New York Bans NRA Insurance Program, Fines Lockton $7M

The NRA program allows policyholders to buy policies that cover legal costs in self-defense shootings. The "NRA Carry Guard" program is still being marketed, according to the program's website, although sales in New York were suspended last fall shortly after the state's Department of Financial Services launched its probe.

Maria T. Vullo, New York's Financial Services Superintendent, said in a news release Wednesday that the investigation concluded that Carry Guard unlawfully provides liability insurance to gun owners for certain acts of intentional wrongdoing. New York state law prohibits that.

Ms. Vullo said Carry Guard is "an egregious violation of public policy designed to protect all citizens."

The broker, Missouri-based Lockton Cos., noted the agreement and pledged to "continue to cooperate with the New York regulators to remediate any issues or concerns."

William A. Brewer III, partner at Brewer, Attorneys & Counselors and counsel for the NRA, said "the NRA acted appropriately at all times." He added that "the NRA relied upon Lockton and its assurances that the program complied with all applicable state regulations."

The $7 million fine Lockton will pay comes as the NRA insurance program already faces challenges.

In February, Lockton notified the NRA that it would discontinue as administrator for insurance programs that the firearms-advocacy organization endorses and would wind down its work under contractual terms.

Lockton's announcement was part of a large wave of companies severing ties with the nearly 150-year-old group in the wake of mass shootings at a school in Parkland, Fla., as public pressure grew on companies to distance themselves from an organization some felt too rigid in its support for gun rights.

Ms. Vullo's department also is probing the NRA itself, and big insurers Chubb Ltd. and Lloyd's of London for their roles in NRA insurance programs, according to a consent order made public Wednesday. The NRA and Chubb probes were previously reported.

In February, Chubb said it had given notice a couple months before to withdraw from its NRA arrangement under terms of its contract.

The "NRA Carry Guard" program offers what it calls "cutting-edge insurance protection for those who lawfully carry firearms" to defend against civil and criminal legal actions. Under the program, policyholders can get $250,000 to $1.5 million of coverage. Carry Guard also offers access to an attorney-referral network and other support services for self-defense cases.

In general, insurance policies don't provide coverage for intended criminal acts, said Robert Hartwig, an insurance professor at the University of South Carolina. But NRA's Carry Guard highlights "a murky area" in that there is "extreme variation across the 50 states about when someone can use deadly force" in self-defense and "what your rights are in instances where you allege self-defense."

He said Carry Guard provides a way for innocent people "to protect themselves financially against the ruinous legal costs that would arise in a civil or criminal action." The Carry Guard coverage terminates when an individual pleads guilty or is found guilty of a criminal charge, he said.

So far, New York's insurance regulators have been alone in publicly tackling Carry Guard.

Ms. Vullo's investigation also concluded that the NRA needs a New York insurance license for the program, and didn't have one even as it "actively marketed and solicited for the Carry Guard program through a website, email, and direct mail, among other channels." The state found other problems with the program's structure, as well.

In recent weeks, New York officials have made clear their concerns about the NRA go beyond technicalities. On April 19,   Gov. Andrew Cuomo released a statement in which he directed Ms. Vullo's department "to urge insurers and bankers statewide to determine whether any relationship they may have with the NRA or similar organizations sends the wrong message to their clients and their communities who often look to them for guidance and support."

Ms. Vullo has taken positions on other public-policy issues, including banning use by car insurers of education and occupation in determining prices charged to policyholders.

In  a consent order with Lockton, New York said the firm had issued 680 Carry Guard policies to New York residents between April 2017 and November 2017. No claims have been submitted so far.

From about January 2000 through March 2018, Lockton and the NRA offered at least 11 additional insurance programs to NRA members in New York and elsewhere. In that longer period, Lockton collected $12 million in premiums and nearly $800,000 in administrative fees, the state said.