Holocaust Reporting Law Ruled Unconstitutional

October 12, 2001

A California law requiring that insurance companies turn over information related to European insurance policies or face loss of their licenses has been ruled an unconstitutional violation of due process, according to the legal counsel for several insurers, including the Los Angeles office of Milbank, Tweed, Hadley & McCloy LLP.

Milbank was retained by nine insurance companies affiliated with Winterthur Swiss Insurance Company after the state insurance commissioner sought to force the California companies to obtain from their foreign affiliates detailed information on all insurance policies they issued in Europe that were in effect between 1920 and 1945.

“Although the California statute was well-intentioned, it was penalizing the wrong people and actually serving to keep money from the hands of the victims,” said Linda Dakin-Grimm, a Milbank litigation partner who represents the insurers. “None of our clients ever wrote any insurance policies in Europe, but they were going to be kicked out of California by the Department of Insurance. The fact that turning over European records to the State of California would violate Swiss privacy laws and the fact that our nine clients do not have control over records of their affiliates in Europe, made no difference whatsoever to the DOI.”

Milbank attorney Sally Agel, along with counsel for other affected insurers, successfully argued in U.S. District Court that the Holocaust Victim Insurance Relief Act (HVIRA) required tasks their clients could not meet because they lacked any such records, and had no way to compel the European companies to produce them. When the state insurance commissioner’s office turned a deaf ear to these explanations and threatened to lift the licenses, the companies sued.

In an Oct. 2 ruling, U.S. District Judge William B. Shubb agreed with the insurers’ argument that they had been denied due process because no sufficient hearing procedures existed. The insurance companies represented by Milbank are Winterthur International America Insurance Company, Winterthur International America Underwriters Insurance Company, General Casualty Company of Wisconsin, Regent Insurance Company, Southern Insurance Company, Unigard Indemnity Company, Unigard Insurance Company and Blue Ridge Insurance Company. Another firm, Republic Insurance Company, was sold by Winterthur during the case.

The California law, enacted in 1999, could face still further legal review before the U.S. Supreme Court, Dakin-Grimm and Agel said. In a petition before the Supreme Court, the insurers seek a ruling as to whether the HVIRA is unconstitutional because it interferes with the federal government’s control over foreign affairs and interferes with commerce.

“The U.S. government filed a brief in support of our case in the Ninth Circuit, and the U.S. Supreme Court has asked those same U.S. government attorneys for briefing in support of our case before them,” Agel said. “We are confident that the California law will no longer threaten companies that have nothing whatsoever to do with past, Holocaust-related actions.”

Counsel representing the other California insurers include Skadden Arps, Mayer Brown and Wilson Elser.

Milbank, Tweed, Hadley & McCloy represents international financial institutions and entrepreneurial companies and has offices in Los Angeles, Palo Alto, New York, Washington D.C., London, Singapore, Tokyo and Hong Kong.

The Los Angeles office of Milbank, Tweed, Hadley & McCloy LLP is at 601 South Figueroa Street, 30th Floor, Los Angeles, Calif. 90017; phone 213/892-4000; fax 213/629-5063; www.milbank.com.

Was this article valuable?

Here are more articles you may enjoy.