commissioners working on the claims issue, said in an interview that the plan announced by Quackenbush and Levin is flawed and needs revision.

Additionally, Senn has raised questions about Quackenbush’s decision to hire Ernst & Young, the large public accounting firm, to work for California on its probe of the insurance claims.

Ernst & Young recently has done work for Assicurazioni Generali, one of the insurers being sued by the heirs of Jews murdered in World War II-era genocide.

Consequently, the firm may have a serious conflict of interest in representing the state, according to Senn, Hayden and New York attorney Edward D. Fagan, one of the lead lawyers in a federal class-action suit against the insurers. The suit alleges that 15 European insurers--including Generali--have failed to honor valid claims of Holocaust survivors and heirs of those who died in the Holocaust.

Hayden plans to amend his bill to include language on the conflict of interest issue after speaking to Quackenbush and doing further research on other firms that might be able to do the needed investigation and record reviews. “It’s unfortunate that this has arisen,” he said.

The bill is set to move next to the Appropriations Committee because it calls for an unspecified amount of money for a four-year Insurance Department endeavor on the issue.

Insurance Department attorney Steven Suchil, who gave the bill the department’s blessing, said the agency is seeking $16 million for the project. Hayden said he had invited Quackenbush to speak at the hearing, but was told at the last minute that as a result of “a misunderstanding” the commissioner had gone to Los Angeles.

Over the last six months, Quackenbush, who is up for reelection, has played a very visible role on the Holocaust issue. He has held three public hearings, subpoenaed insurance company officials, intervened on behalf of the plaintiffs in the New York class-action suit, threatened to remove the licenses of companies that failed to honor valid claims and sent a representative of his staff to do a preliminary reconnaissance on records at a Generali warehouse in Trieste, Italy.

But the new controversy potentially could tarnish his image on the issue.

William Palmer, general counsel of the California Insurance Department, vigorously defended Quackenbush’s actions, both on the formation of the commission and the hiring of Ernst & Young.

The goal of Quackenbush’s plan is to “put justice and morality above petty legalese and get justice to the survivors in their lifetime, realizing that the clock is running,” Palmer said.

The current controversy, however, could seriously complicate the effort to resolve the claims--many of which have been pending for decades and involve very elderly people.

Los Angeles attorney Deborah Sturman, who represents hundreds of claimants, said at the hearing that the average age of a Holocaust survivor is 78.

“These people have been lifelong victims of anti-Semitism,” she said. “The claims they are asserting are not charity. It is their right.”

Last Wednesday afternoon, Quackenbush and Levin announced that they had reached “a historic breakthrough” on how to handle the claims. The two commissioners said that agreement had been reached with Generali and three other insurers, along with the World Jewish Congress and the Conference on Material Claims Against Germany, to establish an international commission that would oversee a process to ensure that the insurance claims are “finally paid in an expeditious manner.”

The announcement also said that the commission would work to resolve existing litigation and “consult with governmental authorities” to gain legal protection for “insurers voluntarily participating in the process.”

The two made their announcement under the auspices of a panel formed by the National Assn. of Insurance Commissioners, but Senn says she doubts that the regulators have any authority to forestall legislation or resolve litigation.

In addition, Senn said she was disturbed by the fact that the announcement contained no provision for disclosure of insurance company records.

Karen Asher-Cohen, director of Insurer Services for the insurance department in Florida, home to about 5,000 Holocaust survivors, expressed similar concerns.

Both Palmer and John Catagna, a spokesman for Commissioner Levin in New York, said that the structure of the commission, its composition and a host of other issues are still a work in progress.

Palmer also said that Ernst & Young and three other firms that had been hired by the state “disclosed all their conflicts to us.” All the large accounting firms are likely to have conflicts, he said, adding that he did not think any of Ernst & Young’s conflicts warranted barring the firm from working on the project.

But New York attorney Fagan said the conflict was serious, as did Hayden.

Last June, an Ernst & Young partner in Italy issued a formal opinion that Generali had no obligations for any assets that may have been seized by Communist officials when the company’s Czech branch was nationalized--a position that is at odds with that of the policyholders, their attorneys and U.S. regulators.

“This is a threshold issue in our case,” Fagan said.

Hayden said: “I don’t know why you would hire a firm that said an insurer had no responsibility for the claims.”

“Overall, I think Quackenbush’s intentions are good,” Hayden said. But “I want to arrive at an approach that is free of even the slightest appearance of a conflict of interest.”