Editors’ note: Indian Country Today presents a three-part series that provides practical tips for Indian decision-makers to ensure that the insurance they purchase not only maximizes the protection that should be afforded to tribal assets, but does not waive Indian sovereignty, jurisdiction and immunity.
orporate America has for too long taken advantage of, ignored and, at times, disrespected Indian people. Energy companies have pillaged tribal lands for oil and gas, underpaid Indians for rights-of-way across allotted lands and decimated salmon populations with dams. Powerhouse financial institutions that were either unable or unwilling to assist tribes Before Casinos (“B.C.”) – before Indian gaming blossomed into a multi-billion-dollar industry – are now roaming the halls of tribal administration buildings, trying to land large Indian financial investment accounts or commercial loans. Insurance companies, which also gave little attention to Indian people B.C., now pocket lucrative tribal premiums.
It is high time Indian country insisted and ensured that big business, which eloquently talks the talk of tribal sovereignty, also walks the walk. It is important that Indian tribes and Alaska Native corporations send that message to their friends in the multi-trillion-dollar insurance industry. Native people are paying millions upon millions of dollars in insurance premiums each year to ensure the protection of the tribal treasury and other Indian assets. But do you know that those expensive insurance contracts that purport to safeguard Indian property and monies probably waive tribal sovereignty, jurisdiction and immunity?
Now increasingly drawn to the reservation by the $23 billion Indian gaming industry, insurers and their agents sell tribes on how they will “protect the tribe and its sovereignty” – and they ostensibly command five- or six-figure premiums to do so. But those same insurers commonly retain discount lawyers with no Indian legal experience to defend tribal insureds from attack. And when sued by tribal insureds for contractual insurance coverage, those same insurers routinely object to the jurisdiction and authority of tribes and their courts. When all’s said and done, the insurance industry is responsible for many federal and state court decisions that have eroded tribal jurisdiction over reservation-based disputes.
Indian country must take a renewed approach to insurance procurement. Tribes and Alaska Native corporations can no longer afford to treat their insurance polices as form contracts by rubber-stamping whatever insurance agents are packaging and selling. Rather, Indian business leaders and tribal lawyers must approach and negotiate those two-inch insurance policies/contracts as they would a multi-million-dollar real estate acquisition or commercial loan transaction. From today forward, tribal insureds must get what they deserve in exchange for those exorbitant premiums – business partners who will make decisions, or honor tribal decisions, that are in the best interest of the tribe and all of Indian country.
Expertise trumps cost when sovereignty is at stake
Insurance companies command trillions of dollars in premiums – $3.4 trillion worldwide and $946 billion domestically last year. They control billions of dollars in damage claims – $61.2 billion in the United States in 2005, the year in which the likes of Hurricane Katrina caused the most property damage in our country’s history. (Note the enormous disparity between premium dollars and estimated damages in the United States alone last year.)
In turn, insurers exert great influence over, among many other things, the legal marketplace. Insurers often dictate to law firms the hourly rate they will pay for defense of an insured, rather than those legal businesses commanding their standard rate as is common with most attorney-client relationships. Ultimately, insurance companies command sizeable discounts on the legal bills they must pay on behalf of their insureds. But, as the old adage goes, you get what you pay for.
Consider the everyday tort lawsuit brought by non-Indian Joe Citizen against a tribal insured. If the facts he alleges against the insured could, if proven, impose liability upon the tribe within its policy’s coverage, the insurer must retain and pay outside lawyers to defend the tribe. When the insurer and/or its claims adjustor are presented with that tort claim, they often hire the same local discount defense lawyers that they hire to defend non-Indian businesses from personal injury suits. But in the context of even the most routine slip-and-fall claim, federally-recognized Indian tribes and Alaska Native corporations have vastly different legal rights than off-reservation grocery or hardware store owners. Therefore, the cookie-cutter approach to insurance defense, which is common in the business world, is not acceptable in Indian country.
