Ninth Circuit Affirms Ruling that Suquamish Tribal Court Has Exclusive Jurisdiction over Insurance Claims

I mentioned last summer that I have come to appreciate how Indian law intersects with almost every substantive body of law. Here’s another example in the contracts context. The issue in Lexington Ins. Co. v. Smith was whether a tribal court had jurisdiction over a claim against  nonmember, off-reservation insurance companies that participate in an insurance program tailored to and offered exclusively to tribes.  

In Montana v. United States (1981), SCOTUS recognized two situations that empower tribal courts to exercise jurisdiction over nonmembers. They have jurisdiction over: “the activities of nonmembers who enter consensual relationships with the tribe or its members” and the conduct of nonmembers that “threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe.” The Ninth Circuit found that this case fell squarely within the first part of the Montana test and thus that the Tribal Court had jurisdiction.    

Beginning in 2016, the Suquamish Tribe (the Tribe) and the Port Madison Reservation (the Reservation) over which it has sovereign authority purchased insurance policies from the Lexington Insurance Company (Lexington) and others that joined the case through the Tribal Property Insurance Program (“Tribal Program”), which is administered by Alliant Specialty Services, Inc., under the moniker Tribal First. Tribal First specializes in tailoring insurance policies to the needs of Indian communities and Indian employees. 

The troubles arose in 2020, when many of the insured business enterprises shut down due to the COVID-19 pandemic. The Tribe and the Reservation made claims on their policies, and Lexington coverage. The Tribe and the Reservation then brought suit for breach of contract in Tribal Court. The parties agreed to stay the proceedings there while Lexington sought declaratory judgment against the Tribal Court in Federal Court. The District Court granted summary judgment to the Tribal Court, finding that the Tribal Court did indeed have jurisdiction over the claims against Lexington, and the Ninth Circuit affirmed.

The court begins its analysis by laying out the parameters of tribal authority. A tribe can only exercise jurisdiction over nonmembers within its sovereign territory. Even within its territory, tribal courts can only exercise jurisdiction over matters within the tribe’s legislative powers.

In this case, Lexington’s relevant conduct related to properties within tribal lands. The fact that negotiations of the insurance policies occurred elsewhere and that no Lexington employees set foot on tribal land is irrelevant.  What matters is that Lexington was conducting business with the Tribe and that Lexington’s business was related to Tribal lands.  Proceeding to the Montana test, the court expressed some incredulity that Lexington would feign lack of awareness that its contracts with the Tribe applies to properties on Tribal lands.  Nor did the court have any difficulty identifying the nexus between the parties’ consensual relationship and the Tribe’s regulatory powers. The court concluded that the Tribe had regulatory power over Lexington under Montana‘s first exception to the general rule that Tribes cannot exercise jurisdiction over nonmembers.

On September 16, by a vote of 16-6, the full Ninth Circuit denied Lexington’s motion for rehearing en banc. The rhetoric of the opposing sides reflects an intense and fundamental disagreement. The majority accuses the dissent of elevating form over substance. The dissent emphasizes the parties’ stipulation that no Lexington employee ever set foot on tribal lands in connection with the transaction at issue and thus argues that allowing the Tribe to hale the non-member insurer into Tribal Court “defies both the Constitution and Supreme Court precedent. It seems quite possible that SCOTUS could take this case to revisit some of the consequences of McGirt v. Oklahoma, at least by analogy.