A Time to Pay

The largest Holocaust-era German insurance company has not paid a single claim to survivors. Meanwhile, the international commission created to resolve Holocaust claims disputes has spent $30 million on administrative costs, compared to $3 million distributed to elderly survivors. From my own experience, these were predictable scandals. It is not too late to reverse them. In any event, the story should be told.

In 1998, Gov. Pete Wilson signed my SB 1189, which required that the California insurance commissioner suspend the license of any insurance company, or its California subsidiary, that failed to pay the valid claims of survivors residing in California. The Nazis had eradicated or confiscated Jewish insurance policies because, in the words of Hermann Goering after Kristallnacht in 1938,”It’s insane to burn out and destroy a Jewish warehouse, then have a German insurance company making good the loss. I am not going to tolerate a situation in which the insurance companies are the ones that have to suffer.”

Allianz, the German firm that has not paid a single survivor claim, is rooted in the Nazi era. Its longtime executive officer, Kury Schmitt, was Hitler’s first minister of economics. In 1996, Allianz’s affiliates in California, such as the Fireman’s Fund, held $1.4 billion in premiums belonging to California residents.

Needless to say, Allianz and the entire insurance industry were aghast at the California law. In plain language, it meant the insurance commissioner would hold hearings to suspend insurance firms’ license to do business in California until survivors’ valid claims were paid.

Or so I thought. Then I met with Charles”Chuck” Quackenbush, then California insurance commissioner, who had quite another idea. After consulting with industry, Quackenbush floated the idea of an international commission to sort out the claims issue, a suggestion I vigorously opposed. While acknowledging that the issue was an international one, I believed that the international commission concept was a diversionary gimmick to avoid lawsuits that would be brought under the California law.

As evidence, I knew that the industry had prevailed in New York in inserting language in a bill that protected any insurance company from survivor lawsuits so long as it was participating in “good faith” in an international conference. The same industry lobbyists, with some Republican support, attempted to include the same amendment in my legislation, which I rejected.

Then, one day Quackenbush — with whom I tried to have a professional, respectful relationship — told me that he’s flown to the East Coast to solicit and hire former U.S. Secretary of State Laurence Eagleburger to head the international commission. I was stunned. The international commission was not contemplated in the state legislation, nor was Quackenbush authorized to form it. But he was spending state funds to hire Eagleburger and set the wheels in motion.

Not long after, I flew uninvited to London to confront the working committee of the new commission. Except for two Israelis present, the group was one of the coldest I ever encountered. I conveyed to them the blunt meaning of the California law in hopes that the pressure would make them comply. But it was to no avail.

Quackenbush once remarked to me, “You can either bang on the industry or try to button this thing up and get it behind us.” He clearly was in denial of the law he was charged with implementing. It was a law designed to resolve an issue where governments and industry had failed for 50 years. It provided $4 million for Quackenbush to research the claims still owed, and it required an oversight committee which he refused to establish.

Soon Eagleburger was telling Henry Weinstein of the Los Angeles Times that I was an irresponsible, anti-American, anti-Vietnam nogoodnik who should have nothing to do with this issue. I responded, perhaps too heatedly, Eagleburger doesn’t have to wait in line for his financial claims. He makes $350,000 a year as head of the insurance commission, which doesn’t have to report to any regulators or oversight officials.

In more polite terms, Stuart Eizenstadt, of the Clinton administration’s State Department, called me to say that the California legislation, while noble in intent, was like a nuclear bomb. “It’s a useful catalyst but should never go off.” He spoke of protecting America’s NATO alliance with Germany, and endorsed the international commission as the quickest route to a negotiated solution. It became the stated position of the Clinton administration that the California law was not in the American interest, that it usurped the foreign policy-making powers of the executive branch.

I was stunned again. California was acting not out of a desire to usurp federal authority, but on behalf of its residents who were survivors. The power to regulate insurance companies is a well-established state function. Our government unfortunately has failed to deliver over the years, and now the survivors are in their twilight years.

In 1999, I passed another Holocaust-related law (SB 1245), empowering survivors who were slave laborers to seek compensation from those German, Japanese and American companies (like IBM, Ford and General Motors) who were enriched by ill-gotten gains. The same reaction ensued. With strong State Department support, the German government promised to create a compensation fund on the condition that the California law was annulled. The amount they offered was approximately $7,000 in U.S. dollars per former slave laborer, a settlement they feared (for good reason) to take before a jury.

It is vital to explore the meaning of this tragic charade. I was influenced long ago by the cry of “never again,” the belief that our leaders failed to act in time against the Holocaust, that we would have acted differently. But the insurance and slave labor issues show that Holocaust issues remain before us, that survivors are being insulted and allowed to die without the compensation due them. Those who say they would have acted differently in the ’30s have an obligation to explain why they are dragging their heels today.

There still is a solution at hand. Davis and his appointed state insurance commissioner can implement SB 1530. Hearings can be called to consider suspending insurance company licenses until the valid claims are paid. The economic pressure, combined with publicity surrounding their sordid past, is all that will make the insurance giants finally recognize their obligation to survivors.