Many tribal insurance policies allow the insurer to select defense counsel for the tribe when it faces a tort claim or lawsuit. Take, for example, one popular tribal insurance underwriter’s Tribal Officials Errors and Omissions Liability Occurrence Form, conferring what is commonly known as director and officers, or “D&O,” coverage, which states:
“The [insurer] shall have the right and duty to select counsel and defend any suit against the insured … The [insurer] shall have the sole right to assign counsel to defend any suit against the insured, and the insured agrees and consents to the [insurer ’s] exercise of that sole right.”
Why? So the insurer can pay discount nontribal defense lawyers to defend any suit against the tribal insured. And such policy language has been invoked by carriers when they unilaterally retain defense lawyers with no experience representing Indian people, to defend tribal insureds.
Notwithstanding any such insurance contract language, tribal insurers have a duty to employ defense counsel who understand the significant legal, political and social implications of even the most frivolous tort lawsuit against a tribal sovereign, even if tribal defense lawyers cost insurers a bit more per hour given their specialty. Still, tribal insureds get only what the insurers are willing to pay for – discount defense lawyers who simply do not understand Indian country, let alone the profound consequences of litigation against a sovereign tribal government in this day and age. If that is not a bad-faith insurance practice, what is?
Consider, for example, a tribal insured’s opportunity to assert sovereign immunity and move to dismiss a tort lawsuit initiated by a non-Indian, arising in a tribal casino. Current common law makes it clear that tribes, tribal businesses and casinos, and tribal officials and employees who act within the scope of their employment, are all generally immune from tribal, state or federal suits. Still, an experienced Indian defense lawyer would first explain to the tribe that courts, including Indian courts, are increasingly skeptical of federal Indian jurisdictional defenses like sovereign immunity, feeling that aggrieved reservation-goers should not be deprived the right to have their case aired on their merits before a judge or jury. That is particularly true in cases that involve “unknowing” non-Indian patrons and/or arise out of tribal “commercial” enterprises (despite the fact that such businesses’ proceeds provide essential governmental services to tribal people).
Indian defense counsel would also advise the tribal insured that it can no longer automatically assert the defense of sovereign immunity because courts increasingly “doubt the wisdom of perpetuating the doctrine,” suggesting to Congress “a need to abrogate tribal immunity, at least as an overarching rule.” See Kiowa Tribe of Oklahoma v. Manufacturing Technologies Inc. (1998). That tribal lawyer would further explain to the tribe that once it files a motion to dismiss, it essentially relinquishes the tribe’s (and Indian country’s) control over the outcome of the lawsuit, to the judicial system.
On the other hand, a non-tribal defense lawyer may not appreciate this legal and political context, particularly the intense scrutiny courts give federal Indian jurisdictional defenses, or the profound effect of the published opinions judges write – and U.S. congressmen read – urging the modification or outright abrogation of legal doctrine like tribal immunity. As a result, that lawyer might very well haul off and file the motion to dismiss, giving rise to the perfect storm for the next federal or state appellate court decision, or congressional bill, that will divest Indian courts from inherent authority over certain reservation disputes, or severely impact sovereign immunity.
When tribal sovereignty is at stake, tribes simply cannot allow insurers to be pennywise and pound-foolish, by assigning defense counsel based upon cost rather than expertise. Tribal business leaders must insist that the tribe “shall have the sole right to assign counsel to defend any suit against the insured.” Like large non-Indian companies that demand of their insurers and obtain the right to select defense counsel, tribes and Alaska Native corporations must enjoy that same prerogative to assign lawyers they trust. If the insurer balks at such language, the tribe and insurer could agree that they will jointly select counsel, which would have the practical effect of giving the tribal insured veto power over the carrier’s choice of inexperienced defense lawyer.
Gabriel Galanda and Debora Juarez are attorneys with Williams, Kastner and Gibbs PLLC’s tribal practice group in Seattle. Galanda is a descendant of the Nomlaki and Concow tribes and enrolled with the Round Valley Indian Confederation. Juarez is an enrolled member of the Blackfeet Nation.