The Ninth Circuit Affirms Tribal Court Jurisdiction Over Insurance Provider

By Heidi McNeil Staudenmaier and Daniel M. Staren 

On February 29, 2024, the Ninth Circuit issued its opinion in Lexington Insurance Co. v. Smith (Suquamish Tribe).¹ The Court affirmed the tribal court’s subject-matter jurisdiction over Lexington pursuant to the Tribe’s sovereign authority concerning “consensual relationships,” as recognized under the U.S. Supreme Court’s first Montana² exception.

Lexington Insurance Co. (Lexington), a U.S.-based surplus lines insurer, insured the Suquamish Indian Tribe’s properties. The Tribe alleged that it had incurred harm from suspending business operations during the COVID-19 pandemic. The Tribe then submitted insurance claims, to which Lexington responded with reservation-of-rights letters. The Tribe sued Lexington in tribal court, and Lexington moved to dismiss for lack of jurisdiction. The tribal court held it had jurisdiction, and the tribal court of Appeals affirmed. Lexington then commenced an action in Washington Federal Court seeking a declaratory judgment that the tribal court did not have jurisdiction. The federal court disagreed and dismissed the case with prejudice. Lexington appealed the federal court’s dismissal to the Ninth Circuit.

The Ninth Circuit held that Lexington’s business relationship with the Tribe in providing insurance coverage was sufficient to provide the requisite connection with tribal lands – notwithstanding that Lexington did not physically visit or have similar in-person contacts with the reservation. As such, the Court found the business connection triggered a presumption of jurisdiction because it satisfied the requirements for conduct occurring on the Tribe’s land. The Ninth Circuit acknowledged the U.S. Supreme Court’s general rule restricting a tribes's inherent sovereign authority over nonmembers, such as Lexington, on reservation lands. But the Ninth Circuit explained that, in Montana, the Supreme 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.'” 

The Ninth Circuit evaluated Montana and its progeny and held that tribal court jurisdiction was proper under the first Montana exception. The Court reasoned that the insurance contract was “mutual and consensual” and there is a nexus between Lexington’s consensual relationship with the Tribe and the conduct the Tribe seeks to regulate, i.e., the scope of insurance coverage that Lexington was to provide under the contract. Because the case fit within the first Montana exception, the Court concluded that jurisdiction flows from the Tribe’s retained sovereignty. As a result of affirming the tribal court’s subject-matter jurisdiction against Lexington under Montana’s first exception, the Ninth Circuit did not consider the second Montana exception.

The Ninth Circuit’s decision in Lexington underscores the complex legal landscape surrounding tribal court jurisdiction over nonmembers in the United States. It is unknown whether Lexington will seek review of the Ninth Circuit decision by the U.S. Supreme Court. If review is sought and accepted, the decision may represent an opportunity for the Supreme Court to opine on lower courts’ application of the Montana exceptions.

Footnotes

1. Lexington Ins. Co. v. Smith, No. 22-35784, 2024 WL 854885 (9th Cir. Feb. 29, 2024). [Back]

2. Montana v. United States, 450 U.S. 544, 565 (1981). [Back]