Holocaust-Era Insurance Claims:
Background and Issues
(November 27, 1999)
Summary
During the 1930's and 1940's, life insurance was a
popular form of savings and investment — a way to safeguard a family’s
assets, assist in retirement planning, provide for a dowry or save for the
education of children. After the Nazis came to power in Germany, they
systematically confiscated the insurance assets, including the cash value
of life insurance policies of Jews and other designated enemies of the Nazi
regime. After the war, European insurers often rejected insurance claims of
Holocaust victims and heirs who lacked the required documentation.
Fifty years later, Europe’s largest insurers, many
with affiliates in the United States, have been named as defendants in
class action lawsuits that seek recovery of unpaid Holocaust-era insurance
claims. Reportedly, European insurers have denied payment obligation on
Holocaust-era insurance claims for five basic reasons: nationalization of
insurers’ assets; wartime Germany’s confiscatory regulations and
decrees targeted towards Jews and other enemies of the state; lack of
policyholder documentation; policy cancellation from non-payment of
premiums; and invalidation of claims due to statutes of limitations.
European insurers make several arguments to support
their claims for non-payment: (1) the assets supporting Holocaust-era
insurance policies — policy reserves held in the form of government
securities or real estate — were expropriated by the respective
Soviet-controlled Communist governments in Central and Eastern Europe; (2)
during and after the war the German government, not they, were liable for
the Jewish insurance monies they had paid out to the Nazi regime; (3)
Holocaust survivors and heirs were paid billions of dollars as
indemnification and compensation by the Federal Republic of Germany under
its post-war restitution programs; and 4) U.S. insurance regulators and the
courts have no jurisdiction over their dealings.
U.S. insurance regulators and their trade group, the National Association
of Insurance Commissioners (NAIC), are uniquely positioned to assist
Holocaust survivors and their heirs in resolving unpaid Holocaust-related
insurance claims. In October 1998, the NAIC established the International
Commission on Holocaust Era Insurance Claims (ICHEIC) to determine the
current status of Holocaust-era insurance and promulgate a valuation and
claims process to settle unpaid Holocaust-era insurance claims
Congressional interest has set in motion legislative
activities that would allow Holocaust survivors to sue German insurers that
denied Holocaust-era insurance claims, regardless of the decisions made by
the ICHEIC.
Background
In the 1930's and 1940's, Europeans customarily
purchased insurance to safeguard their family’s future, assist in
retirement planning, provide for a dowry or save for the education of
children. Some fifty years later, an international effort is now underway
to assign insurance liability for unpaid and unclaimed insurance policies
bought before 1946 by people who became victims of Nazi persecution.
Europe’s largest insurers have been named as
defendants in class action lawsuits, alleging the companies avoided payment
to policyholders, beneficiaries or their heirs on life insurance policies
issued between 1920 and 1940 to people who became victims of the Nazi
regime. European insurers identified in this matter currently engage in
extensive insurance business in the United States, either directly or
through multiple branches and subsidiaries; in some cases, they provide
U.S. insurers with a worldwide network of insurance facilities to meet the
insurance needs of U.S. companies with international operations.
European insurance companies refused to pay many
Holocaust-era insurance claims for several reasons: (1) the socialization
(nationalization) of insurance company assets in Central and East European
countries after the war transferred to various governments and successor
entities the legal and moral responsibility for unpaid and unclaimed
insurance policies; (2) confiscatory regulations and decrees in Germany
forced insurers to pay insurance proceeds and the cash values of life
insurance policies to the Nazi regime, and Germany’s postwar restitution
programs compensated individual Holocaust victims for specific claims as
well as for Germany’s general responsibility for the Holocaust; (3) the
beneficiaries lacked death certificates to redeem their murdered
relatives’ insurance policies; (4) policies lapsed (canceled) for
non-payment of premiums; (6) claims were invalidated by the passage of
time.1 Holocaust survivors and heirs, as
well as their supporters, assert that these are rationalizations for the
non-payment of claims and do not relieve the European insurers of their
obligation to honor legitimate unpaid claims.
