Holocaust Claims Still Going Unpaid

Nearly three years after an international commission was created to resolve Holocaust-era insurance disputes, the leading German insurance company has not paid a single claim, according to internal commission documents.

Instead, a consortium of German insurance companies has taken steps to make collection more difficult, including filing lawsuits in California and Florida to try to contest statutes designed to make collection easier. The companies also have not honored a commitment to provide a complete listing of potential unpaid policyholders, according to insurance regulators and Jewish advocates.

Allianz, the largest German insurance company, for example, has provided only 380 names so far out of a list of 1.5 million policies, according to commission records.

The companies say that producing the lists would be overly burdensome and in some instances would violate European privacy laws. But U.S. officials say the lists are vital to the process of settling the insurance claims.

“Production of lists and giving claimants an opportunity to know if they are on the lists or their relatives were on the list is essential for people to have confidence that all reasonable efforts have been taken to try to resolve the situation,” said Nathaniel S. Shapo, director of the Illinois Department of Insurance and chairman of the Holocaust task force of the National Assn. of Insurance Commissioners.

The firms also are seeking to get a credit for at least $25 million they gave to the International Commission on Holocaust Era Insurance Claims for operating expenses. The reimbursement would come from funds that are supposed to go toward paying policyholders, according to commission documents.

The broad issue involves claims by heirs of people murdered by the Nazis who allege that the insurance companies have refused to pay off life insurance policies written in prewar Europe.

The claimants and their advocates argue that tens of thousands of such unpaid policies exist, but the insurance companies insist that unpaid claims are rare.

In 1998, about a year after the in surance controversy erupted, several of the companies, including Allianz, said that a number of policyholders had been compensated under Holocaust reparations programs set up by the German government in the 1950s.

Joerg Allgaeuer, an Allianz spokesman in Munich, reiterated that position on Friday. He acknowledged that “it does look weird to have that zero” in the international commission’s list of claims paid. However, he said that a number of Allianz policyholders had been compensated under German government reparations programs in the 1950s, ‘60s and ‘70s. He offered no specific dollar figures.

U.S. officials dispute that assertion.

“If there were no valid claims, Allianz would not have agreed to participate” in a proposed multimillion-dollar settlement fund for claims, said Stuart E. Eizenstat, the former deputy secretary of the Treasury Department who was the special U.S. envoy on Holocaust issues in the Clinton administration.

Eizenstat said Friday that he is “very concerned about the impasse that may be developing” over the claims process and the publication of policyholder lists.

The moves by the insurance companies have angered Jewish leaders as well as insurance regulators in California and elsewhere in the United States.

The international commission has scheduled a special meeting for Tuesday in Washington aimed at resolving some of these issues, but a resolution seems unlikely, according to several sources, including Reuven “Bobby” Brown, one of the Israeli government representatives on the commission.

“That meeting will be high noon at the OK Corral,” Brown said. “I know I speak for the Jewish side. . . . We are not going to agree to anything that is not a fair shake.”

In addition to the impact on the insurance claims themselves, the continuing dispute could delay completion of a related settlement reached earlier this year to resolve World War II slave labor claims.

The two issues were linked in a $4.6-billion deal funded by German industry and the German government. Payments already have started flowing to some of the thousands of former slave laborers covered by the agreement.

Of the money in that settlement, $220 million was allocated to cover insurance claims. But no accord has been reached on several key issues that would allow that money to be distributed.

“It is critical that there be an agreement . . . relating to the unpaid policies of German insurers,” Lawrence S. Eagleburger, the former U.S. Secretary of State who heads the international commission on insurance claims, said in a declaration filed recently in a related court case.

“At present, no such final agreement has been reached,” he said. “And it is uncertain that any such agreement will be reached,” Eagleburger added in an uncharacteristically pessimistic tone.

The international commission was created in October 1998 in an attempt to find a way outside the U.S. court system to settle battles over unpaid claims. At the time, the insurers were facing multibillion-dollar class-action lawsuits in the United States. They were also concerned about legislation in half a dozen states, including California and Florida, designed to make it easier for people to collect on insurance policies from the Holocaust era. Under some of those laws, the U.S. subsidiaries of the European insurers faced the loss of their state licenses to do business if valid claims were not honored.

