OT: California judge rules state can punish Munich Re

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California judge rules state can punish Munich Re

SAN FRANCISCO, Feb 23 (Reuters) - A judge ruled on Wednesday that California officials can punish German reinsurer Munich Re <MUVGn.DE> if the company does not comply with the state's request for information about Holocaust-era policies and policyholders.

Administrative Law Judge Michael Jacobs warned Munich Re that a failure to allow investigators to look at hundreds of possible Second World War-era claims could mean that the company's U.S. affiliates will lose their licenses to do business in the state.

"The risk it faces is that every related company doing business in the state of California ... will lose the ability to do so," Jacobs said. "I mention these sanctions on the record so that the insurers know what could be the consequences of their actions."

Munich Re did not contest the ruling on whether California officials had the jurisdiction to punish the company. But Martin Checov, a U.S. lawyer representing the firm, said the reinsurer might do so at a later point.

"Munich Re has to review the record and determine whether it will take further action with regards to jurisdiction," Checov told Reuters after the hearing.

At issue is a request for Munich Re to open the files of Dusseldorf-based Victoria Lebensversicherung AG, in which it owns a majority stake, to scrutiny by officials of the California Department of Insurance who are looking for signs of unpaid Holocaust-era claims.

Munich Re last week obtained an offer from Victoria to allow state regulators to review the firm's records on site. But Department of Insurance officials blasted that proposal because Victoria would not guarantee that they could make copies while searching the archives.

Checov said German law prevented Munich Re from simply ordering Victoria to comply with all the insurance commissioner's demands.

"Munich Re cannot direct Victoria to comply with the commissioner's request to examine documents,' Checov said. "Munich Re has gone to great lengths to persuade Victoria to cooperate."

The judge, however, dismissed those concerns, saying that justice for Holocaust survivors and their heirs demanded that California officials be given access to the records. State law requires companies to disclose this information or risk losing their licenses do business in California.

Karl Rubinstein, the state's lead lawyer in the case, did not ask the judge at the hearing to impose penalties, but he said sanctions could be the next step.

"It is now our intention to pursue our investigation of whether or not Munich Re has paid all its liabilities to California residents," Rubinstein told Reuters after the hearing. "The next step is we might take more aggressive action against Munich Re."

The German reinsurer is not a member of the International Commission on Holocaust-Era Claims, headed by former U.S. Secretary of State Lawrence Eagleburger, which is trying to track down unpaid insurance policies from that era.

California has one of five state insurance officials on the commission, which also includes representatives of the World Jewish Congress, Israel and five European insurance companies.

It has also been among the most aggressive U.S. states in pursuing the Holocaust issue, threatening to bar Italy's Assicurazioni Generali <GASI.MI> and Germany's Allianz AG <ALVG.DE> from doing business in the state unless they obey the law requiring them to name Holocaust-era policyholders.

© copyright 2000 Reuters, Ltd.

-- Possible Impact (posim@hotmail.com), February 23, 2000

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