Lexington Ins. Co. v. Smith

94 F.4th 870

LEXINGTON INSURANCE COMPANY;Homeland Insurance Company of New York;Hallmark Specialty Insurance Company; Aspen Specialty Insurance Company;Aspen Insurance UK Ltd;Certain Underwriters at Lloyd's, London and London Market Companies Subscribing to Policy No. PJ193647;Certain Underwriters at Lloyd's, London Subscribing to Policy No. PJ1900131;Certain Underwriters at Lloyd's,London and London Market Companies Subscribing to Policy No. PJ1933021;Certain Underwriters at Lloyd's,London Subscribing to Policy Nos. PD-10364-05 AND PD-11091-00;Endurance Worldwide Insurance Limited T/AS Sompo InternationalSubscribing to Policy No. PJ1900134-A, Plaintiffs-Appellants, v. Cindy SMITH, in her official capacity as Chief Judge for the Suquamish Tribal Court;Eric Nielsen, in his official capacity as Chief Judge of the Suquamish Tribal Court of Appeals;Bruce Didesch, in his official capacity as Judge of the Suquamish Tribal Court of Appeals;Steven D. Aycock, in his official capacityas Judge of the Suquamish Tribal Court of Appeals, Defendants-Appellees,andSuquamish Tribe, Intervenor-Defendant-Appellee.

No. 22-35784

United States Court of Appeals, Ninth Circuit

Argued and Submitted August 24, 2023 Seattle, Washington

Filed February 29, 2024

Appeal from the United States District Court for the Western District of Washington David G. Estudillo, District Judge, Presiding, D.C. No. 3:21-cv-05930-DGE

Richard J. Doren (argued), Matthew A. Hoffman, Bradley J. Hamburger, Daniel R. Adler, Patrick J. Fuster, and Kenneth Oshita, Gibson Dunn & Crutcher LLP, Los Angeles, California; Gabriel L. Baker, Jensen Morse Baker PLLC, Seattle, Washington; Michael E. Ricketts, Gordon Thomas Honeywell LLP, Seattle, Washington; Kasie Kashimoto, Kevin J. Kay, Thomas Lether, and Eric J. Neal, Lether Law Group, Seattle, Washington; Robert W. Novasky, Forsberg & Umlauf PS, Tacoma, Washington; for Plaintiffs-Appellants.

Andrew Brantingham (argued), Skip Durocher, and Benjamin Greenberg, Dorsey & Whitney LLP, Seattle, Washington; Timothy W. Woolsey, Office of Tribal Attorney, Squamish, Washington; for Intervenor-Defendant-Appellee.

Before: Michael Daly Hawkins, Susan P. Graber, and M. Margaret McKeown, Circuit Judges.

OPINION

McKEOWN, Circuit Judge:

Justice Thurgood Marshall once wrote, "It must always be remembered that the various Indian tribes were once independent and sovereign nations, and that their claim to sovereignty long predates that of our own Government." McClanahan v. State Tax Comm'n of Ariz., 411 U.S. 164, 172, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973). Yet, a complex history has made federal courts the arbiters of tribal court jurisdiction. This history has also led to the Supreme Court's general rule that restricts tribes' inherent sovereign authority over nonmembers on reservation lands. See Montana v. United States, 450 U.S. 544, 565, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981). Nonetheless, in Montana, a "pathmarking case concerning tribal civil authority over nonmembers," Strate v. A-1 Contractors, 520 U.S. 438, 445, 117 S.Ct. 1404, 137 L.Ed.2d 661 (1997), the Court crafted two important exceptions that bring conduct within tribal jurisdiction: "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," 450 U.S. at 565-66, 101 S.Ct. 1245.

This appeal involves an insurance claim covering tribal properties on tribal land brought by a tribe and its businesses. We consider whether the tribal court has jurisdiction over this claim against nonmember, off-reservation insurance companies that participate in an insurance program tailored to and offered exclusively to tribes.

Here, several insurance companies and underwriters (collectively, "Lexington") challenge the Suquamish Tribal Court's ("Tribal Court") jurisdiction over an insurance contract suit brought by the Suquamish Tribe ("Tribe") and its businesses. Since 2015, Lexington has insured the Tribe's properties on tribal lands within the boundaries of the Port Madison Reservation. After suspending business operations during the onset of the COVID-19 pandemic, the Tribe submitted insurance claims for lost business and tax revenue and other expenses. Lexington responded with reservation-of-rights letters. The Tribe then sued Lexington in Tribal Court for breach of contract, and Lexington moved to dismiss for lack of jurisdiction. The Tribal Court found that it had jurisdiction, and the Suquamish Tribal Court of Appeals affirmed.

