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January 2011

Movsesian v. Victoria Versicherung AG ? California Statute Relating to Claims Under German Insurance Policies is not Preempted by Federal Policy

California Statute Governing Claims Arising out of German Insurance Policies Issued to Armenian Genocide Victims does not Conflict with Federal Policy and is not Preempted by Federal Acts

No. 07-56722 (9th Cir. Dec. 10, 2010)

The United States Court of Appeal for the Ninth Circuit has concluded that California Code of Civil Procedure section 354.4(c), which relates to claims arising out of life insurance policies issued to "Armenian Genocide victims," does not conflict with any express federal policy and is not preempted under the foreign affairs doctrine or by the federal Claims Agreement or the War Claims Act.

In 2000 section 354.4 of the California Code of Civil Procedure was enacted to provide California courts jurisdiction over certain claims against insurers arising out of insurance policies held by "Armenian Genocide victim[s]" and to extend the statute of limitations for such claims to December 31, 2010.

In 2003, Appellant Vazen Movsesian and other persons of Armenian descent filed a class action suit against several insurers and their parent company ("Munich"), claiming benefits under insurance policies issued by the insurers.  Munich moved to dismiss, arguing in part that section 354.4 violated the due process clause of the United States Constitution and was preempted under the foreign affairs doctrine.  The district court rejected these arguments, and Munich successfully moved to certify the district court's order for interlocutory appeal.

On appeal, Munich argued primarily that section 354.4 is preempted under the foreign affairs doctrine in that (1) it conflicts with the Executive Branch's policy prohibiting legislative recognition of an "Armenian Genocide," and (2) it is preempted by the federal Claims Agreement of 1922 and the War Claims Act of 1928.  Munich also argued that it was not an "insurer" as defined in section 354.4, and thus was not a proper defendant.

The Ninth Circuit rejected both of these arguments.  The Court acknowledged state power that touches on foreign relations "must yield to the National Government's policy" and that executive agreements can carry policy-making power, if Congress acquiesces to the executive practice.  However, the Court found no Executive agreement regarding the use of the term "Armenian Genocide" in the materials identified by Munich, comprised of informal presidential and State Department communications with Congress regarding proposed Congressional legislation.  The Court found that these communications urging against recognition of the Armenian Genocide were "counterbalanced" by various statements from the executive branch in favor of such recognition.

The Court discussed the principle of "field preemption," under which state legislation may be preempted if the state were to take a position on a matter of foreign policy with no serious claim to be addressing a traditional state responsibility.  The Court found the field preemption did not apply, because "California's attempt to regulate insurance clearly falls within the realm of traditional state interests," and section 354.4 has only an incidental effect on foreign affairs.

The Court also found that section 354.4 is not preempted by either the Claims Agreement or the War Claims Act.  The Claims Agreement of 1922 established a commission to resolve all claims concerning "debts owing to American citizens by the German government or by German nationals."  In 1928, the War Claims Act provided for payment of Claims Agreement awards.  The Court rejected Munich's argument that the Acts applied to claims against German insurance companies by Armenian Genocide victims because the insurance policies were the private property of insured Armenian citizens of the Ottoman Empire, not German debts owing to American citizens.

The Court also rejected Munich's argument that it was not an "insurer" under section 354.4 and thus not a proper defendant, because Munich's subsidiaries issued qualifying insurance policies.  Further, section 354.4 does not define "insurer" for purposes of limiting potential classes of defendants, but rather to limit the types of claims that may be brought.

This opinion is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the United States Supreme Court. These events would render the opinion unavailable for use as legal authority.

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