Holocaust claims program progressing toward goal

After a long struggle to develop a fair process for resolving Holocaust-era insurance claims, an international program is starting to win some praise for its efforts and hopes to conclude the majority of its work this year.

The task of settling unpaid life, annuity, education and dowry insurance claims required creation of a unprecedented global claims identification and valuation process with relaxed standards of proof so that more Holocaust victims' and survivors' decades-old claims could be identified, settled and paid at no cost to them.

The resulting International Commission on Holocaust Era Insurance Claims, launched in 1998 with offices in London and Washington, has faced several challenges, including criticism that the process has suffered from a slow pace, poor oversight of insurers, low payments and high administrative expenses.

One of the claims facility's biggest challenges has been to devise a new approach to handling claims. Traditional processing procedures, in which a claimant files a claim along with proof of a valid policy, are not applicable to the Holocaust-era policies.

"The Nazi government of Germany engaged not only in genocide and enslavement but theft of Jewish assets, including the value of insurance policies," U.S. Supreme Court Associate Justice David H. Souter wrote in AIA vs. Garamendi, citing research submitted to the court. That June 2003 decision involved the ability of state regulators to require U.S. insurers and their European affiliates to disclose the names of all Holocaust-era policyholders.

"After the war, even a policy that had escaped confiscation was likely to be dishonored, whether because the 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 of the policyholder's death," Justice Souter wrote.

Also, in the more than a half-century that has passed since many of the policies were issued in Europe, records have been lost.

Victims of Nazi persecution now living in the United States-who represent only 16% of the world's more than 685,000 Holocaust survivors-brought complaints about claims difficulties to various state insurance regulators in the early 1990s.

At regulatory hearings, elderly claimants testified that insurers had denied their claims because the claimants could not provide death certificates, which was a cruel irony for survivors whose family members were killed in Nazi gas chambers and concentration camps.

Momentum grew among regulators to find a solution before the aging survivors died, explained Gregory V. Serio, New York's current superintendent of insurance. He currently heads the National Assn. of Insurance Commissioners' International Holocaust Commission Task Force.

In addition to regulators, other participants in the ICHEIC are five European insurance companies-Allianz Insurance Co., AXA S.A., Assicurazioni Generali S.p.A., Winterthur Leben and Zurich Financial Services Group Inc.-as well as representatives of international Jewish and survivor organizations and the government of Israel.

Each participant signed a formal "memorandum of understanding" to establish "a just process to collect and facilitate the...processing of insurance claims" following negotiated guidelines, according to Lawrence S. Eagleburger, a former U.S. secretary of state who serves as chairman of the ICHEIC. Establishing such guidelines "was a much more difficult and complicated process than anyone envisioned at the start," said Mara Rudman, ICHEIC's chief operational officer.

Creating the guidelines "took complex, intense and bitter negotiations," noted Mr. Serio.

State insurance regulators' leverage during the process stemmed in part from the perception-and occasional threat-that they would take regulatory action against uncooperative companies or their U.S. subsidiaries (BI, Sept. 23, 2002).

The limit of regulators' power, however, was demonstrated in the U.S. Supreme Court's ruling in the Garamendi case. That 5-4 decision overturned a California state law that authorized insurance regulators to impose sanctions against insurance companies that failed to publish information about Holocaust-era policies. The majority opinion held the state law interfered with U.S. foreign policy, which favored a more conciliatory approach to resolving Holocaust reparations.

Search for claimants

To deal with what Mr. Eagleburger described as the "overriding moral responsibility" to pay the claims, ICHEIC launched a global campaign in February 2000 to locate potential claimants.

The ICHEIC's Web site, www.icheic.org, offered potential claimants or heirs information about claims procedures in 23 different languages. Visitors to the site can search lists naming thousands of potential policyholders from 1920 to 1945.

Up until the extended Dec. 31, 2003, deadline they also could print out ICHEIC claim forms. Although that date has passed, a person who obtained a form by the deadline can still make a claim through the commission, if they file it promptly, Ms. Rudman said.

Once a claim form is received, the commission relays it to the insurance company the claimant has named. If the claimant is unable to name any company, ICHEIC sends the form to all member companies that could have sold coverage.

Each ICHEIC insurer is responsible for reviewing the claim in accordance with ICHEIC guidelines, which include relaxed standards of proof. That allows a claimant to provide unofficial evidence, such as copies of premium receipts or records held by any governmental body that can verify the existence of an insurance policy.

If an insurer's research determines that a policy existed and it was not previously paid, a determination is made of the policy's current worth and a settlement offer is made.

The ICHEIC, which audits the insurers' decisions, also has appeals procedures for claimants and helps oversee humanitarian funds to compensate others, especially those lacking policy documentation.

As of early January, the ICHEIC had received 67,576 claims eligible for processing. ICHEIC member companies have made 3,019 claims settlement offers totaling $48.0 million. Thus far, 2,149 offers totaling $33.2 million have been paid to claimants, according to ICHEIC.

A separate trust fund in Israel, established by Generali, also follows ICHEIC's guidelines. To date, the Generali fund has made payments of about $50 million, said Chris Carnicelli, president and chief executive officer of Generali U.S. Branch in New York.

Relatively few claimants have chosen to sue insurers in U.S. courts. Bringing such suits is challenging because insurers enjoy limited protection stemming from a diplomatic agreement signed in 2000 between U.S. and German officials. That pact created the German Foundation for Remembrance, Responsibility and the Future, which provided millions of dollars to ICHEIC (BI, Aug. 28, 2000).

But some claimants are taking their chances in court. For example, plaintiffs' attorney William Shernoff of Shernoff Bidart Darras L.L.P. of Claremont, Calif., is representing 18 individuals whose claims against Generali are pending before U.S. District Court Judge Michael B. Mukasey in New York. These survivors seek full life insurance benefits and damages due to Generali's alleged bad-faith in handling of the claims, he said.

In earlier rulings, Judge Mukasey has criticized ICHEIC, which receives its funding from the participating insurers, as being "in a sense the company store."

Mr. Shernoff said that a U.S. State Department official told him that Generali is not protected by the German Foundation agreement, though the Italian insurer may have other protection from liability as a result of its arrangement with ICHEIC.

According to Mr. Carnicelli, Generali has already paid well in excess of $100 million to resolve all claims-including some paid to Mr. Shernoff's clients-through the ICHEIC. He also pointed out that the commission has been officially endorsed as the exclusive remedy for Holocaust claims.

Work nearing completion

By the end of 2004, the commission expects to complete the major portion of its mission to resolve claims disputes, though appeals may run into June of 2005, Ms. Rudman said.

At completion, she predicted that ICHEIC will have spent 20%-or $100 million-of its funding in administrative expenses, with the remaining $400 million going to claimants through claims and humanitarian payments.

The commission earlier was criticized for its administrative expenses in light of its low volume of claims payouts.

However, since a typical insurer spends 20% to 25% for administration, Mr. Serio said he considers that "a real positive" for ICHEIC.

The commission's overall job in managing claims now is "much, much better" than it had been, Mr. Serio added.

ICHEIC "has performed quite well under the circumstances," said Mr. Carnicelli of Generali.

However, "while ICHEIC has made progress...it still has more work to do," said a spokesman for the U.S. House of Representatives' Committee on Government Reform, which has held hearings on ICHEIC's operations.

"For a lot of Holocaust survivors, time is running out for justice," he said.