By

Washington

The U.S. Supreme Court last week struck down a California law requiring insurers doing business in the state to disclose claims payment and other information relating to Holocaust-era insurance policies.

In a 5-4 decision, the high court ruled that the California law–the Holocaust Victim Insurance Relief Act (HVIRA)–interferes with the conduct of foreign policy by the President of the United States and thus is preempted.

The court said the White House has negotiated executive agreements with Germany, Austria and France aimed at resolving controversies surrounding Holocaust-era insurance policies that rely on voluntary settlement funds and disclosure of policy information.

However, the court said, HVIRA takes a different approach by threatening to revoke the license of any insurance company that does not follow the laws disclosure requirements.

This undercuts the White Houses diplomatic discretion, the court said in an opinion written by Justice David Souter.

In a dissent, Justice Ruth Bader Ginsburg argued that HVIRA responds to the long-frustrated efforts of Holocaust victims and their descendents to collect unpaid insurance proceeds.

The federal government, she wrote, has become more active in this area recently, undertaking foreign policy initiatives aimed at resolving these claims.

While the federal approach differs from Californias approach, Ginsburg wrote, no executive agreement or other formal expression of foreign policy disapproves of state laws like HVIRA.

Absent such a statement, she said, the California law should stand.

In the case of American Insurance Association v. Garamendi, the Washington-based AIA, joined by several American and European insurers, challenged the constitutionality of HVIRA, arguing it violates the authority of the president to conduct foreign policy.

A federal district court ruled in favor of AIA, stating HVIRA violates the due process rights of insurance companies. The district court said HVIRA mandates license suspension for nonperformance of what may be impossible tasks without allowing for a meaningful hearing.

But the 9th Circuit Court of Appeals reversed, stating that due process does not require states to grant insurers the opportunity to raise an impossibility excuse for noncompliance with the law.

In reversing the 9th Circuits decision, the Supreme Court outlined the various efforts of the federal government to resolve Holocaust-era claims and contrasted them to Californias approach.

“The basic fact is that California seeks to use an iron fist where the President has consistently chosen kid gloves,” the court said.

While there are powerful arguments that the iron fist works better, the court said, that is beside the point. It is not the courts business to judge the wisdom of federal government policy, the court said.

The question, the court said, is whether the state law conflicts with the federal approach. In this case, the court said, the evidence is more than sufficient to demonstrate HVIRA stands in the way of the presidents diplomatic objectives.

Ginsburg, however, said that allowing HVIRA to stand would not compromise the ability of the President to speak with one voice for the nation.

She said the president has not taken a clear stand on this issue and courts should not presume to preempt state laws on foreign policy grounds when they rely not on legislative or executive text, but only on inference and implication.


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 30, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.