Triggering the Holocaust-era insurance claims issue was
the disclosure of previously secret documents stored in archives in the
former Soviet Union that provide evidence that high-ranking European
insurance company representatives in Germany, Switzerland, Italy, and
Austria were “co-conspirators” with Nazi leaders in confiscating
insurance assets from German Jews and other victims of Nazi persecution.2
Another factor triggering the Holocaust-era insurance
claims issue involved threats of an insurance consumer boycott in Israel,
and an appeal to the Israeli government to delay the acquisition of Migdal
Insurance Group by Assicurazioni Generali di Trieste Venezia until Generali
had resolved unpaid Holocaust-era life insurance claims. This acquisition,
for the sum of $320 million, would have been the largest financial merger
in the history of the Israeli insurance industry. Under pressure from
members of Israel’s Knesset who threatened to introduce legislation that
would have blocked the Generali-Migdal merger, Generali opened its
archives.3
According to media reports, the record found in
Generali's archives showed that the insurer failed to honor Holocaust-era
claims because its Hungarian operation, Der Ankar Insurance Company, was
nationalized after the war and its assets shifted to Hungarian authorities.
It was later revealed, however, that Der Ankar was reimbursed by the
Hungarian government, but the company did not pay any benefits. The company
failed to honor claims, insisting on receiving death certificates to prove
the deaths of Holocaust victims, but had to abandon this requirement when
international agreements annulled the need to prove the death of Holocaust
victims.4
European insurer's main legal defense in the class
action lawsuits — the so-called "nationalization defense" —
is that individual Holocaust victims and their heirs were paid billions of
dollars by the Federal Republic of Germany, which assumed legal
responsibility for bodily injury, property damage, and lost assets,
including insurance policies, as part of the country’s postwar
restitution program.
It is important to note that most European insurers were
bankrupt or near bankrupt at the end of the war because either they had
been forced to invest in Nazi War Bonds that became worthless, or they held
properties that were destroyed during the war. To prevent the collapse of
the insurance industry, the post-war German government provided state
guarantees, similar to those currently provided by state guaranty
associations in the United States when an insurer becomes insolvent, that
could be drawn upon by insurers to pay individual claims. Further, insurers
maintain that while they might have colluded with the Nazis, they were not
enriched from unpaid or unclaimed policies and that they will pay any
claim, provided there is reasonable evidence that the beneficiaries were
not paid by or received indemnification from the German government under
its post-war restitution programs.
Nazi Confiscation of Insurance
Assets
This overview of the mechanics of German-Jewish
insurance asset confiscation is based on the work of Dr. Gerald D. Feldman,
Professor of History, University of California, Berkeley. He presented much
of that work at the Washington Conference on Holocaust-Era Assets, November
30 to December 3, 1998.
Professor Feldman made a distinction between direct and
indirect efforts to confiscate the insurance assets of German Jews. Prior
to World War II, the insurance assets of Jews were indirectly confiscated.
Indirect expropriation took the form of economic deprivation — i.e., loss
of livelihood and the ability to pay premiums, the financial needs arising
from decisions to emigrate to Switzerland, Palestine, or elsewhere, and
other financial imposition. The financial needs arising from emigrating
during the period 1933-1939 forced Jews to cancel, surrender (cash-in), or
convert to paid-up (which meant incurring a significant financial loss)
their life insurance policies in order to satisfy tax and other currency
and financial obligations imposed on them by the Nazi regime.
According to Professor Feldman, Jews who planned to
emigrate had to notify German authorities of their intention and, in
certain instances, transform their bank accounts into blocked emigrant
accounts from which they could only withdraw funds with the permission of
the tax authorities upon certification that they had paid an onerous Flight
Tax and Asset Tax. Insurance proceeds were paid either into these emigrant
accounts or directly to German authorities.
