How Would Insurers Stop Straw Purchases?

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One of the main feeders into the pool of illegal guns that cause a large portion of the deaths and injuries is those guns that are obtained through straw purchases.  A straw purchase is one that is done by a person with a clean record that can pass a background check to obtain a gun for a prohibited person.  For the purposes of this writing straw purchases are distinguished from other channels for guns to enter dangerous hands including:

  • Unchecked sales or gifts after the initial purchase
  • Theft of guns
  • Previously owned guns by persons who subsequently become prohibited persons
  • Guns used by persons who are not prohibited from having guns but who are clearly dangerous in hindsight

Straw purchases are the primary input to the “Iron Pipeline” which is the name that New York gives to the practice of buying guns in low regulation states such as Virginia and illegally smuggling them into New York for sale to prohibited persons.  The hate killing by a white supremacist in Kansas City in April, 2014 was with a straw purchased weapon.

If compulsory gun insurance is to work to reduce the level of gun violence, it needs to reduce the number of guns in dangerous hands without being excessively a burden to gun ownership by the larger part of the public.  How can it do this?

Insurance will accomplish this because insurers will take measures in their pricing, sales decisions and policy terms to limit their exposure.  The insurance recommended here would compensate victims on the basis of their losses not liability of the gun owner and would continue to apply to a given gun until it is replaced by other insurance.  Because an insurer would still be on the hook after a gun is lost, stolen or illegally transferred, it would take steps to prevent that from happening.

Any gun can kill, but some guns are more likely to be involved in violence than others.  The distinctions can be obvious such as the difference between handguns and long guns or the relative safety of hunting rifles with limited ammunition capacity.  Insurers will take these differences into account in the same way that they take the model of car into account for pricing car insurance.  It is much more difficult for a government to make such distinctions as can be seen in the never ending debate over the definition of an “assault weapon.”  The difference between models may be in the convenience and effectiveness of a certain model for misuse or in the statistical makeup of the body of persons who chose that model.  In the case of cars, insurers take both into account.

In low risk situations, insurers are likely to simplify the process.  They would simply sell the insurance with insured people agreeing to do things like not transfer the gun to anyone without replacement insurance, to follow safe practices and to report loss or theft of the gun.  It’s likely that insurance will evolve in these cases to be a low cost rider on homeowners or renters insurance.  In some cases, it may even be at no additional cost as a way to get a highly desirable kind of insurance customer.

The higher the risk the more complex the insurers would make the process. Here are some things they might do in certain cases:

  • Require prepayment of a certain period of insurance
  • Assess high premiums or refuse insurance if cases of excessive risk
  • Give lower rates if the gun is stored at a range or hunting club
  • Require proof of the purchase or ownership of a gun safe
  • Require the owner of a lost or stolen gun to pay for reinsurance to cover future losses
  • Require the owner of a dangerous gun to periodically prove that the weapon was still in their possession
  • Require an agreement to surrender the gun to the insurer if certain situations such as the owner becoming a prohibited person arise
  • Require proof of financial responsibility for future insurance premiums
  • Investigate reported losses or thefts to make sure they are not being used as a cover for improper transfer and to recover weapons where possible
  • Require proof of compliance with any state or local firearms laws

The risk to an insurer of a customer turning out to have made a straw purchase for a person who cannot get insurance is substantial.  The insurer is likely to use policies such as those listed above to reduce that risk.  This will in turn reduce the risk to the public.

Insurers are also likely to work for the adoption of federal, state and local laws and regulations that will really improve gun safety.  They have been quite successful in this in the case of motor vehicles, funding safety research and lobbying for measures such as child car seats, use of seat belts and non-use of cell phones.

The Question of Pricing Mandatory Gun Insurance

In addition to policy arguments such as those against putting costs and responsibilities on the public or burdens on gun owners, the insurance industry has offered two major substantive arguments against mandating gun insurance.  The first, which is the claim that insurance does not and cannot cover, intentional or criminal arguments is simply false.  This has been extensively explored by this blog at the post entitled  “Gun Insurance for Willful, Intentional & Criminal Acts.”  The second argument is basically a “Chicken and Egg” objection.  They claim that insurers have no experience to price such insurance and that without ratings experience such insurance cannot be sold.  This post is to show the reasons that this objection is of greatly diminished importance in the case of mandatory gun insurance.

Why can’t insurers simply add up the losses that are occurring as they are reported by emergency rooms, as part of claims for various other kinds of insurance, media reports and government statistics and assign them different weights in an estimate?  The basic reason is that, with voluntary insurance, the people who will actually buy the insurance are not a representative sample of the risk exposed public.  Sometimes that works for the insurers advantage because people can buy insurance because they are more than typically responsible in many ways and produce fewer than average claims.  But those who know that they have an elevated risk can buy insurance for that reason as well. Continue reading

Mandatory Insurance for Armed Professions is Normal

We see armed people working around us on a daily basis.  Some of these private professionals are highly visible such as guards for banks and armored car services and some are less obvious to the eye such as private investigators or detectives.  In almost all states there are requirements for them to have licenses and in most states they must have insurance or bonds that function as insurance.  But there is tremendous variation in the requirements and in the definitions and terminology of the various roles.

