OFAC Offers Guidance About Insurance Claims Involving Sanctioned Parties

One FAQ says insurance companies should contact OFAC about whether they can pay a claim under a policy to a sanctioned person or entity if the payment is to an “innocent third-party,” such as an injured person in a car accident. OFAC said it will work with companies about the “specifics” of each case, adding that it may authorize certain insurance payouts in special circumstances.

“Although authorizing payments to blocked persons is rarely aligned with the U.S. foreign policy and national security objectives of OFAC sanctions, circumstances may weigh in favor of authorizing payments to innocent third parties,” the agency said. “Ultimately, the insurance policy itself is a blocked contract, so all otherwise prohibited dealings related to the policy would require OFAC authorization.”

Another FAQ addresses how insurance companies should approach situations wherein a non-sanctioned person files a claim for a loss caused by a party on OFAC’s Specially Designated Nationals List. When a U.S. insurance firm receives a claim request for “death, injury, or property damage” caused by a sanctioned person, that doesn't necessarily mean paying the claim would be restricted under the agency’s sanctions regime, OFAC said.

The “mere fact that a blocked person has caused the loss does not in and of itself create a blocked interest in the policy or any claim or payment under the policy, nor does it constitute a dealing involving the blocked person,” the agency said. “Therefore, U.S. insurers may pay such claims to non-sanctioned recipients” as long as other OFAC sanctions regulations don't block those payments. “This guidance does not apply to scenarios in which a person is seeking reimbursement for payments that were made or will be made to a blocked person,” OFAC said.

Insurers that receive claims for losses caused by a sanctioned person should carry out “necessary” due diligence to make sure that paying the claim carries “no other potential sanctions risks,” OFAC said, such as processing a payment involving a sanctioned bank.

The agency also said some insurance policies may include “subrogation rights,” which give the insurer a legal right to seek reimbursement from the liable third-party for payment of the claim. OFAC said this situation also isn’t necessarily restricted by sanctions, but “claims paid as described above and all other obligations of the insurer on behalf of the insured (or their non-sanctioned beneficiaries) under a given policy must not be contingent on the successful pursuit of a subrogated claim by the insurer against a blocked person.”

OFAC also stressed that it doesn’t require U.S. people or companies to first obtain a specific license before suing a sanctioned person, but a license is “generally” required to enter into a settlement agreement with a sanctioned person, to accept payment from a blocked person, or to “enforce an order or award transferring blocked property.”

OFAC also amended several previously issued FAQs “as part of its ongoing process of reviewing published guidance to ensure information remains current,” the agency said. Those FAQs cover other compliance tips for the insurance industry.