After 1939, the confiscation of insurance assets of Jews
became more direct, with expropriation often following deprivation of
citizenship. Once a German citizen was deprived of citizenship — usually
arbitrarily — the Nazi regime could then "legally" seize that
person's bank accounts and insurance policy proceeds. According to Feldman,
German Jews who held insurance were forced to cash in their policies by
1940. The confiscation of these assets was fully systematized with the
enactment of the 11th Decree of the Reich Citizenship Law of November 25,
1941, which mandated the reporting and confiscation of all bank accounts
and the face value of all insurance policies of Jews remaining in Germany.
Insurance companies, banks, and other institutions holding Jewish assets
were required under the Decree to report all Jewish assets to German
financial authorities. The confiscation of Jewish insurance assets spread
as Germany occupied more and more territory across Europe.
State Legislative Activities
Several states — California, Florida, New York, and
Washington State — have passed insurance-related legislation to restrict
the ability of European insurers to engage in business transactions in that
state if they have not paid outstanding Holocaust-era insurance claims.5
The California legislature approved two
Holocaust-related insurance laws. The first law, which gave Holocaust
victims and heirs in California the right to sue to collect
Holocaust-related claims, extends the statute of limitations for these
claims until 2010. On April 6, 1999, the 2nd District California Court of
Appeals upheld this law.6 The second law
compels insurers doing business in California to disclose information about
policies sold in Europe from 1929 tho 1945. The Department of Insurance is
to use the data to create a comprehensive Holocaust insurance data base.
Under this law, the Commissioner has the authority to revoke the license of
any insurers who fails to file information on the policies and their
policyholders. The companies must demonstrate that they have either paid
all valid claims, or have been unable to locate the beneficiaries despite
diligent searches. Should no beneficiaries be found, the companies would be
required to contribute the proceeds to a non-governmental organization
which would distribute the funds to Holocaust survivors and heirs.7
On July 1, 1998, Florida’s governor Lawton Chiles
signed the Holocaust Victims Insurance Act, which requires insurance
companies that do business in Florida, and which sold policies to Jews in
Europe, to pay the claims of the victims and their heirs. The bill waives
the 10-year statute of limitations on insurance claims for life, property
or education policies that were issued or in effect from 1920 to 1945,
allowing Holocaust victims until 2008 to submit claims.8
On July 8, 1998, the New York state legislature passed
the Holocaust Victims Insurance Act, which subjected all insurers licenced
in New York to strict requirements for investigating and resolving claims
on property/casualty and life policies that may have been purchased by
Holocaust victims. The law encourages insurers to comply with the ICHEIC to
resolve unpaid claims. Failure to comply would result in the insurers being
subject to reporting requirements and civil fines of $1,000 per day. 9
In May 1999, the Washington state legislature passed the
Holocaust Insurance Act of 1999 to create a Holocaust Survivor Assistance
Office to assist the state's Holocaust survivors and heirs recover proceeds
from insurance policies that were improperly processed or denied. The law
would waive the statute of limitations for unpaid insurance policies, allow
survivors and heirs of victims to file lawsuits against insurance companies
that failed to recognize those claims, and require that European insurers
that conduct business in Washington open their books and records to
Holocaust survivors.10
State Insurance Regulatory
Action
U.S. insurance regulators and the NAIC,11 are uniquely positioned to assist Holocaust
survivors and their heirs in resolving unpaid Holocaust-related insurance
claims. The NAIC was created in 1871 to establish a coordinated and
consistent system of regulation of multi-state insurers. To achieve this
objective, the NAIC developed uniform standards for financial reporting by
insurance companies. It meets several times each year to investigate
emerging issues and to develop “model” legislation for introduction in
state legislatures.
U.S. insurance regulators have undertaken several
specific steps to resolve unpaid claims on behalf of Holocaust survivors
and victims’ heirs. In September 1997, the NAIC established a Working
Group to determine the scope of legitimate, unpaid insurance claims arising
from the Nazi era in Germany and other European nations, and to recommend
ways that the NAIC and insurance regulators in each state could help
Holocaust survivors and their heirs recover the benefits they had been
denied or have not yet sought. The Working Group held several informational
meeting across the United states to collect testimony from Holocaust
survivors and their heirs, as well as to hear from representatives of
several of the largest European insurers that have been identified in this
matter.
The Working Group made four recommendations:
-
develop a model claims process for individual U.S.
states;
-
assist the state insurance departments in responding to
legal jurisdictional questions;
-
provide assistance to researchers and insurance
archeologists in developing a national database to record and track
insurance claims and potential claimants; and
-
create an International Commission on Holocaust Era
Insurance Claims (ICHEIC) to "establish a just process that will
expeditiously address the issue of unpaid insurance policies issued to
victims of the Holocaust."
In October 1998, the ICHEIC was established by the NAIC
in conjunction with several European insurance companies,12 European regulators, representatives of several
Jewish organizations, and the State of Israel. European insurers agreed to
provide the ICHEIC with full access to all of their relevant files and
records, and to contribute to the establishment of a humanitarian fund to
pay Holocaust survivors who have policies that cannot be traced to an
existing insurance company.
State insurance regulators have several tools to address
the failure of European insurers to pay Holocaust-era insurance claims:
-
undertake market-conduct audits to examine the books and
records of European holding companies on behalf of claimants in the various
states;
-
use the unfair trade practices statutes to investigate a
“bad-faith-claims practice” charge; or
-
utilize the Form A acquisition process, which enables a
state to consider foreign and alien ownership interest in insurers
transacting business in that state.
The issue of unpaid Holocaust-era insurance claims was a
central topic at the Washington Conference on Holocaust Era Assets,
November 30-December 3, 1999. During the conference, a rift developed among
members on the ICHEIC regarding the use of sanctions to force European
insurers to join the Commission. Chairman Lawrence Eagleburger stated his
opposition to sanctions against insurers that have failed to join the
settlement process: he supports an approach that emphasizes “moral
persuasion.”13 On the other hand,
several U.S. insurance commissioners have stated their willingness to use
newly enacted laws that allow them to prohibit uncooperative insurers from
selling insurance in their state. State banking regulators in New York,
Florida, and California have also shown a willingness to impose sanctions
in response to Holocaust-era issues. State officials (i.e. controllers,
treasurers, and other financial managers) could delay mergers and other
financial transactions that require their approval if European insurers
fail to resolve unpaid claims.
Most legal experts agree that economic sanctions against
European insurers for non-payment of Holocaust-era insurance claims would
not violate international trade agreements in service trade under the World
Trade Organization. However, the U.S. State Department has urged insurance
commissioners, especially those in California, Florida, and New York, not
to impose sanctions against European insurers that are part of the ICHEIC.14 Stuart Eizenstat, then Undersecretary of State,
argued that sanctions would "gravely undermine the commission's work,
to the ultimate disadvantage of Holocaust survivors."15 He suggested that U.S. insurance commissioners
recognize the importance of a "safe harbor" for the European
insurers that are actively working with the ICHEIC, and that the Commission
is a better alternative than litigation (class-action lawsuits), which
typically takes years, if not decades, to be completed. Los Angeles
Superior Court Judge Florence-Marie Cooper has set February 9, 2000 as the
first trial date assigned in the United States or Europe to any
Holocaust-related litigation involving any individual family.16
On June 23-24, 1999, the ICHEIC, meeting in Jerusalem,
adopted a very aggressive timetable to resolve remaining issues.17 On August 6, 1999, Chairman Lawrence
Eagleburger signed an executive decision on policy valuation that would be
used to calculate the value of Holocaust-era policies. European insurers
immediately sought to change the valuation methodology, claiming that it
would allow for relaxed standards of proof and unfairly favored insurance
regulators and Jewish groups.18 They
argued that policies should be valued at what they would have been worth in
the 1930s. At a meeting in London on May 5, 1999, the ICHEIC agreed that
policies would be valued at present-day value.
Class-Action Lawsuit
While many believe that the ICHEIC is the most
appropriate mechanism for resolving issues of unpaid Holocaust-era
insurance claims, litigation and regulation have also emerged as tools to
resolve unpaid Holocaust-era insurance claims.
On March 31, 1997, a group of Holocaust survivors and
heirs of victims filed a class-action lawsuit in U.S. Federal District
Court of New York against seven named European insurers and up to 100 more
unidentified firms. The lawsuit seeks to recover the proceeds of insurance
policies bought by Jews and other victims of Nazi persecution from 1920
through 1945. Neither the attorneys for the class-action lawsuit nor U.S.
insurance regulators have officially determined the number of claimants or
the number of policies sold, but based on available documentation and
inquiries received by state insurance departments, the lawsuit could
ultimately involve thousands of claimants and an average claim in excess of
$100,000.19
Two central questions have emerged in the class-action
lawsuit: did European insurers collude with German officials (and their
local collaborators) to withhold insurance proceeds from Jewish
policyholders; did the European insurers violate the terms of the policies
and their obligations as trustees to the insured parties and the
beneficiaries. The class-action attorneys detail how the Nazi regime
converted the cash value of proceeds of policies, how they transferred the
money to the Deutsche Bank, Dresdner Bank, and to other banks, and how,
after the war, European governments made payments to European insurers
which the insurers kept without telling policyholders.20
One of the European insurers, Assicurazioni Generali di
Trieste Venezia, Italy’s oldest and largest international multiple-line
insurance organization with branches or affiliates serving 70 countries,
offered to settle its part in the class-action suit by paying $100 million
to Holocaust survivors and heirs, but the move was not matched by the other
insurers in the case. These other insurers wanted to resolve the dispute
through the ICHEIC. Attorneys for the class-action lawsuit insisted the
monetary settlement offer was only the beginning, that the amount was the
minimum amount Generali had to pay whatever happened. For these reasons, in
September 1998, Generali announced that it was withdrawing the monetary
settlement offer and that the company would only comply with the ICHEIC.
Generali’s attempt to negotiate a separate settlement
in the class-action lawsuit was contingent on the court’s approval,
which, in turn, required input from other groups of claimants against
Generali who were not parties to the class-action lawsuit, and who were not
represented in the negotiation that produced the Generali settlement offer.
One such group, the Committee for Justice for Holocaust Victims, based in
Florida, had objected to the dollar amount of the Generali offer.
Conclusions
Four major conclusions emerge from this review of
Holocaust-era insurance claims issues, some of which have significant
policy implications.
First, Holocaust victims were mainly European residents,
many of whom purchased insurance coverage from European insurers who did
not at that time have U.S. subsidiaries, and, therefore, did not do
business in the U.S. insurance market.
Second, although European insurers may have reinsured
portions of their risk with an American insurer or reinsurance company, the
financial responsibility for paying claims remained with the European
insurer who underwrote the coverage.
U.S. insurance regulators, who exercise regulatory
jurisdiction over European insurers operating in the United States, have
stated their intention to revoke the license of any European insurer that
fails to honor unpaid Holocaust-era insurance claims. Commissioners have
also filed motions to intervene in federal class-action lawsuits in order
to protect the interests of residents in their state -- i.e. to ensure the
integrity of the records of insurance policies yet unpaid, records which
are housed in archives under the control of European insurers.
Third, German insurers claim that after World War II,
victims of Nazi persecution were compensated by the German government and
that a lump sum payment was made to Israel.21 Several European court decisions have, in fact, rejected Jewish claims
based on a finding that the European insurers had fulfilled their
contractual obligations when they were forced to make payments to the Nazi
government or deposit a policy’s cash surrender value in a court after
German occupation and the assets were nationalized.
It is important to note that insurers generally collect
a premium in advance for which it must deliver an intangible --
indemnification or protection -- in the future. Thus, in insurance
accounting and insurance terminology, European life insurers were required
to maintain policy reserves on outstanding policies and to reflect those
reserves as liabilities in their financial statements. While there is
general agreement that European insurers created reserves for potential
losses, there is disagreement over whether they all remain liable, since in
many cases their assets supporting the “accounting” reserves were
nationalized by post-war Communist regimes.