Lexington commenced this action in federal court, seeking a declaratory judgment that the Tribal Court is without jurisdiction. On cross-motions for summary judgment, the district court held that the Tribal Court had subject-matter jurisdiction over this dispute. The court granted the Tribe's motion for summary judgment, denied Lexington's motion, and dismissed the case with prejudice to allow proceedings to continue in Tribal Court.

We affirm. The Tribal Court has subject-matter jurisdiction over this matter under the Tribe's sovereign authority over "consensual relationships," as recognized under Montana's first exception. 450 U.S. at 565, 101 S.Ct. 1245. Because our decision rests on Montana's first exception, we need not examine the second Montana exception or the right to exclude, as discussed in Water Wheel Camp Recreational Area, Inc. v. LaRance, 642 F.3d 802 (9th Cir. 2011) (per curiam).

BACKGROUND

The Suquamish Tribe is a federally recognized tribe located in the Puget Sound in Washington State. Pursuant to the Treaty of Point Elliott, the Tribe has sovereign authority over the Port Madison Reservation ("Reservation"). 12 Stat. 927 (1855). The Tribe operates a host of businesses on the Reservation, both directly and through Port Madison Enterprises ("Port Madison"), a tribally chartered economic development entity that is wholly owned by the Tribe and headquartered on tribal trust lands. The businesses, which include a museum, a seafood company, a casino, a hotel, and several gas stations, are all located on tribal trust lands within the boundaries of the Reservation.

Beginning in 2015, the Tribe and Port Madison purchased insurance policies from Lexington Insurance Company and several other off-reservation insurance companies via an insurance broker. The policies were offered under the Tribal Property Insurance Program ("Tribal Program"), which is administered by Alliant Specialty Services, Inc., under the moniker Tribal First.¹ Tribal First provides insurance and risk management services exclusively to tribal governments and enterprises. Tribal First describes itself as "the largest provider of insurance solutions to Native America and a leader in the specialty areas of tribal business enterprises, including gaming, alternative energy, construction, and housing authorities." Because of this focus on "Native America," Tribal First "structure[s] insurance programs tailored to safeguard both [tribal] operations and [tribal] employees."

Specifically, Tribal First contracts with insurance providers and underwriting services that are willing to provide coverage to tribal entities, and then supplies insureds with the property insurance policies issued by the contracted providers. Tribal First handles the "underwriting, claims/risk management, and administrative services" for the tribal insureds. Lexington is one of these contracted providers. Lexington participated in the Tribal Program to provide insurance to tribal entities, like the Tribe and Port Madison, that signed up with Tribal First. Lexington entered into a contract with Alliant and issued insurance policies—based on underwriting guidelines specifically negotiated for the Tribal Program—that were provided through Tribal First to the tribal entities.

The relevant insurance policies named Lexington as the insurer and the Tribe, Port Madison, and various subsidiaries—all located on tribal trust lands within the Reservation—as the insureds. In addition to being listed on the evidence-of-coverage letters and the policies' declaration pages as the insurer, Lexington knew it was insuring the Tribe and Port Madison. The "All Risk" policies issued by Lexington provided broad coverage for losses to the Tribe's and Port Madison's businesses and properties. The policies covered "all risks of physical loss or damage" to "property of every description both real and personal" located on the trust lands, as well as interruptions to business and tax revenues generated within the Reservation. Overall, the policies covered almost $242 million worth of real property, $50 million worth of personal property, and $98 million of business interruption value—all centered on Tribal trust lands—for the Tribe and Port Madison.

In March 2020, in response to the outbreak of COVID-19, the Suquamish Tribal Council passed several resolutions that declared a public health emergency, restricted access to certain public facilities operated by Port Madison, and suspended operations at all tribal businesses on the Reservation. Eventually the Tribal Council initiated a phased reopening plan for these businesses. As a result of these closures and the pandemic, the Tribe and Port Madison allege various injuries, including damage to the buildings on trust lands, loss of business income and tax revenue, and costs associated with disinfecting and sanitizing the business premises. In an effort to recoup these losses, the Tribe and Port Madison submitted claims for coverage under the Lexington insurance policies. Lexington responded to these claims by issuing reservation-of-rights letters, contending that the policies may not cover COVID-19-related losses. The merits of the coverage claims are not before us.

The Tribe and Port Madison then sued Lexington in the Tribal Court, claiming breach of contract and seeking a declaratory judgment that the insurers were...