Insurers remain subject to tribal jurisdiction in the Ninth Circuit following denial of certiorari by the Supreme Court

Present or not, insurers doing business with tribal government and businesses cannot escape the jurisdiction of tribal courts, at least within the Ninth Circuit.  

The Supreme Court of the United States denied certiorari on May 19, 2025 for insurers’ appeal from the Ninth Circuit decision in Lexington Ins. Co. v. Smith, 94 F.4th 870 (9th Cir. 2024), cert. denied sub nom. Lexington Ins. Co. v. Suquamish Tribe, No. 24-884, 2025 WL 1426677 (U.S. May 19, 2025), solidifying Ninth Circuit jurisprudence holding that in instances where an insurance policy covers tribal business, property and operations of tribal government or businesses that extensively involve the use of tribal land, tribal courts have jurisdiction over an insurance coverage action involving a nonmember insurer even if the insurer was never physically present on the reservation. 

The Suquamish Tribe (Tribe), located in Suquamish, Washington, filed a complaint against its insurers in the Suquamish Tribal Court (Tribal Court) for breach of contract and sought a declaratory judgment that the insurers were obligated to indemnify the Tribe and its economic development arm for business losses related to the COVID-19 pandemic.  The insurers filed a motion to dismiss arguing that the Tribal Court did not have personal or subject matter jurisdiction. The Tribal Court and its respective appellate court determined that it had jurisdiction to hear the matter.

The insurers then filed suit against various Tribal Court judges in the U.S. District Court for the Western District of Washington seeking a judgment that the Tribal Court lacked jurisdiction over the insurers and the claims brought against them.  The District Court agreed with the Tribal Court, citing to the U.S. Supreme Court ruling in Montana v. United States, 450 U.S. 544, 101 S. Ct. 1245, 67 L. Ed. 2d 493 (1981) in support. 

In Montana, the Supreme Court held that although tribal courts generally lack the right to regulate and adjudicate disputes involving nonmembers, there are two narrow exceptions to the general rule:  tribal courts have authority over (1) nonmembers who enter into consensual relationships with the tribe or its members and where there is a nexus between the regulation/dispute and the consensual relationship, and (2) the conduct of non-members on fee lands within its reservation when that conduct threatens or has a direct effect of the political integrity, economic security, or the health or welfare of the tribe. 

Finding that tribal jurisdiction over the nonmember insurers was proper per Montana because the first exception had been met, the Ninth Circuit affirmed.  The Court viewed the insurance policy as a contract created by mutual and consensual conduct between the insurers and the Tribe, and held that the nexus requirement had been met because the Tribe sought to regulate the scope of insurance coverage that the insurers were bound to provide under the insurance contract.  Importantly, the Court stated that no physical presence requirement existed when evaluating whether a tribal court had jurisdiction over a nonmember.  The Ninth Circuit also rejected the insurers’ argument under Plains Com. Bank v. Long Fam. Land & Cattle Co., 554 U.S. 316, 128 S. Ct. 2709, 171 L. Ed. 2d 457 (2008) that the first exception in the Montana analysis required an additional inquiry into whether the coverage action stemmed from the Tribe’s inherent sovereign authority to set conditions on entry, preserve tribal self government, or control internal relations.  The Court held that it did not read Plains Commerce as requiring any such separate inquiry, following the majority view in the circuits on the issue of whether Plains Commerce implicates a separate inquiry under the first exception of the Montana analysis.  

As noted by the Ninth Circuit in denying a Petition for Rehearing, “…no court has addressed a situation like Lexington”. Lexington Ins. Co. v. Smith, 117 F.4th 1106, 1111 (9th Cir. 2024).  While prior decisions examining jurisdiction over nonmembers all involved a nonmembers’ physical presence on tribal land, the Ninth Circuit rejected the proposition that a physical presence requirement exists in the existing jurisprudence.  As all federal appeals have been exhausted, Lexington is now the law of the land in the Ninth Circuit. Insurers should be aware of the possibility of being subjected to tribal jurisdiction for insurance coverage actions concerning policies written to insure risks on tribal lands existing within the Ninth Circuit, even if the insurer does not have a physical presence on tribal land.