As the calendar flips to 2023, among the scores of new laws taking effect are a pair of legislative mandates that would, for the first time anywhere in the country, require firearms owners to obtain and maintain liability insurance. What remains to be seen, however, is whether either measure will survive Second Amendment challenges, particularly given the standard handed by the U.S. Supreme Court in its June 2022 New York State Rifle & Pistol Association Inc. v. Bruen decision.
There are good reasons for skepticism in both cases, although one of the two—a municipal ordinance passed in San José, California in January 2022—has already cleared its first court challenge. The other mandate—an arguably more carelessly drafted statewide bill signed by New Jersey Gov. Phil Murphy just before Christmas—may raise insurance-law questions pertaining to coverage for intentional and criminal acts, even before it is subject to Second Amendment analysis.
The Limits of San Jose’s Mandate
Under the terms of San Jose’s Ordinance No. 30716, gun owners residing in the city are required to “obtain and continuously maintain in full force and effect a homeowner’s, renter’s or gun liability insurance policy from an admitted insurer or insurer as defined by the California Insurance Code.” The coverage must extend to “losses or damages resulting from any accidental use of the Firearm.”
The ordinance does not stipulate minimum policy limits for the coverage. An earlier version passed in January 2022 would also have mandated coverage for firearms injuries or property damage stemming from acts deemed “negligent,” but that language was dropped in the final version.
Exemptions are granted for those who work in law enforcement or who have concealed-carry permits. According to the Santa Clara County Sheriff’s Office, there are only 36 permitholders in the city, out of an estimated 50,000-55,000 households who own or possess firearms.
Notably, the kinds of coverage mandated by the ordinance would not cover the overwhelming majority of firearms incidents that tend to be the subject of public concern. To start, homeowners and renters policies only extend coverage for injuries to third parties. Generally, this would mean guests, contract workers, or other visitors to the insured’s property, or in some cases, to third parties who were injured by the insured off-premises. Injuries to other members of the household would not be insured. Thus, the paradigmatic example of a tragic firearms accident—a child gets hold of an unsecured firearm and injures his or her sibling—would not be covered.
More importantly, coverage would not extend to intentional acts. In the language of the Insurance Services Office’s (ISO) standard HO-3 form for homeowners insurance, coverage is excluded for injuries or property damage that the insured “expected or intended.” As Peter Kochenburger of the University of Connecticut School of Law has noted, earlier versions of ISO’s standard exclusion were limited to true accidents—excluding acts that the insured did not intend but nonetheless covering situations where the insured’s negligently careless actions resulted in unintentional injuries. In 2000, however, the standard exclusion was expanded to include bodily injury or property damage that “is of a different kind, quality or degree than initially expected or intended” or “is sustained by a different person, entity, real or personal property, than initially expected or intended.”
According to the Centers for Disease Control and Prevention, more than 70% of firearms injuries are the result of assaults, while less than 20% are unintentional. Among firearms-related deaths, the National Safety Council finds that 54% are suicides, 43% are homicides, and only about 1% are accidental.
New Jersey and Insuring Criminal Acts
Drafted in response to the Supreme Court’s Bruen decision, New Jersey’s A. 4769 ostensibly repeals the state’s “justifiable need” standard for issuing concealed-carry permits, which was nearly identical to the New York statute that the Supreme Court struck down in Bruen.
In its place, the Legislature adopted a broad-ranging set of restrictions: prohibiting carrying firearms into schools, parks, bars, courthouses, or on any private property without the permission of the property owner; raising permit fees and requiring permitholders to take safety-training courses; and mandating that:
Every private citizen who carries a handgun in public in this State shall maintain liability insurance coverage insuring against loss resulting from liability imposed by law for bodily injury, death, and property damage sustained by any person arising out of the ownership, maintenance, operation or use of a firearm carried in public wherein such coverage shall be at least in an amount or limit of $300,000, exclusive of interest and costs, on account of injury to or death of more than one person and for damage to property, in any one incident.
Unlike the San Jose ordinance, the mandate prescribed here specifies a minimum coverage limit and does not explicitly limit coverage to accidental injuries and damage. It doesn’t, on its face, even appear to contemplate excluding coverage for intentional criminal acts, which is commonly prohibited under state insurance laws on grounds that a criminal cannot be allowed to profit from his or her crimes.