Commission Criticized by Both Sides of Dispute

Five insurers--Allianz of Germany, AXA of France, Winterthur and Zurich of Switzerland and Assiscurazioni Generali of Italy--agreed to fund the commission in return for receiving a “safe harbor” from litigation in the U.S.

Several German insurance companies that declined to participate in the international commission, as well as the German Insurance Assn., have challenged the constitutionality of the California and Florida laws, thwarting their implementation.

The international commission has been criticized by both sides. Survivors say the panel has failed to get insurers to pay claims more rapidly; insurers call the group overly aggressive on behalf of the survivors. The organization has also come under fire for high levels of spending on administrative costs, including newspaper advertisements, salaries and hotel bills, which total almost 10 times the amount paid to survivors.

Officials at Allianz say they had launched an internal audit of their prewar policies even before the international commission was formed. The audit of a sample of policies revealed very few that were unpaid and showed that offers had been made on those, said Allgaeuer, the company spokesman.

He added that Arthur Andersen, the large public accounting firm that did the audit in 1998, concluded that completely reviewing the company’s files would have taken 1,529 person-years.

Allgaeuer also said that Allianz had received no valid claims under the process set up by the international commission--an assertion that is disputed by U.S. insurance officials.

“I know people who are holding Allianz policies from this era” that have not been honored, said Deborah Senn, the former insurance commissioner for the state of Washington who was one of the most forceful regulators in support of survivors while she was in office. “This company has thrown every barricade in the path of survivors,” said Senn, who now practices law in Seattle.

Along the same line, other survivor advocates point out that of the thousands of claims sent to the international commission for review, the companies have denied only nine because they were previously paid by one of the firms and denied an additional 66 because the individual was compensated by a government program, according to records of the International Commission on Holocaust Era Insurance Claims.

One of the complicating factors is that nearly all Holocaust victims lost their records when they were taken to the German death camps, said Shapo, the Illinois insurance department head. Moreover, the Nazis did not issue death certificates at the camps. Consequently, virtually none of the survivors or heirs of those who died have records to document their claims, making them dependent on the willingness of the insurance companies to search their files.

Effort to Show Goodwill Exists

“That leads to a rough road and is at the heart of the extraordinary frustration that people experience,” Shapo said.

From the standpoint of the companies, however, the insistence on further searches of files and publication of lists has unnecessarily dragged out the process of settling claims.

Wolfgang Gibowski, a spokesman for the German Foundation, which is supervising the slave labor claims process, said that representatives of the foundation would try to calm disagreements at Tuesday’s meeting. “We are going to talk to the American side, the Israeli side, to convince them there is goodwill on the German side,” he said.

But, he added, the international commission “should think more about taking care to get payments started than to discover and discover and discover and accelerate costs.”

“They think there are more unpaid policies” than actually exist, he said.

Another thorny issue is the contention of the German Foundation that German insurers, primarily Allianz, should be able to recoup at least $25 million that they previously appropriated to fund the commission’s operations.

Foundation leader Hans-Otto Brautigam presented Eagleburger with a proposal on June 11. Eagleburger distributed it to commission members, including U.S. insurance regulators, Israeli officials and leaders of Jewish organizations in this country, arousing ire in all three constituencies. In an accompanying memo, Eagleburger said Brautigam had told him the proposal was based on a German law and that “while there is some room for discussion. . . his flexibility is very limited.”

Among other things, the foundation maintains that the German insurers should be able to recover $21 million in contributions that were made by German companies for the commission’s administrative expenses from 1998 through 2000. (In effect, the reimbursement would be effectuated by setting off $21 million from the money the commission would get under the slave labor agreement.)

“This is an inappropriate use of foundation money,” California Department of Insurance attorney Leslie E. Tick wrote in a June 15 memo to Eagleburger. “Claim money should not be used to reimburse Allianz for [commission] expenses incurred to date.”

Commissioner Shapo said he also was troubled by the Brautigam proposal. “I have yet to see evidence that there is a basis” for these proposals in the U.S.-German agreement settling the slave labor issue.

Critics of the reimbursement proposal also note that none of the other companies that originally funded the commission in the fall of 1998 would be reimbursed because they are based in other countries and thus are not covered by the U.S.-German agreement. “They want a sweetheart deal we are not going to give them. We are not going to give better terms to the Germans than to the others,” Israel’s Brown said.