Holocaust Insurance Law Negated

The U.S. Supreme Court on Monday overturned a California law designed to help Holocaust survivors collect on insurance policies from the Nazi era, ruling 5-4 that the state was improperly interfering with foreign affairs.

Insurance companies praised the ruling, but Holocaust survivors and leading Jewish organizations decried it, saying that it benefits companies that have not acted honorably. The ruling is “a crushing blow to the victims of the Holocaust,” according to a statement issued by the Simon Wiesenthal Center.

Members of Congress from both parties said they would push legislation that would help survivors pursue claims despite the ruling.

European insurers, many with California affiliates, have been accused in recent years of failing to honor valid policies issued during the Holocaust. Most claimants 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.

The 1999 law requires insurers doing business in California to disclose information about any policies sold in Europe from 1920 to 1945. Companies that failed to comply could have lost their licenses to do business in the state.

The American Insurance Assn. and several insurance companies contended that if the California law were permitted to stand, 50 states could establish 50 different disclosure requirements.

The Bush administration sided with the insurers, saying the law hampered the federal government’s goal to speak “with one voice” in foreign affairs.

That argument proved critical to the high court.

“The basic fact is that California seeks to use an iron fist where the President has consistently chosen kid gloves,” Justice David Souter wrote for the majority, referring to the administration’s position that the claims should be resolved by an international commission, headed by former Secretary of State Lawrence Eagleburger. The commission has been criticized by Jewish groups as ineffective.

“We have heard powerful arguments,” Souter added, “that the iron fist would work better, and it may be that if the matter of compensation were considered in isolation from all other issues involving European allies, the iron first would be the preferable policy. But our thoughts on the efficacy of the one approach versus the other are beside the point, since our business is not to judge the wisdom of the national government’s policy; dissatisfaction should be addressed to the president or, perhaps Congress.”

Justice Ruth Bader Ginsburg, one of the two Jews on the high court, issued a sharp dissent from the bench. “The judiciary has no warrant to serve as an expositor of the nation’s foreign policy” by overriding a state statute in this manner, she wrote.

Justice Stephen G. Breyer, the other Jewish member of the court, joined Souter, Chief Justice William H. Rehnquist and Justices Sandra Day O’Connor and Anthony M. Kennedy in the majority. Justices John Paul Stevens, Antonin Scalia and Clarence Thomas joined the dissent.

The American Insurance Assn., a trade organization that challenged the law, said it was “gratified” by the decision. “While there is no way to provide absolute justice for Holocaust victims and their families, we believe that the International Commission for Holocaust Era Insurance Claims (ICHEIC), which was established specifically to handle Holocaust insurance claims, is the best way to provide a measure of financial relief today.”

Commission spokesman Dale Franklin said the group, which was formed in an attempt to head off litigation, was pleased with the ruling. “We believe ICHEIC is the best way to resolve insurance claims” arising out of the Holocaust. He said the organization has helped to arrange more than $37 million in settlement offers, about 75% of which have been accepted.

In her dissent, Ginsburg noted that the total is less than the $40 million in administrative costs the commission had run up as of two years ago. “Moreover,” Ginsburg wrote, “ICHEIC has thus far settled only a tiny proportion of the claims it has received.”

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International Policy

An agreement between the United States and Germany provides that all claims against German insurance companies must be submitted to the commission. A pact signed last year set aside $275 million to settle claims and support humanitarian programs for Holocaust survivors.

California Insurance Commissioner John Garamendi said he was “deeply disappointed that the court did not uphold the constitutionality of the Holocaust Victims Insurance Relief Act, and that it did not see fit to require insurers to live up to their obligations. Now the ball is in the Bush administration’s hands.”

Century City attorney Frank Kaplan, who represented California, contended that states have broad authority to regulate insurers and that the law did not interfere with foreign affairs.

In addition to helping Holocaust victims, Kaplan contended, the statute provided information to consumers that could be useful in evaluating insurance companies.

Kaplan said about 20,000 people in California could benefit from the law, including 5,600 Holocaust survivors and thousands of family members of those killed during the Holocaust.

Edwin Kneedler, U.S. deputy solicitor general, had countered before the high court, “What we have here is one state of the union trying to establish its own foreign policy. The Constitution assigns responsibility for foreign relations to the national government.”

Souter and four other justices agreed. “Vindicating victims injured by acts and omissions of enemy corporations in wartime is thus within the traditional subject matter of foreign policy in which national, not state interests, are overriding, and which the national government has addressed.”

The court majority, as well as the dissenters, did not take issue with the contention that the survivors had been harmed economically, in addition to the brutal mistreatment inflicted upon them.

“The Nazi government of Germany engaged not only in genocide and enslavement but theft of Jewish assets, including the value of insurance policies, and in particular policies of life insurance, a form of savings held by many Jews in Europe before the Second World War,” Souter wrote.

“After the war, even a policy that has escaped confiscation was likely to be dishonored, whether because insurers denied its existence or claimed it had lapsed from unpaid premiums during the persecution, or because the government would not provide heirs with documentation,” Souter added.

New York University law professor Burt Neuborne, who was one of the lead lawyers in a separate Holocaust reparations case filed against Swiss banks, said he was disappointed in the decision, but he saw a silver lining in that language.

“It may be the first time the Supreme Court has formally acknowledged the massive nature of the theft which took place during the Holocaust. This lays to rest the myth of Holocaust deniers and others that these claims were blackmail,” Neuborne said.

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Expressing Outrage

Los Angeles attorney David Lash, the former executive director of Bet Tzedek Legal Services, which represents many Holocaust survivors, criticized the ruling.

“In very real human terms, this is going to have an adverse impact on the lives of Holocaust survivors who have been waiting 50 to 60 years for some measure of truth and some measure of salvation,” Lash said. “This may have been one of their last great hopes to unearth truthful information about their families ... who died in the death camps. The records of those truths [the insurance policies] still exist with the insurance companies, who have for the past 50 or 60 years have largely been denying survivors access to information that because of the most horrific crime in history remains only in their hands.”

National legislation aimed at making the companies disclose their policies has been introduced by Rep. Henry Waxman (D-Los Angeles) as well as by Sen. Norm Coleman (R-Minn.) and Rep. Mark Foley (R-Fla.).

Foley and Waxman said they hope the Supreme Court ruling will spur congressional action.

“If the Supreme Court won’t stop this thievery, Congress must,” Foley said.

The ruling struck down a unanimous decision of the U.S. 9th Circuit Court of Appeals, which upheld the law last July.

Several Southern California survivors, including Dr. Jack Braun of West Covina, who has sued over a policy his father purchased in Lithuania, before being killed in the Treblinka death camp, expressed outrage at the ruling.

“My thinking is very simple,” Braun said.

“If someone buys a policy and pays the premiums and then the insurer tries to wiggle out of it, that is breaking trust. That has nothing to do with international relations.”