There are states which require insurance if and only if the person involved is armed.  For example, in California both private guards and private investigators only are required to have insurance ($500,000 for each of bodily injury and property damage) if they carry firearms.  Or, in North Carolina, private guards and patrol personnel are required to carry insurance whether armed or not but private investigators or courier’s are only required to be insured if they carry firearms.  In New York State security people only need licenses and insurance if they do such tasks over 50% of the time if unarmed but any amount of time if armed.

This means that we already have mandatory gun insurance in some situations in this country, with none of the problems projected by those who think it is not possible.  It also shows that the need for insurance protection is closely associated with carrying weapons and is not just part of the role of guard or investigator.

Private guards and investigators are thoroughly screened perhaps more carefully than holders of non professional weapons permits.  The application for North Carolina requires a fingerprint card, directly submitted questionnaires from 3 character references, clearances from local police at previous addresses and an Equifax credit report among many other requirements. Similar requirements are made by most states.  A security professional can lose their license or job because of incidents of irresponsibility as well as for crimes and has a great incentive to handle firearms with due care.

The need for insurance to protect the public both by compensating those hurt and by encouraging safe practices is likely to be greater for persons carrying weapons for personal reasons than for professionals.  They come into a wider variety of situations and they are not working under supervision in defined roles as are the professional armed persons.  A business even without the backup of insurance is likely to be able to pay if they cause intentional or negligent harm, while many individuals lack sufficient personal resources to be financially responsible.

All of these factors show that legislators should adopt laws requiring weapon permit holders to have the same level of insurance that is required of the armed professions.

New Bill SB2646 for Gun Insurance in Illinois Covers Intentional

Illinois Majority Caucus Chairman Ira I. Silverstein has introduced a new bill (SB2656) in the Illinois General Assembly to require that gun owners have liability insurance.  This bill covers willful as well as accidental shootings by the owner or others.  It covers lost or stolen guns until they are reported.

This would be very helpful legislation if adopted as introduced and could form the basis of a more detailed and developed requirement to cover more victims.  Because it designates continued responsibility for unreported stolen guns it recognized the important of gun theft for supply to illegal gun possession.

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Voluntary Insurance and Strict Liability as Good First Steps

Much of this blog is about how insurance should be designed and how it would work if an ideal insurance mandate was in place.  Opponents of such a mandate point out real and imagined problems that would prevent such insurance from working.  When the possibilities are examined the problems turn out only to apply to particular models of insurance and can be avoided by designing the insurance for the particular nature of guns and gun violence.

But there are also transitional problems that could block adoption of an insurance mandate that would work well once it was in place.  The most important of these problems is the fact that gun insurance that would protect victims does not exist currently.  The insurance that is designed to protect gun owners from accidental or self-defense incidents is very narrow and is not adapted to the need to protect victims even to the extent that existing liability laws could allow the redress in the courts.

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The Role of Reinsurance in Mandated Gun Insurance

A gun insurance system designed to encourage safe practices will need to maintain insurer responsibility for lost, stolen or improperly transferred guns. This is essential also to using continuing insurer responsibility as the means of guaranteeing coverage of all guns once they enter the system. Insurers will face risks that continue into the indefinite future for guns whose location is unknown. Specialists in assessing these risks will be needed to encourage the sale of this insurance. This is often done by specialty reinsurance companies in various areas in our economy.

Reinsurance is the practice of insurers buying their own insurance from other companies and thereby transferring part of the risk out of their hands.

Separation of risk after loss or theft

The primary insurer will be able to treat their risk as that of having to buy reinsurance in the event that the gun owner loses control of the insured gun. As the specialty reinsurers establish a market with prices and terms for assuming the risks, the primary insurers will become able to view themselves as selling insurance for the risk of having such a loss of control of the gun. This attitude on the part of insurers is just what is needed to have them take the best role in demanding safe practices. They will put terms in their policies that are designed to stop guns from straying and, thereby, protect the public from the effects of stolen and diverted guns.

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Federal Mandate for Top-Down Insurance

A federal requirement that all manufacturers and importers have insurance that protects victims of their products with a top-down provision requiring it to continue until replaced is the core of a successful system for guns. Ideally this requirement would specify the terms and benefits laid out in the next level for state legislation that seriously provides for victims, but this will describe the minimum requirements that should be specified on a national level.

A bill (H.R.1369) proposing mandated gun insurance was introduced in the United States Congress in 2013, but it did not specify details of the insurance required in the language of its introduced.

