Tribal Insurance Policies: Buyers Beware
Indian Country must take a renewed approach to insurance procurement. Tribes, Alaska Native Corporations and Indian casinos and enterprises can no longer afford to treat their insurance polices as boilerplate, non-negotiable contracts. Why? Because the future of tribal sovereignty and self-governance depends in significant part on better insurance products and risk management practices. (For example, see Tribes & Insurance Defense Lawyers Should Avoid Asserting Sovereign Immunity.)
It is time for tribal business leaders and staff lawyers to approach and negotiate those two-inch thick insurance policies as they would a significant real estate or commercial loan transaction.
This checklist is designed to help Indian decision-makers ensure that tribal insurance contracts not only maximize the protection of Indian assets, but do not inadvertently waive tribal sovereignty, jurisdiction or immunity. Tribal executives should work with their brokers to negotiate and tailor make (“manuscript”) policies for the tribe or tribal business.
- Tribal Defense & Indemnity. These are the two things any insured bargains for, in exchange for a costly insurance premium. Without claim defense and indemnity, there is not much reason to have insurance. Yet, some tribal insurance policies do not include an express defense right. Make sure yours does – or your insurance policy might not be worth the paper its printed on.
- Tribal Choice of Counsel. Tribal business leaders must insist that the tribe “shall have the sole right to assign counsel to defend any suit against the insured.” Like Corporate America, which demands of its insurers the right to select outside defense counsel, Indian Country must enjoy that same prerogative to assign Indian 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 any carrier’s choice of discount, non-tribal defense lawyer.
- Policy Doesn’t Waive Immunity from Tort Claims. If a tribe does not wish to cause a blanket immunity waiver by purchasing insurance, as is the case for most tribes, their policy should provide that nothing therein should be read to waive immunity or confer jurisdiction to any court.
- Tribal Authority to Waive Immunity. An insurer is not, as a matter of law, authorized to waive or otherwise limit a tribal insured’s sovereign immunity. All tribal policies must make clear that in the event of a claim or suit against the tribe or tribal officers or employees, the insurer shall not assert or waive tribal immunity absent written authorization from the tribe.
- Tribally Appropriate Dispute Resolution. Standard arbitration endorsements arguably: (1) divest Indian courts from jurisdiction to entertain a reservation-based insurance coverage disputes; (2) relinquish the application of tribal law; and (3) waive the tribal insured’s sovereign immunity from any suit or countersuit the insurer may advance. The tribe must decide whether any coverage dispute with its insurer should be brought before an arbitration tribunal and/or a tribal or state court, and whether it wishes to risk waiving immunity relative to any such dispute through an arbitration endorsement.
- Self-Governance Tribal Authority for FTCA Tender. A 1990 amendment to the federal self-determination act provides tribes and/or tribal employees full protection under the Federal Tort Claims Act (FTCA) for tort claims arising from self-governance contractual functions. A self-governance tribe’s policy should reflect the interplay between their insurance coverage and FTCA protection. The policy should also explain that the insurer shall not tender an FTCA-covered claim/suit to the federal government without tribal authorization. If for public policy reasons the tribe opts against doing so, the policy should reflect the insurer’s continued duty to defend the matter.
- Duty to Defend FTCA Claim Unless/Until U.S. Does. If a self-governance tribe opts to tender an FTCA-covered personal injury claim/suit against the tribe and/or tribal employees, the Department of Justice must defend the matter. The tribe’s insurance policy must make clear that the insurer has a duty to defend a claim or lawsuit against the tribal insured until such time as the Justice Department formally agrees to defend the matter pursuant to the FTCA.
