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Articles appearing in this column in recent years have emphasized that a significant benefit of arbitration is that parties are not constrained by the one-size-fits-all procedures imposed by courts; rather, they may fashion a process specifically designed to deal with the special situation and issues to be arbitrated. To demonstrate the flexibility parties have in this regard, I wish to assert a personal privilege by recounting an arbitration procedure in which I participated over a seven-year period and which was created to address issues without precedent. Some of you may have read about the recent completion of the work of the International Commission on Holocaust Era Insurance Claims (ICHEIC), which was established to search out and pay beneficiaries of insured individuals who had been deprived of the benefits of life insurance policies by reason of the Holocaust. Agreeing on the mechanism by which this might be accomplished involved lengthy negotiations among the U.S. government, European insurance companies and foundations, Jewish organizations, and insurance commissioners of various states (including Pennsylvania’s Diane Koken). Among these agreements was a decision that if a claim was denied or a claimant was dissatisfied with an insurance company’s offer, an appeal could be taken to binding arbitration. It was at this stage that I was asked in 2000 to serve as president of the ICHEIC Appeals Tribunal and oversee the work of some 30 to 40 arbitrators worldwide. But what form could an arbitration take that would be fair to the claimants and the insurance companies? In typical life insurance cases, the beneficiary presents the policy together with a death certificate, and the company confirms the existence of the policy through a review of its records. The Holocaust, however, did not allow for such standard procedures. In most cases, the claimants no longer possessed the policies, and, where the insured perished during the Holocaust, there was assuredly no death certificate to be produced. Moreover, while records relating to some policies could be located, many were destroyed or lost during World War II; in addition, in Eastern Europe, where many of the policies had been issued, communist governments nationalized insurance companies after the war. Finally, the identities of companies were often unclear by reason of multiple mergers and acquisitions in the 1930s thirties and 1940s. Even where fragmentary information about polices was located, other problems emerged. For example, records from the thirties and forties reflected that insureds seeking to flee, often attempted to obtain the cash value of their policies. But, it was also known that in many such circumstances, due to Nazi regulations, these funds as well as death benefits were often paid into blocked accounts or confiscated in their entirety. While there was agreement that beneficiaries in such circumstances should receive payments, how was a determination to be made as to whether the insured or beneficiary had actually received these funds? Difficulties in valuation were also encountered with respect to policies issued for payment in currencies no longer in existence. And often, the existence of a policy was proven, but its value or designated beneficiary could not be determined. Nonetheless, the commission, under the leadership of its Chairman Laurence Eagleburger, succeeded in creating a claims and arbitration procedure (agreement) for what was clearly a unique situation, and which allowed decisions to be made in accordance with established guidelines. For example, recognizing the difficulties facing a claimant seeking to establish the existence of a policy, the agreement provided for “relaxed standards of proof” under which the claimant was required to show that it was plausible, in light of the passage of time and the destruction occasioned by the Holocaust, that the claimant was entitled in whole or part to the benefits of the policy. Moreover, the claimant could rely on documents such as letters mentioning policies or gift objects received from companies as well as recollections of individuals concerning the policies. Similarly, recognizing the difficulties insurance companies would face once the existence of a policy had been established, relaxed standards of proof were also applied when they sought to prove that the payment had been paid to the insured or beneficiary, that the policy had been cancelled before the Holocaust, or that the claim had already been reviewed by an earlier compensation authority. But what should be done in those situations where it appeared that the company had paid out the cash value or insurance proceeds but it was unclear whether the funds had been paid into a blocked account or confiscated? The commission resorted to the creation of presumptions based on the situation in the relevant years in each involved country. Thus, in Germany, for the period between 1933 and 1937, there was a rebuttable presumption that the money had been paid into a blocked account if there was evidence under the relaxed standards of proof that the policyholder had emigrated, was deported or was otherwise deprived of freedom as a Holocaust victim. From 1938 through 1939, the presumption that the policy had been paid into a blocked account was still rebuttable but no longer required any proof relating to the condition of the policyholder during this period. After 1939, the presumption was that the insurance funds had been confiscated. It was also necessary, of course, to determine the values of policies based upon when the policyholder died. But, in many situations, the date was unknown. Based upon historical study, therefore, for those circumstances, the agreement fixed deemed dates of death for victims of the Holocaust for each of 14 European countries. Further issues arose concerning who should be entitled to the proceeds of the policy, assuming there was insufficient evidence of the named beneficiary or heirs. But, again, this would have involved a study of the intestacy laws of numerous countries, many of which had border and other changes during the decades before, during and after World War II, requiring intensive and often inconclusive research. A decision was made, therefore, to apply a single intestacy table (which was ultimately based on New York state’s statute) to all claims, which assured certainty, uniformity and ease of application with respect to complicated claims. Another issue was presented with respect to the valuation of currencies that had undergone many revaluations over the decades. Indeed, some of these currencies, such as the Hungarian pengo, no longer existed. Accordingly, valuation guidelines were established which converted claims expressed in local currencies into agreed upon exchange rates particular to that country together with accumulated interest through the year 2000. Additional interest was added for each year thereafter, until the final award was paid out. Another problem was faced when it had been established that a policy had existed and had not been paid, but there was no evidence establishing the face value of the policy. For this situation, an historical review was made to determine the size of the average policy in that country, and awards were based on those average amounts. As this compensation was to be paid only to victims of Holocaust persecution of any religious or ethnic group, as defined, but not just to individuals who had perished during the war, it was not always clear whether individuals in certain locations at certain times and in certain circumstances fell within the Agreement’s definition of “Holocaust victim.” For this purpose, therefore, provision was made for the appointment of historical experts, who would be familiar with the history and circumstances in the region of each particular country, and make a reasoned decision and report to the arbitrator relating to the insured’s or claimant’s qualification as a Holocaust victim. The agreement also gave protection to claimants who appealed insurance company decisions to the arbitration tribunal so that they would not be dissuaded from taking such appeals. Accordingly, the rules provided protection to the claimant by declaring that the arbitrator might enter an award that was lower or higher than the amount originally claimed, but in no event could it be lower than the amount originally offered by the insurance company or (to prevent runaway awards) higher than the value of the policies as calculated pursuant to the valuation guidelines. Finally, the arbitration acts of England or Switzerland (depending on the date of the claim) were designated as the controlling statutes for these arbitrations, so that there was an established framework as to those issues not specifically superseded by the arbitration agreement. Numerous other provisions were adopted to satisfy the needs of the parties that cannot be set out here. What the process did demonstrate, however, is that through negotiation, parties may mold a claims and arbitration process that will answer many of their concerns, some of which they were confronting for the first time. It is a lesson to be remembered as we approach any dispute resolution process and consider whether the established framework of the particular ADR provider is acceptable or additional procedures should be negotiated that will better serve the needs of the parties. ABRAHAM J. GAFNI is a mediator/arbitrator with ADR Options, and a professor at Villanova University School of Law.

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