Regulators threaten lawsuit to hasten Holocaust payouts. (Briefing).

If the International Commission on Holocaust-Era Insurance Claims can't resolve internal disputes in the next few months, the companies who volunteered to join the commission may find themselves in court, regulators said.

Companies on the commission have paid about $20 million to settle insurance claims in the three years since the commission was established, but spent more than twice that on administration. U.S. insurance commissioners are frustrated with the lack of action and say the insurers may not deserve to be protected from litigation.

In particular, regulators point to the member companies' desire to use money in a German foundation to reimburse themselves for the international commission's administrative costs instead of using the money to pay decades-old claims for Holocaust victims and their heirs.

The companies' request "is not harmless," said Illinois Insurance Director Nat Shapo, an ICHEIC member who is also chairman of the National Association of Insurance Commissioners' Holocaust Task Force. "That money comes straight from survivors and claimants. There is no legal basis for this claim. It's legally, politically and morally unacceptable."

The NAIC unanimously adopted a resolution in September to consider revoking ICHEIC's member companies' safe harbor protections.

"We are looking at a critical period over the next few months over whether this can be resolved," Shapo said. "If it can't, it's unlikely the safe harbors and the legal peace in the U.S. courts can be sustained."

Insurers say they aren't dragging their feet but are paying the claims that they should be paying. A spokesman for Allianz said that while member companies of the International Commission on Holocaust-Era Insurance Claims represent only a fraction of European companies that may have written Holocaust-era policies, they are being forced to take the blame for many companies who aren't members of the commission. In addition, many claims were paid before ICHEIC was founded, he said.

Also, the agreement to form the German foundation included a note that some of the money could be used for administration, he said, although Shapo said there's no mention of retroactive payments and no provision to take the money from a humanitarian fund.

Three years ago, several European companies volunteered to join the commission and abide by the commission's standards in paying decades-old outstanding Nazi-era life insurance claims in exchange for a "safe harbor" that would protect them against lawsuits. But even with the commission's lower standards of proof, less than 1% of claims sent to the commission have been paid, ICHEIC said.

Former Secretary of State Lawrence Eagleburger, who heads the commission, apparently became so frustrated that he quit his post for 24 hours last month: On Eagleburger's return, the commission agreed to establish a monitoring committee to review the rejected claims. The committee was expected to meet and possibly report to the next commission meeting, which has not been scheduled.

"The chairman's resignation was very real," said Elan Steinberg of the World Jewish Congress and a member of ICHEIC. "My sincere hope is that at our next ICHEIC meeting, we will finally achieve the progress that has been stalled for so long."

$20 Million So Far

ICHEIC has helped claimants receive more than $20 million in claims so far, which is $20 million more than was paid before, Shapo said. But the commission "certainly hasn't been as effective as it should be for claimants," he said. "It's just a preposterous, ridiculous situation where the way we resolve problems is for the chairman to quit and then be talked back into staying. It's a dysfunctional approach. I think the regulators should re-evaluate the process and the companies' safe harbor."

Companies insist that they are following ICHEIC's rules, and shouldn't be punished for not paying claims that are not theirs.

When the International Commission on Holocaust-Era Insurance Claims was founded, insurance regulators had hoped it would resolve the decades-old issue of unpaid life insurance poilcies owned by victims of the Nazis.

But as of November, the commission had spent $40 million on administrative expenses and less than half that, $12 million, had been paid to Holocaust survivors and their families, according to a report from the U.S. House of Representatives' Committee on Government Reform.

Of 81,000 claims forms received by the commission by February, settlement offers have been made on about 1,000 claims, according to ICHEIC. But many of the "claims" are considered just inquiries, and only about 9,600 name a specific insurer that is a member of the international commission.

The five insurance companies that were charter members of the international commission--Allianz, Axa, Generali, Winterthur and Zurich--agreed to honor claims based on just a name, date of birth and place of birth. They also agreed to pay a modem valuation on the policies and to publish names of potential policyholders. A Dutch insurance group, the SJOA Foundation, has since joined the commission.

"There's good news, and there's bad news," Steinberg said. "The good news is we have the mechanism in place that, if it were properly implemented, would get these claims paid. I never expected we'd get as many names published on the Web as we had. I had low expectations that we'd get agreements on valuations.

"But the bad news is, having achieved these things, I thought the companies would have acted in better faith," he said. "With the exception of Generali, they have been grudging at best...our major disappointment is we have to continually take them kicking and screaming into the process."

Allianz and Winterthur said they had been cooperating.

"ICHEIC has accomplished a lot of work. A lot of inquiries have been searched and claims have been paid out," said Joeng Allgaeuer, a spokesman for Allianz. "ICHEIC is the result of a good-faith effort on all sides involved."

The ICHEIC process also has been complicated by the slow progress of the German Foundation negotiations, Shapo said. The foundation was established after an agreement between the U.S. government, the German government and German companies. The foundation is supposed to distribute 10 billion deutsche marks ($4.5 billion)--half coming from the German government and half from German industry--to Holocaust survivors and heirs. While most of the money is earmarked for slave-labor restitution, 200 million deutsche marks has been set aside for insurance claims and 350 million deutsche marks for insurance humanitarian/ICHEIC purposes. At least 550 million deutsche marks in insurance money is supposed to be processed according to ICHEIC's standards, Shapo said.

The foundation and the international commission have tried to resolve how the money should be distributed, and the ICHEIC member companies have lobbied for the money to go back to them to reimburse them for ICHEIC's administration costs. The companies have asked for $36 million in retroactive payments and $10 million in future payments, Shapo said.

"I remain as opposed to this diversion of funds as ever," Shapo said. "It's unacceptable both legally and morally to divert money from claimants and survivors in order to reimburse insurance companies for payments made under their contractual obligations to ICHEIC."

Negotiations have been frustrating, Shapo said. "The kind of chronic distrust between the parties at ICHEIC is as severe as ever," he said. "The companies continue to scuttle all aspects of discussions about their cost-reimbursement plan:'

But according to the footnote in the agreement itself, the German foundation's insurance money, at least for claims, "includes ICHEIC administration expenses."

"The mutual intention was to avoid having the companies pay double," Allgaeuer said.

Shapo disagreed. He noted that the agreement makes no mention of retroactive payments, and it says that while money from claims can be used for administration, the money from the humanitarian fund should go to survivors and heirs. Insurers wanted to take $21 million from claims and $25 million from the humanitarian fund for administrative expenses.

Holocaust Claims Paid Through ICHEIC

While ICHEIC has received more than 81,000 inquiries as of Feb. 1, only
about 9,641 named specific companies.

              Named Claims
                  Received    Number of
Company     Through ICHEIC  Offers Made

Generali             5,500          716 (*)
Allianz              3,700          231
Axa                    246           28
Winterthur              68            3
Zurich                 127           15

(*)Chris Carnicelli, president and chief executive officer of Generali's
U.S. Branch, said this figure includes only calims that have come
through ICHEIC's call center. Counting claims sent directly to Generali,
which have been considered under ICHEIC's relaxed standards, 1,244
offers have been made, totalling $14.1 million, by Jan. 28. Also, since
Nov. 1 about $2.3 million in offers on 196 policies were transferred to
the Generali Fund in Isreal for handling. The Generali Fund is an
independent trust established by Generali and chaired by former Isreal
Supreme Court President Justice Meir Shemgar.

Source: International Commission on Holocaust Era Insurance Claim