The goal of all parties is to assure that tribes have private liability insurance that is appropriate, but not excessive. As previously noted, this balance is often hard to strike.

The FTCA provides immunity only to a self-determination contractor and its employees carrying out a P.L. 93-638 contract. But the tribal employees must be carrying out their duties under the contract and performing activities that are within their job or position description. Although the scope of the P.L. 93-638 contract issues are matters of federal law, whether an employee is acting within the scope of employment in carrying out those activities is a matter of state law. Distinguishing between official duties and voluntarily undertaken activities may require fact-intensive analysis that differs in each case. Given the variability of state employment law and the complicated factual nature of the analysis necessary to reach a legal judgment, making generalizations as to whether certain fact patterns will result in FTCA protection may not be possible.

As a result of this uncertainty, some tribes have chosen to purchase more comprehensive private liability insurance that may duplicate some of the protection they may have under the FTCA. In that case, the Department of Justice has required insurers to bear the cost of litigating claims that are covered under the FTCA. The Department's lawyers will stay involved in the litigation and work with the insurance company's lawyers, but the insurer bears the litigation cost and pays any judgment due up to the limits of the policy. Again, the problem is that it may be impossible to determine before a claim is filed whether or not the claim will be covered.

During the course of our study, we examined a few private liability insurance policies purchased by tribes and were surprised to find that none contained language that we think would solve this problem of potential duplicative coverage. A simple statement, such as “This policy

covers only tort claims not covered under the FTCA," would be helpful in making clear to the Justice Department that the coverage is not duplicative. More difficult, of course, is the question

of how the insurance underwriter would price that policy.

4.

The provision contained in section 201(c) requiring insurance policies to contain provisions waiving the insurer's right to assert a tribe's sovereign immunity is essential and should be made effective with respect to any policy or contract of insurance entered into or renewed after the date of enactment.

Generally the liability policies we examined were silent as to the right of the insurance company to raise the tribe's sovereign immunity as a defense. A few contained a provision that stated that the insurer would only raise the immunity defense if the tribe authorized the company to do so in writing. However, one insurance company representative with many clients in Indian country bragged to us that every time a claim was filed against the policy, the insurer routinely raised immunity to defeat the claim. The premiums charged by this company were no lower than other insurance companies writing tribal liability insurance that did not raise the immunity defense. We found it quite troubling that this insurer charged tribes so much for coverage, even though its exposure for claims was practically non-existent. When we asked one of this insurer's tribal clients whether, as a hypothetical matter, the tribe approved of an insurer using the tribe's sovereign immunity in this way, the tribal representative remarked, "Why would a tribe pay an insurance company if it planned to avoid all claims by raising immunity? The tribe could do that itself; it wouldn't need insurance."

5. If the Secretary is required to establish a program to provide Federal supplemental insurance, it must be actuarially sound.

Section 201 contemplates that some type of Federal supplemental coverage will be made

available to tribes which do not have adequate supplemental tort coverage. This raises a number

of questions, both philosophical (e.g., should Congress require all tribes to have insurance to compensate parties who are injured by the tribe's negligence or should the decision to supplement FTCA coverage be made by each tribe) and technical. Regardless of whether such supplemental insurance is mandatory or voluntary, any Federal insurance program must be actuarially sound. The greater degree of flexibility that the tribes have either in determining whether they want supplemental coverage or whether they will purchase supplemental coverage in the private marketplace or from the Federal government, problems of adverse selection will arise. Clearly professional risk managers must be consulted before such an undertaking gets too far along. There are many other technical details that must be examined as well. At a minimum, however, the bill should require the Secretary to set premiums at a level that assures the pool's actuarial soundness.

6.

Legislation could provide the Secretary with flexibility in fulfilling the mandate to obtain or provide liability insurance for tribes.

The Secretary could decide to make supplemental liability coverage available to tribes in

various ways, such as:

By operating a Federal insurance program.

By using the Federal Employees Health Benefits Program (FEHBP) model (i.e., setting minimum Federal criteria for coverage, then permitting any insurer that wants to offer such a package to participate in the program with the Secretary's oversight).

By using a variant of the FEHBP model (e.g., setting minimum Federal criteria for coverage, then utilizing a competitive bidding process, selecting one or more private carriers to offer the supplemental insurance).

By setting minimum Federal standards for the coverage and solvency, but offering a Federal charter to any purchasing consortium of tribes or tribal organizations or any self-insured risk pool established by one or more tribes or tribal organizations.

7. Existing insurance arrangements that provide adequate supplemental tort coverage for tribes in a cost-efficient manner should not be disrupted.

Some insurers and brokers have spent considerable time developing private liability

insurance programs that are tailored to meet the needs of individual tribes and take into consideration their coverage under the FTCA when applicable. To the extent that these programs

do the job in a cost-efficient manner, Federal legislation should not disrupt them. On the other hand, as previously noted, we did discover at least one example of an insurer that was not providing its tribal clients with a fairly priced product (i.e., the insurer that was using sovereign immunity to defeat all claims).

8. The Committee should consider asking the General Accounting Office to evaluate the adequacy of tribal regulation with respect to solvency and consumer protections for tribally-chartered insurance companies.

Although beyond the scope of our study, more careful evaluation of the operation of tribally-chartered insurance companies may be desirable. A number of people we interviewed expressed concern about the degree to which tribally-chartered insurance companies appear to escape the type of initial scrutiny and ongoing monitoring with respect to solvency and consumer protections that insurance companies that are regulated by the states undergo. Although there are not many currently in operation, if Congress were to require all tribes to secure adequate supplemental liability coverage, it might become a more attractive option to establish a triballychartered insurance company to provide that coverage. The GAO could provide an objective evaluation of the strengths and weaknesses of tribal regulation of insurance.

Conclusion

In conclusion, S. 2097 is a good first step toward assuring tribes access to more adequate and more affordable private liability insurance to supplement the protection from tort liability that self-determination contractors have under the FTCA. This is a complex issue, but one which

is important not just to the tribes themselves but to others who visit or engage in commercial activities on tribal lands.

I understand that the bill is a work in progress and to the extent that I can be a resource

for members of the Committee or your staff, please feel free to contact me.

Thank you again for inviting me to testify and I will be pleased to take your questions.