Should the successor companies that received payment
after the war be held liable for the payment of Holocaust claims? Holocaust
survivors say that European insurers did not search for surviving
beneficiaries of their policies; that any payments due the claimants must
be paid by insurers who assumed the assets and liabilities of the old
companies; that East European countries signed treaties which led to the
return of nationalized assets to the insurance companies, and that European
insurers enriched themselves by the non-payment of Holocaust-era insurance
claims.
Finally, there are several international issues involved
in resolving the unpaid insurance claims issue. Congress and the federal
government have considerable leverage to address the international issues.
Federal legislative efforts are under way to pressure European insurers and
governments to participate in the international efforts to reconstruct the
insurance coverage for the era, the disposition of the assets behind the
coverage, and to determine the scope of unpaid claims.
*Prepared by Rawle O. King,
Insurance Analyst, Government and Finance Division.
1National Association of
Insurance Commissioners. The Holocaust and Insurance Claims: Preliminary
Report of the NAIC Working Group Investigating Claims Against European
Insures by Holocaust Survivors and Heirs. New York, December 9, 1997.
2Gift, Ronald,
"European Insurers Move to Settle Holocaust Suits." Journal of
Commerce, August 17, 1998. P. 5A.
3Alan Abrahamson,
"Searching for Justice."Los Angeles Times, June 20, 1999, p. 20.
4Ibid.
5Amy S. Friedman,
"Holocaust Recovery Bills Now in 3 States." National Underwriter:
Life & Health/Financial Services Edition, May 25, 1998, p. 11.
6"California Upholds
Holocaust Heirs' Rights to Sue." Best's Review, Life
&Health/Financial Services Edition, May 1999, p. 17.
7Greg Lucas and Robert B.
Gunnison, "Holocaust Insurance Bills Signed by Wilson: 20,000 in State
May be Due Unpaid Claims." The San Francisco Chronicle, p. 17.
8"Insurers
Subpoenaed." The Orlando Sentinel, October 11, 1999, p. 21.
9Meg Fletcher, "New
York Sets Holocaust Law Timetable." Business Insurance, August 10,
1998, p. 3.
10Amanda Levin,
"Washington Legislature Passes Holocaust Insurance Act." National
Underwriter: Life & Health/Financial Services Edition. April 9, 1999,
p. 28.
11The NAIC is comprised
of insurance commissioners from every state, the District of Columbia, and
the territories of Guam, Puerto Rico, American Samoa, and the Virgin
Islands.
12The ICHEIC is composed
of thirteen members: three representatives from European insurance
companies and regulators; three observer from Jewish groups; an observer
from the State Department; and an observer from the European Economic
Commission.
13Wolffe, Richard.
"Holocaust Commission Faces Split on Sanction," Financial Times.
Dec. 2, 1998, p. A6. .
14Amanda Levin,
"U.S. Advises Against Holocaust Sanctions," National Underwriter:
Property & Casualty/Risk & Benefits Management. June 7, 1999, p.
29.
15Ibid.
16Amanda Levin,
"Trial Date Set for Holocaust Suit," National Underwriter: Life
&Health/Financial Services Edition. June 14,1999, p. 9.
17Amanda Levin,
"Holocaust Commission OKs Swift Timetable," National Underwriter:
Property & Casualty/Risk & Benefits Management. July 12, 1999, p.
9.
18Joanne Woljcik,
“Holocaust Claim System Coming: Standards of Proof Will Be Relaxed,"
Business Insurance, July 26, 1999, p. 3.
19Ostermiller, Marilyn,
and Caroline Saucer. "Righting a Five-Decade Wrong," Best’s
Review: Life/Health Edition, April 1998. p. 48.
20Johnson, David Cay,
“Italian Insurer Agrees to Pay $100 Million in Holocaust Suit,” New
York Times, August 20, 1998. p. A8.
21Statement of Mr.
Herbert Hansmeyer, Member of the Board of Management of Allianz, AG of
Germany, at the Washington Conference on Holocaust-Era Assets, November 30,
1999.
Source: Congressional Research Service of the Library of Congress for the U.S. House
International Relations Committee.
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