AIA Says Calif. Law Undermines Federal Government Ability to Conduct Foreign Affairs

April 24, 2003

As the Bush administration and the insurance industry informed the
Supreme Court on Wednesday that a California law to aid Holocaust survivors with decades-old insurance claims intrudes on U.S. foreign policy and should be shot down, the American Insurance Association (AIA) reacted too.

The AIA says that requiring insurance companies operating in the state to provide detailed reports about Holocaust-era polices or forfeit their ability to sell insurance in California exceeds state legislative and regulatory jurisdiction and jeopardizes the federal government’s ability to conduct foreign affairs.

Lawyers representing AIA presented arguments demonstrating the 1999 law’s Constitutional defects as the U.S. Supreme Court heard the case of American Insurance Association vs. Garamendi.

“We appreciate the opportunity to articulate the serious Constitutional deficiencies in the California law,” said J. Stephen Zielezienski, AIA assistant general counsel. “We have been asking, and continue to ask, the courts to review this law because it violates the foreign affairs powers the U.S. Constitution vests in the executive branch of the federal government. The U.S. cannot have 50 different states advocating 50 different foreign policy positions. Allowing states to conduct their own foreign policy undermines the federal government’s ability to speak with one voice to other sovereign nations.”

The law under review reportedly requires insurance companies operating in California to report detailed information about policies sold by any corporate relative in Europe to Europeans to cover European risks from 1920 to 1945, or lose their licenses to sell insurance in California.

“The California law also violates the due process clause by asserting jurisdiction over insurance transactions that took place outside the borders of California,” continued Zielezienski. “What right does one state have to regulate transactions that took place in another state, let alone another country? If this law is not overturned, there will be nothing standing in the way of another state following California’s misguided lead to assert jurisdiction over regulatory transactions outside the state simply because they disagree with the transaction. The U.S. Constitution simply does not permit a state to question transactions that took place wholly outside its borders. Permitting such a result would lead to regulatory chaos here and abroad.”

As for the California law’s intrusion into the exclusive federal foreign affairs power, AIA believes that the U.S.-led process of negotiated resolution, which has resulted in agreements with a number of European nations, provides the best chance for some measure of justice to Holocaust victims, survivors, and their heirs and beneficiaries.

“The federal government has been working diligently with its European allies to bring a measure of justice to those impacted by the Holocaust,” added Zielezienski. “The International Commission for Holocaust Era Insurance Claims (ICHEIC) was created to resolve Holocaust-era insurance claims and is supported by the U.S. government.” Notably, ICHEIC’s participants include several major European insurers, the National Association of Insurance Commissioners (NAIC) (the trade association for state insurance regulators), European regulators, representatives of several Jewish organizations, and the State of Israel. Zielezienski added, “ICHEIC has the largest list of policyholders’ records available. An individual can file a claim and ICHEIC will match any derivation of the name with over eight million records. The California law creates a path of protracted litigation antithetical to the path of negotiated resolution advanced by both the U.S. government and European nations.”

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