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MASHANTUCKET, Conn.-Cross a risk manager for a municipality with one for a private conglomerate experiencing explosive growth and you have a rough approximation of the job of Richard Paton, chief risk management officer for the Mashantucket Pequot Tribal Nation.
As risk manager for the tribal government and its 1,000 employees, he weighs risks common to other small governments, such as professional liability for a police department and the doctors and nurses who staff a clinic.
But the MPTN-with about 350 members and a seven-person tribal council that itself resembles a cross between a corporate board of directors and a city council-also owns several enterprises, including one of the nation's most successful gaming operations. Foxwoods Resort Casino currently employs about 11,000 workers.
And a steady addition of new business operations leads the MPTN's risk management staff to obtain other coverages, such as marine products liability and builders risk.
The tribe is building high-speed ferries to carry passengers from the World Trade Center in Manhattan to Foxwoods.
But business interruption is one of the most significant concerns Mr. Paton and others managing gaming operation risks face. That is likely to weigh more on tribal gaming operations than on other industries, because a halt to guests bringing cash could ruin a tribe's drive for self-determination through economic development.
Another closely guarded asset is the tribe's right to invoke sovereign immunity from state and local jurisdictions. That right arises from a congressionally granted status as a sovereign nation. The proper handling of that status is also linked to the casino's success. And just as business interruption is an insurance purchasing concern, so is the tribe's sovereign immunity.
"There most likely is no other purchase that the tribe will make that can have, if it is not properly handled, an impact on those two items, the revenue and the sovereignty," said Sandy Sampson, an expert in tribal gaming and vp for Aon Risk Services Gaming Group in Atlantic City, N.J. Aon places property/casualty coverage for the MPTN.
A tribe and its insurers, if they choose, can invoke sovereign immunity as a defense against liability claims. But many gaming tribes prefer to indemnify patrons legitimately harmed on their property. Otherwise, revenue could suffer under negative publicity if injured guests are not made whole.
Foxwoods guards its sovereign immunity status "judiciously," Mr. Paton said. Decisions to change its policy regarding that status can come only from the top.
For example, all liability policies the tribe purchases must stipulate that an insurer will not invoke the tribe's sovereign immunity as a defense against third-party liability claims, Mr. Paton said.
"That's a deal-breaker as far as we are concerned," he said. "If an insurer can't do that, then we just move on to another insurance company. That's how critical and crucial that is. Outside of the tribal council, there is no one here that has the authority to invoke sovereign immunity."
It is imperative that a broker and insurer understand a tribe's sovereign immunity rights and its desires for handling them, as well as its tribal court and ordinances governing liability issues, Ms. Sampson said.
Purchasers also should know that all insurers are not equal in their grasp of those matters.
Insurers of gaming casinos used to be few, Ms. Sampson said. "However, we are seeing more insurance companies enter the marketplace, and some of them are doing a better job than others. Some are spending time really getting to understand the industry. Unfortunately, some of them will get in there quickly, and they are not long-term players."
Mr. Paton agrees.
"There is a small core of companies that historically have refrained or refused to do business with us because of the industry," he said. "It's not so much Native Americans (they refrain from working with). But because of the gaming industry and their uncertainty about it."
Some insurers are wary of tribal law and its unique judicial system, he added.
As for business interruption, the loss of daily income to a casino can easily outweigh the potential loss to a prosperous shopping mall or a huge manufacturing operation, sources said. For Foxwoods, with nearly $1 billion in annual revenue, daily losses from a business interruption claim would quickly add up.
About 50,000 guests visit the 2.5 million square-foot casino daily. Ongoing construction will add another 1.6 million square feet to the property.
"The greatest potential impact on our current and future earnings potential is a major interruption in business as a result of fire or anything else," Mr. Paton agreed.
Yet many tribal gaming operations are located in rural areas where fire department protection and water sources are often scarce.
So gaming industry insurers often require them to install fire protection systems superior to those used in many other industries. Otherwise, insurers cannot provide the needed insurance limits at an affordable price, Ms. Sampson said.
In response to insurer requirements, many operators of large tribal gaming casinos have obtained highly protected risk status for their properties. Getting an insurance broker and insurer involved before construction begins is crucial because retrofitting costs to meet such standards far exceed the expense of early planning, Ms. Sampson said.
The property coverage for Foxwoods is a typical HPR account, Mr. Paton said. It is spread among Liberty Mutual Insurance Co., Industrial Risk Insurers and CIGNA Indemnity Insurance Co. of North America, with IRI providing the majority of technical advice.
Foxwoods casino has a state-of-the-art fire/life safety center described by Mr. Paton as "space-age." Several sprinkler and alarm technicians monitor the grounds with a computerized system that includes a bank of video cameras. The technicians perform constant inspections and train together as an emergency response team, similar to firefighters.
The fire/life safety department is not a part of risk management. But its lead engineer "is really our first line of defense in terms of property risk management," Mr. Paton said.
It's all part of a concern for patron and employee safety as well as business interruption.
"We can't afford to have any really bad publicity as a result of an unsafe operation," Mr. Paton said. "We have to make sure our patrons feel safe and comfortable."