A back door for reparations?

Perhaps it's about political correctness. Perhaps it's about long-overdue restitution for atrocities that befell innocent lives. Perhaps it's just an attempt to find the deepest pockets. Whatever the reasons, it's achingly clear that insurers and activist groups are embroiled in a controversy that many had thought was long gone.

In California, insurers that do business in the state are required to provide information about any policies they or any acquired companies may have had that insured slaves. Two more states, Georgia and Pennsylvania, are considering similar legislation.

Signed into law on September 2000 by Governor Gray Davis, California's law requires insurers to make known to the California Department of Insurance "any records within the insurer's possession or knowledge relating to insurance policies issued to slaveholders that provided coverage for damage to or death of their slaves." California's bill was authored by former state Senator Tom Hayden, who was unable to be reached for comment for this story.

In a report issued in May 2002, the California Insurance Commission discussed the data submitted. To date, 1,300 insurers with ties to slavery in California have been asked to provide data on slave-related activities that the companies have engaged in during the 1600s through 1865. Of those companies, 92 percent have responded. Most companies had nothing to report since they were incorporated after the end of the slavery, there were no predecessor companies, or they were unable to locate records from that era.

Eight insurers were able to locate records either from their companies or predecessor companies. Among these, 614 slaves and 433 slaveholders were identified.

What Now?

But now that this data on slavery-era insurance policies has been collected, what happens? Questions remain about the purpose of such a law and about why the State of California would find this information useful. The law only requires disclosure of such policies. It does not require that any benefits be paid.

Even the California State Insurance Commissioner is unsure of what this information will be used for. "We've put it out on the Web, providing it to those who have interest in it, whether it's historical, genealogical, or economic interests," Insurance Commissioner Harry W. Low told Risk & Insurance. "That's the extent of our role. In terms of any further activity on our part, I don't think there will be much if any."

Some have speculated that activists will seize upon this information to support reparations for slave descendents. Although California officials say that the state's law was not intended to support reparations, some are using the information collected as the basis for lawsuits.

One lawsuit in particular is a class action filed in Brooklyn in March 2002 against FleetBoston Financial Corp., Aetna Inc., and railroad giant CSX as defendants. The suit names Deadria Farmer-Paellmann, a New York lawyer, as the lead plaintiff. In her suit, Farmer-Paellmann charges that insurance companies acquired wealth that slave descendents should have inherited. "The companies are expected to pay something."

The suit calls for "defendants to account to plaintiffs for any profits they derived from slavery." The suit also asks for full disclosure from the defendants and for "restitution of the value of descendents' slave labor; restitution of the value of unjust enrichment based upon slave labor; disgorgement of illicit profits; compensatory damages in an amount to be determined by trial; exemplary or punitive damages in an amount to be determined at trial."

One source told Risk & Insurance that Farmer-Paellmann's lawsuit targets the insurance industry for the industry's ability to pay large sums in a settlement. Another source claims that the insurance industry is being unfairly targeted in an attempt to approach reparations through a back door.

A second class-action lawsuit was filed in May just after California released its finding. This suit was filed in Newark, N.J., against New York Life Insurance Co., Brown Brothers Harriman & Co., a investment firm, and Norfolk Southern Corp. It was filed on behalf of Richard E. Barber Sr., formerly with the National Association for the Advancement of Colored People (NAACP). This lawsuit also seeks an accounting of any money derived from the slave trade. It also asks that any unjust profits be turned over as well as calling for the establishment of a humanitarian fund to benefit blacks.

According to Hilary McLean, chief deputy press secretary for Governor Davis, the California law was not specifically intended to support the reparation cause. "There was legitimate interest to know and to have more information about this period in our history. People are very interested to know to what involvement companies today might have, if there are any repercussions from history."

But even Governor Davis hints at a possible stronger action against insurance companies. In a radio broadcast in June, he said, "I've said that if evidence shows that insurance companies took advantage of these policies that they ought to make the situation right. But there's no proof yet. All we have is information that some policies existed, mostly in the eastern part of the country. But there's no linkage yet in terms of wrongdoing on the part of the insurance companies. If there is, at some point, because people develop more evidentiary information, then I think insurance companies should do the right thing and compensate people taken advantage of."

Other States

At least two other states are considering following in California's footsteps. In Pennsylvania, State Representative Louise Williams Bishop says that the bill she is sponsoring is entirely separate from reparations. "My legislation has nothing to do with reparations. It is a piece of legislation that demands and legislates that the insurance companies reveal their records and what role they played in the slave trade. The insurance companies have the only records that we can put our hands on that had anything to do with the slaves. The goal is to help people realize their identities, to help them to know their roots...to create a higher self-esteem, especially for African Americans."

