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Tribes Win Insurance Coverage For COVID-19 Business Losses

Insurance Coverage Litigation Brandon Gutschow, Patrick Nolan, John Aramanda, Amy Levine Heiserman

Business interruption insurance form and red pen for signing.

Positive news has recently developed for Native American tribes seeking insurance coverage for COVID-19-related business interruption losses. Although many policyholders across the nation have struggled to obtain business interruption insurance coverage for pandemic-related losses, tribal policyholders have recently achieved two notable victories in Oklahoma state court under a Tribal Property Insurance Program Policy form. This form is widely used by tribes across the country and so these decisions have important weight for other claims.

In Cherokee Nation, et al., v. Lexington Ins. Co., et al., 2020 WL 8251117 (Okl.Dist. Dec. 18, 2020) and Choctaw Nation of Oklahoma v. Lexington Insurance Company, et al., 2021 WL 714032 (Okl.Dist. Jan. 27, 2021), the court granted summary judgment in favor of the tribes on their business interruption coverage claims for losses caused by COVIDÔÇÉ19. At issue in both cases was whether the term direct physical loss for purposes of business interruption coverage occurs when property is “rendered unusable for its intended purpose.” While the tribes argued in the affirmative, the insurers countered that direct physical loss is a term of art which means there must be “distinct, demonstrable, physical alteration to the property.” In ruling in the Cherokee Nation’s favor, the court found that the tribe had set forth a plausible claim for direct physical loss and that the insurers had not shown that any exclusionary language applied. The Choctaw court’s analysis went further and held that the tribe’s interpretation of direct physical loss was reasonable and that the insurers’ interpretation was unreasonable. The Choctaw court also noted that even if, for the sake of argument, it found the insurers’ interpretation to also be reasonable, cannons of construction utilized in Oklahoma required any ambiguities in policy language to be construed against the insurer and in favor of coverage.

Coverage of this type may be very time-sensitive. While tribal policyholders may be tempted to take a “wait and see” approach until the law in this area becomes more settled, note that time limitations either imposed by statute or in the policy itself may foreclose untimely claims. With the one year anniversary of the pandemic-related shutdowns fast approaching, time may be of the essence. Therefore, tribal policyholders must determine if a deadline to file suit applies to them, and to either file suit or enter into tolling agreements with their insurers prior to the deadline's expiration. Otherwise, covered claims could be time-barred.

If you have any questions on policy coverage, please do not hesitate to contact your Quarles & Brady attorney or: