Tribe seeks pandemic protection from insurers

Muscogee (Creek) Nation filed a lawsuit against several insurance companies seeking a judicial declaration that policies purchased and in effect cover economic losses and expenses related to the COVID-19 pandemic. 

The Okmulgee-based tribe is one of at least three in Oklahoma asking state courts to make a determination on the issue after shuttering casinos in March, when the novel coronavirus began to spread through the state. The tribe, like others across the state, temporarily closed casinos in March in an effort to slow community spread of the novel coronavirus. 

MCN, doing business as Muscogee (Creek) Nation Casinos, filed in April its petition in Muskogee County District Court, and a month earlier the Chickasaw and Choctaw nations filed lawsuits in Pontotoc and Bryan counties respectively — all three tribes are represented by the Oklahoma City-based firm of Whitten Burrage.

The Muscogee (Creek) Nation alleges it purchased a policy represented as one that would provide "all risk benefits" for its "multiple commercial businesses and services located within the state." Among the risks believed to be covered were "business interruption, interruption by civil authority, limitations of ingress and egress, and extra expense."

The tribe alleges its "property sustained direct physical loss or damage" due to the COVID-19 pandemic. Its property "has been damaged" and "cannot be used for its intended purpose," and the tribe will "continue to sustain direct physical loss or damage covered by the policies."  

The National Association of Insurance Commissioners issued a statement in March, cautioning against the adoption of any proposals in Congress "that would require insurers to retroactively pay unfunded COVID-19 business interruption claims." Representatives of the standard-setting organization said business interruption policies generally are not "designed or priced to provide coverage against communicable diseases" like COVID-19.

"Insurance works well and remains affordable when a relatively small number of claims are spread across a broader group," NAIC officials said. "Therefore it is not typically well-suited for a global pandemic where virtually every policyholder suffers significant losses at the same time for an extended period."

While the U.S. insurance sector remains strong, if insurance companies are required to cover such claims, such an action would create substantial solvency risks for the sector, significantly undermine the ability of insurers to pay other types of claims, and potentially exacerbate the negative financial and economic impacts the country is experiencing.

Adam Levitt, co-counsel for plaintiffs who filed a federal class-action lawsuit to compel insurers to pay COVID-related claims for business interruptions, said companies have bought policies to protect against disruptions outside their control for years. The partner at DiCello Levitt Gutzler, one of the firms representing the plaintiff class, said such coverage is "an additional expense that they would have preferred not to carry but felt a responsibility to do so."

"For insurers to now tell them, in the most challenging of times, that the joke was on them and their policies were worthless, is unethical and abhorrent,” Levitt said.

Defendants named by the tribes in the three lawsuits include insurance companies and underwriters such as Lexington Insurance Co., Homeland Insurance Co. of NY (One Beacon), Hallmark Specialty Insurance Co., Endurance Worldwide Insurance LTD T/as Sompo International, Arch Specialty Insurance Co., Evanston Insurance Co., Allied World National Assurance Co., Liberty Mutual Fire Insurance Co., XL Insurance America Inc., and several Underwriters at Lloyd's syndicates.

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