Bishop is not sure what possible lawsuits could stem from her legislation. "I have no idea what will happen. Her intention, she says, is to provide the African American community with its heritage. "The only records that would be available would come from the insurance companies," she says. "I am definitely going after the insurance companies to open up the records and tell all. If somebody else's issue gets caught up in there, I cannot stop it."

In a statement released just days after Bishop spoke with Risk & Insurance, she says, "The bill as written does not call for reparations. However, it can be argued with some degree of moral legitimacy that any company with a foundation built on free labor from slaves owes the descendants of those enslaved. But that is an issue to be addressed by some other bill sponsored by some other legislator at some other time." Bishop's bill was referred to the Committee on Insurance on June 5, 2002.

In May, the Georgia State Insurance Commissioner launched an investigation into the practice of insuring slaves in the state. The state is expected to follow California in registering slave-related data.

Profits Questioned

Legislators in California, however, have been making inquiries over the last 10 years into slavery and its continuing legacies. They claim that slavery-era insurance policies provide the first evidence of ill-gotten profits from slavery, profits they say were used to capitalize insurance companies in existence today. They also say that the "people" of California are entitled to this significant historical information.

But slavery was legal until 1865, which brings many to question whether any profits can be considered "ill-gotten."

"All of this has to be viewed through the eyes of someone who lived in the 16th, 17th, 18th, and part of the 19th centuries, when the practice of slavery, horrific as it was, was legal and widespread not just in North America but in much of the world," says Robert Hartwig, chief economist at the Insurance Information Institute, New York. "It was endemic in the economies of most of the western world. Beyond that is a question of who exactly, given that there are no slaves alive today, who is entitled? To my knowledge, there are no slaves or children of slaves alive now."

Farmer-Paellmann tells Risk & Insurance, however, that "the insurance industry is one of many industries that played a role in enslaving Africans. In particular, many existing insurance companies helped to finance the domestic and international slave trade by giving potential slave owners security on their investments in human chattel."

The goal of the lawsuit, she says, is to secure restitution from companies that profited from crimes against humanity. "The topic of reparations from corporations is timely and important."

But even if the information collected by California is used to support any type of compensation plan, questions exist about how reliable the information is. For one thing, just 614 slaves and 433 slaveholders were identified as a result of California's request. The number of slaves in the United States between 1619 and 1865, however, is estimated to be more than eight million.

Additionally, there are no legal grounds for forcing the insurance industry to pay claims or other compensation, Hartwig says. "The notion that insurers should be singled out as an industry that should be paying reparations for a practice that was ubiquitous throughout the economy is an odd one. There's no legal grounding for this."

Holocaust as Model?

An unlikely comparison has also been made by activists hoping to win reparations for slavery-related activities and profits. Those who are supporters of reparations to African-Americans say that the Holocaust is a model for their cause. "In both cases, innocent people were tortured, murdered, and forced to slave for blue chip companies that still exist," says Farmer-Paellmann.

Hartwig, however, points out that the differences are quite apparent. The analogy doesn't make sense, he says. "There are children of survivors of the Holocaust. There are people who were forced into Japanese camps. Can anyone alive today show that they were personally damaged by slavery?" he asks. "No one alive today can meet the legal test required to receive damages. This is the biggest distinction."

At least one attorney points out that the Holocaust is not a legal model for reparations of the descendants of slaves. "There isn't a parallel between Holocaust survivors and this issue," says Aurora Cassirer, co-managing partner at Jenkens & Gilchrist Parker Chapin, New York. "There are no people here. When you're talking about Holocaust survivors, you're talking about just that: survivors who actually spent years of their lives working, getting sick, and being pegged for extermination. There is a distinction there that people were slated for extermination. They weren't preserved for work. That's a real contrast."

Cassirer, who unsuccessfully tried a lawsuit against German companies, says that the presence of the insurance industry makes the distinction even greater. "Here you're talking about property that was insured. It's a terrible thing to talk about 'property', but you're talking about preservation of an asset. In the case of the slave labor cases brought against Nazi Germany and those companies, they didn't care about preserving an asset."

On the issue of statute of limitations, she says, "Actually, all of these types of cases were dismissed on that basis as well as others."

