Among the many civic debates emerging from the aftermath of a mass shooting at Florida’s Marjory Stoneman Douglas High School involves the role of retailers and other businesses that profit from gun sales. While gun control advocates have praised efforts by Dick’s Sporting Goods, Walmart, and others to limit gun sales, the National Rifle Association and others sharing its mission have chastised their efforts and urged boycotts.
The latest twist: State regulators are entering the fray. Last week, New York’s Department of Financial Services (DFS) announced that Lockton Affinity and its parent company have agreed to pay a $7 million fine as part of a consent order for serving as the administrator of the National Rifle Association-branded “Carry Guard” insurance program and violating state insurance laws in doing so.
The announcement follows a DFS investigation that found the NRA “Carry Guard” insurance program: “unlawfully provided liability insurance to gun owners” and “improperly provided insurance coverage for criminal defense for any act of self-defense covered under the policy for gun owners and their resident family members who may be charged with a crime involving a firearm.” The NRA, which does not have a license from the DFS to conduct insurance business in New York, actively marketed and solicited for the “Carry Guard” program through a Website, e-mail, direct mail, and other channels.
The “Carry Guard” program, according to DFS Superintendent Maria Vullo, improperly provided coverage in any criminal proceeding against the policyholder or the policyholder’s family members, including coverage for bail money, premiums on bonds, attorney consultation fee and retainer expenses, and expenses incurred for the investigation or defense of criminal charges arising out of a shooting.
The state regulator’s investigation found that Lockton issued 680 Carry Guard insurance policies to New York residents between April and November 2017. As administrator for the Carry Guard program, Lockton carried out such functions as marketing the insurance, binding the insurance, collecting and distributing premiums, and delivering policies. Between approximately January 2000 and March 2018, the company collected $12,056,627 in premiums and $785,460 in administrative fees from customers, under the Carry Guard Program and other NRA programs.
Lockton was licensed by the DFS to act as an excess line insurance broker. Excess line coverage provides policy holders an opportunity to obtain insurance that could not be procured from another insurance company that has received a license from the state to provide specified types of insurance to customers in New York.
Lockton, the DFS claims, made “inaccurate representations in connection with affidavits of compliance with New York insurance law” related to excess line insurance. Those laws require brokers to first approach three separate authorized insurers to see if any of them will write the coverage for the selected risk and step into the chosen market only if they will not. The process is required for each individual policy.
In placing the Carry Guard Program and other NRA program insurance policies, Lockton is alleged to have only obtained declinations from three authorized insurers once annually for a single policy and then relied upon that single annual declination for other customers who received policies under the programs.
In addition to the fine, Lockton agreed to refrain from participating in the Carry Guard insurance program or any similar program in New York and from “entering into any other agreement or arrangement, including any affinity-type insurance program involving any line of insurance involving a contract of insurance involving the NRA.”
The company is also prohibited from providing liability insurance that may not be offered in the New York State excess line market, specifically: defense coverage in a criminal proceeding and liability coverage for the use of firearms “beyond the use of reasonable force to protect persons or property.”
Lockton, which announced in February that it planned to stop offering the NRA-branded insurance policy, is now being sued by its former partner for breach of contract related to its signing the consent order, according to a report in Friday’s Wall Street Journal.