Indeed, this very question was at the heart of the most noteworthy gun-insurance case of recent years: former New York State Financial Services Superintendent Maria T. Vullo’s enforcement action against the National Rifle Association (NRA) over its Carry Guard insurance program for NRA members. (I wrote about the case in 2018 for National Review.) Vullo separately came to settlements and consent decrees with broker Lockton Companies LLC, insurer Chubb Ltd. and its subsidiary Illinois Union Insurance Co. for their roles in underwriting and administering the program.
The charges Vullo brought were voluminous, but the core contention was that Carry Guard violated New York insurance law by providing coverage for intentional criminal acts. The grounds for this claim were that Carry Guard purported to cover an insured’s defense costs in a criminal prosecution following the purposeful use of a firearm, although the NRA asserted that the coverage was available only to members who legally carried firearms and in cases where the insured contended the weapon was used in self-defense.
Other states likewise alleged that Carry Guard violated insurance law. Washington State Insurance Commissioner Mike Kreidler reached a consent order with Illinois Union in March 2019 to settle charges that the program allegedly insured unlawful activity. Even New Jersey itself came to a $1 million consent order with Lockton in September 2019 to settle various alleged insurance-law infractions—primarily that the broker had enabled the NRA to market the program as an unlicensed insurance producer.
As to whether it would violate New Jersey insurance law to extend coverage to criminal acts, the question is—as it is in many states—somewhat complicated. But ultimately, the state Supreme Court has repeatedly upheld exclusions for “expected or intended” injury as barring coverage, including in Voorhees v. Preferred Mutual Insurance Co. (1992), SL Industries v. American Motorists Insurance Co. (1992), and Harleysville Insurance Cos. v. Garitta (2001). Moreover, in 1990’s Figueroa v. Hartford Insurance Co., the Appellate Division of the Superior Court of New Jersey held that an injured party could be collaterally estopped from suing a third-party’s insurer to relitigate questions of intent where that intent had been settled in a previous criminal action, such as by a guilty judgment or plea.
At a minimum, it can therefore be said that New Jersey insurance law broadly permits exclusions for intentional acts in personal liability policies and that state courts have shown deference to criminal proceedings as dispositive in settling questions of intent (which isn’t necessarily true in all states.) Given that backdrop, a broad reading of A. 4769’s text would appear to require the state’s firearms owners to obtain coverage that does not actually exist, particularly in the wake of regulatory actions to shut down the NRA’s Carry Guard program. That would amount to a de facto ban on firearms ownership, directly contravening the Supreme Court’s 2008 decision in District of Columbia v. Heller, even before applying the Court’s more recent Bruen test.
Bruen and Surety Laws
The Supreme Court’s Heller decision famously determined that the Second Amendment established an individual right to possess firearms, which the Court subsequently found, in its 2010 McDonald v. City of Chicago decision, applies to the states through the incorporation doctrine associated with the 14th Amendment’s Due Process Clause.
In the wake of Heller and McDonald, courts generally came to apply what has been known as the “two-part test” in Second Amendment cases. In part one, a determination is made whether the challenged law, rule or regulation intersects with protections offered by the Second Amendment. If it does, then in part two, courts would apply an appropriate standard of review, opting for strict scrutiny in cases where core Second Amendment conduct is burdened, but intermediate scrutiny in most other cases.
In his opinion in the Bruen case, Justice Clarence Thomas effectively vacated the two-part test, positing instead that “the government must affirmatively prove that its firearms regulation is part of the historical tradition that delimits the outer bounds of the right to keep and bear arms.” In essence, burdens on the right to self-defense, including the right to carry legal firearms in public, are to be considered presumptively unconstitutional, with the burden shifted to the government to demonstrate that such burdens are “consistent with the Nation’s historical tradition of firearm regulation.”
San Jose’s firearms liability-insurance ordinance has already become one of the very first tests of the Bruen framework, although the results are decidedly incomplete. In September 2022, Judge Beth Labson Freeman of the U.S. District Court for the Northern District of California dismissed a challenge to the mandate filed by the National Association For Gun Rights Inc. (NAGR) on grounds that it was “drafted under a now obsolete Second Amendment landscape” and thus “does not state a claim under the current post-Bruen framework.”