On the class-action suits, she says: "I don't think the suits can withstand the motion to dismiss due to the statute of limitations. I think it will bar them from maintaining the claim."

Supporters of reparations for slavery descendents are not deterred, however, by any of these points.

"In this nation, many laws are passed and applied retroactively," says Farmer-Paellmann. "Further, legal arguments based on equity often prevail in court where 'laws' do not exist to be applied to a given matter."

Meanwhile, insurers are marking time. Says one industry source, "We're hoping it will pass over us. We're playing it one step at a time. We're not being proactive--we're being reactive."

No one is denying the gross injustices that were done under slavery. "Every industry named in these suits views the practice obviously as abhorrent- and in no way reflects the practices of any company today," says Hartwig. "But you cannot look at this issue nearly a century and a half later and base a legal argument on that."

One source said that the idea that the insurance company profited is unbalanced. "Everyone's quick to show how the insurance companies may have profited, but why not show how much they've given back to the community in terms of charitable donations? That is never mentioned."

The bad publicity alone has insurers wondering how they became caught up in a centuries-old battle, one that they feel is not theirs to fight. Says one source: "We're one industry among thousands. This isn't about the insurance industry."

RELATED ARTICLE: A Closer Look: Why the Holocaust is Different.

Efforts to force reparations for the descendents of slaves ore being modeled after those to resolve unpaid insurance claims of Holocaust survivors. Yet a closer look reveals that the two issues are as worlds apart as the people who were involved.

In the case of Holocaust survivors, some legitimate insurance claims went unpaid, which has lead to allegations of wrongdoing on the part of some insurers. These insurers denied some claims because of a lack of a death certificate or the inability to obtain records that were destroyed during World War II.

In the case of slavery, while slavery itself was reprehensible, it was a legal endeavor at the time in question. Insurance companies that issued policies that insured the life of slaves or ships transporting those slaves did nothing illegal. Also, any claims on those policies are likely to have already been paid.

According to Robert Hartwig, chief economist at Insurance Information Institute, New York, too much time has passed to assess claims from the slavery era. "That will be the first obstacle (any reparation lawsuit) will run into. The statute of limitations lapsed over a century ago."

Another issue is that many of the Holocaust victims are still alive. Any victims of slavery are now deceased, and some descendents may not even be aware that their ancestors were slaves.

Even if any current victims of slavery could be found, a question remains about how a compensation plan would be determined--and who would pay. If the experience of those trying to get reimbursed for unpaid Holocaust claims is any indication, this would be a difficult undertaking.

Consider that the Holocaust Task Force of the National Association of Insurance Commissioners (NAIC) and the International Commission on Holocaust Era Insurance Claims (ICHEIC) are currently at odds with the German Foundation over terms of restitution to be made by German companies.

The ICHEIC and the German Foundation and German Insurance Association had spent more than a year working out a reimbursement proposal for victims and victims' families. As port of this proposal, the German Foundation recommended a $76 million reimbursement to German companies For processing Holocaust-era claims, a move that brought objections from the ICHEIC and the NAIC. The NAIC then called for each state in the United States to take legal action with regard to Holocaust claims issues.

A number of states have already implemented specific Holocaust insurance laws. Eight states--Arizona, California, Florida, Georgia, Illinois, New York, Pennsylvania, and Washington--have token steps to help protect the claims of the states' Holocaust victims by adopting lows that extend the statute of limitations. Arizona has moved to extend the statute of limitations until 201 2 for that state's victims.

But some say laws aren't necessary to take action against German companies involved in the Holocaust. Insurance companies have made specific commitments in writing to insurance regulators and consumers in each state by agreeing to the foundation agreement, which calls for reevaluating "safe harbor" provisions given to affected insurers, holding hearings about the German Foundation/ICHEIC negotiations, and making filings in relevant court cases involving unpaid Holocaust-era insurance claims.

"In my view, the general powers of the commissioner given them under the insurance code gives them ability to pursue this issue without any specific Holocaust insurance law," says Nat Shapo, insurance director at Illinois Department of Insurance and vice chair at. the NAIC's International Holocaust Commission Task Force, Chicago.

So far, around $20 million in claims hove been paid, and negotiations with the German Foundation are continuing, Sapo says.

Reparations activists also point to the settlements to reimburse Japanese Americans who, during World War II, were held in camps against their will. In 1 998, the U.S. government passed a law that paid each victim of forced internment $20,000, and allocated nearly $1.5 billion for education funds for Japanese Americans.

Lori Widmer can be reached at lwidmer@lrp. com.