Preemption -- 2003



American Insurance Association v. Garamendi   (U.S. Supreme Court)

Impact of state law on US foreign relations

The Supreme Court held 5-4 on 6/23/03 that the California Holocaust Victim Insurance Relief Act (“HVIRA”) interferes with the President’s conduct of the nation’s foreign policy and is therefore preempted. The HVIRA required, as a condition to state licensure, that all insurers provide certain details about every insurance policy issued by them in Europe between 1920 and 1945 and provides Holocaust victims with a private right of action to compel payment of insurance claims if the insurer is, at the time of suit, legally related to the issuer of the policy. Applying its decision in Zschernig v. Miller, 389 U.S. 429 (1968), the Court held that “resolving Holocaust-era insurance claims . . . is a matter well within the Executive’s responsibility for foreign affairs” and is a matter “in which national, not state, interests are overriding.” The HVIRA stands in “clear conflict” with the Executive’s policies and practices to resolve Holocaust-era insurance claims and therefore must yield. Justice Ginsburg, joined by Justices Stevens, Scalia, and Thomas, dissented. She would have held that because “no executive agreement or other formal expression of foreign policy disapproves of state disclosure laws like the HVIRA,” the statute survives preemption. This case is specifically important to insurers, but is more broadly important to businesses who face increasing efforts by states to regulate conduct that touches upon foreign affair.