More specifically, Freeman wrote that the complaint “does not define a proposed course of conduct for the Court to determine whether it is covered by the Second Amendment’s plain text.” And while she was briefed by the parties on the application of Bruen, these arguments “were presented under a different procedural posture and did not directly address the sufficiency of” NAGR’s challenge. She granted the group leave to amend their complaint.
In an earlier order denying NAGR’s motion to stay enforcement of the ordinance, Freeman appeared swayed by the city’s argument that historical precedent for the insurance mandate could be found in 19th century laws requiring some individuals to post surety bonds before they could carry weapons in public—with the proceeds forfeited if they did, in fact, breach the peace. Freeman wrote that such laws “bear striking analogical resemblances to the Insurance Requirement.”
Adam B. Shniderman of the University of Michigan Law School disagrees. In a new paper posted to SSRN and examining insurance mandates for firearms, Shniderman looks at the history of surety laws. He finds they can be traced to Britain’s Justices of the Peace Act of 1361, with North American precedents to be found in colonial Massachusetts and Pennsylvania. A typical 19th century example is Massachusetts’ 1836 statute, which states:
If any person shall go armed with a dirk, dagger, sword, pistol or pistols, or other offensive and dangerous weapon, without reasonable cause to fear an assault or other injury or violence to his person, or to his family or property, he may, on complaint of any other person having reasonable cause to fear an injury or breach of the peace, be required to find sureties for keeping the peace, for a term not exceeding six months, with the right of appealing as before provided.
Shniderman notes several relevant distinctions between these kinds of surety laws and modern liability-insurance requirements. Most importantly, while the surety laws were limited in time, scope and application, the insurance requirements are applied broadly, to all firearms owners, and for an indefinite period of time.
“Surety laws proscribed the carrying of certain weapons by certain people without providing a surety,” Shniderman wrote. “San Jose’s mandate exempts individuals with concealed carry permits. The mandate, therefore, impacts the keeping of weapons.”
Responding to arguments made by NAGR that surety requirements were imposed only after “cause has been shown specific to the individual” and that the San Jose mandate, in contrast, assumes that “every person is a danger,” Judge Freeman wrote in her August order that “the actual amount of the financial burden (i.e., insurance premiums) involves a risk evaluation that is tailored to the individual and analogous to ‘reasonable cause’ determinations under surety statutes.”
But this, Shniderman argues, is just factually incorrect. Homeowners and renters insurance premiums are overwhelmingly determined by risks to the property, not by the size or likelihood of liability insurance claims. Indeed, insurers generally do not even ask whether policyholders own a firearm or how they are stored. As Shniderman writes:
Her decision turns on a mistaken belief that risk-adjusted premiums account for gun ownership and specific ownership behaviors. Under that hypothetical system, the mandate would be a minimal financial burden on responsible gun owners and a more significant financial burden on high-risk owners. But homeowner’s and renter’s insurance—the most likely policies gun owners would purchase to comply with the mandate—do not account for gun ownership. And contrary to Gilles and Lund’s claim, [that “Competitive pressures would lead insurance carriers to keep the premiums for low-risk gun owners low, while charging higher premiums to those who are more likely to cause injuries to other people.”] insurance experts believe insurance companies are unlikely to ever account for these behaviors.
Through the mechanisms of risk-based premia and active underwriting and claims management, casualty and liability insurance has played a tremendous role in encouraging safer practices across a broad range of activities, from how we work to how we drive. It is understandable, therefore, that some would seek to leverage this role to address the scourge of firearms injuries.
Alas, there are some crucial distinctions here. One is that, while the U.S. Constitution speaks to “the right of the people to keep and bear Arms,” it is comparatively silent on the right to operate a forklift or to ride without a seatbelt.
But even more importantly, unlike in cars or workplaces, most gun injuries aren’t accidental. Nor are they the result of recklessness or even negligence. They are the result of intentional violence, whether directed toward others or, in the majority of cases, self-directed. Such incidents are fundamentally uninsurable.
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