The legislation should require that, before manufacturing or importing a firearm, insurance must be accepted by an insurance company specifically authorized to issue such insurance by some state. In order to make certain that the required financial stability is available, all such insurers should be required to join a pool backed by all such insurers guaranteeing each insurers ability to pay valid claims. Once an insurer accepts responsibility for a certain gun, that responsibility is only relinquished when another qualified insurer takes it on. Continue reading

Should Gun Owner’s Insurance Pay Victims After Gun Theft?

The insurance model recommended by this blog is designed to have insurer retain responsibility for guns after they are stolen.  That means that if a responsible gun owner has a burglary and a gun is stolen and then after the gun changes hands, goes underground and turns up to injure someone in a distant location then the gun owner’s insurance will have to pay.  Gun defenders are quick to object and say that the burglar and the shooter are responsible and the gun owner shouldn’t be held to account for their acts.

In those cases the criminals are, of course,  responsible and if they can be caught and have resources they should be the first to pay to the injured party.  Unfortunately, they often aren’t caught and they don’t have resources and, if they go to prison for their crimes, are unlikely to earn enough in the future to redress the damage they have done.  So the question is should the legal gun owner or the gun owner’s insurance be held responsible in light of their role as enablers of this unfortunate situation.  My answer is that they should be.

Guns are unique among the common articles in our society because they are widely held in large numbers, intentionally designed and made to be effective in killing and injuring persons, and easily transferred into prohibited hands. At least 200,000 and probably twice that or more guns are stolen each year and, because they have serial numbers, do not return to legal hands. Illegal guns almost all start out as legally held ones; there are no significant reports of clandestine gun factories and smuggling across international borders goes from the US to other countries.

Common Law on the subject

There are two mechanisms of judge made law which seem to apply, but judges have not generally made a determination that they should be used for guns that are stolen.  The first is to take into account the fact that a gun is a particularly dangerous object and apply a rule of absolute liability for the harm done by this object as is often done for users of explosives and keepers of dangerous wild animals.  It’s probably not entirely coincidental that guns are powered by explosives and stolen guns injure people when they ‘get out’ into the public.  The second is to have a presumption of negligence under the doctrine of res ipsa loquitur (lit. the thing speaks for itself), the point here being that it’s fair to assume that allowing a gun to be stolen implies that there must have been some negligence.  Just because judges have not widely applied these doctrines on their own to guns does not mean that such a responsibility could not be legislated.

An example of legislation on a similar subject

An example of how this is done in other areas is provided by the dog bite laws in various states.  In California the statue says:

(a) The owner of any dog is liable for the damages suffered by any person who is bitten by the dog while in a public place or lawfully in a private place, including the property of the owner of the dog, regardless of the former viciousness of the dog or the owner s knowledge of such viciousness

I asked a famous dog bite lawyer in California if this would apply after the dog was stolen as was told that as far as he knew there had been no such cases in the courts. His website states that he has never seen the defense of non-ownership succeed.   In res ipsa cases theft is often taken as a sufficient intervening cause to break the chain of negligent responsibility, but that is not a universal rule.  Holding gun owners responsible after their gun gets out of their hands is a matter of policy.  This is a policy badly needed to protect the legions of victims of such guns which should be adopted by legislatures.  Insurance is the most logical mechanism to enforce this policy.

Questions and Answers on Mandating Gun Insurance.

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This post is a good place to start if you’re new to this blog.  Scan the questions and follow the <More> link if you have an interest in a particular area

Q: What is the purpose of mandating gun insurance?

Required insurance for guns or gun owners should be designed to provide benefits for victims of gun accidents or violence. Insurers will automatically take appropriate steps to encourage gun safety as part of their loss control and underwriting activities. <More>

Q: What specifically would be the best insurance system for guns?

Each state should adopt a system of no-fault insurance with a system of delivering medical and cash benefits directly to victims. This insurance should be required to be in place for any firearm brought into or kept in the state in order for that firearm to be legal. It should provide all of the benefits available to victims of motor vehicle or workplace injuries.

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CCW Permit + Stand Your Ground = Insurance Need

Many states have adopted stand your ground laws that protect shooters in public spaces that accidently(with or without negligence) either unintended bystanders or innocent persons who are wrongly believed to be a threat.  This is the most uncontroversial situation where insurance should be required.  These innocent people need to be protected and many of them are not insured themselves.

As this blog has argued people who have permits to carry weapons into streets and outside the home.  These people are more likely to confront real and perceived threats with an audience of bystanders.  They represent an additional risk over those who only have guns for protection in their homes.  These risks and the relative ease of insuring against it are described in another post “Enacting a Concealed Carry Insurance Mandate

For example the Florida Statute states:

776.012 Use of force in defense of person.—A person is justified in using force, except deadly force, against another when and to the extent that the person reasonably believes that such conduct is necessary to defend himself or herself or another against the other s imminent use of unlawful force. However, a person is justified in the use of deadly force and does not have a duty to retreat if:

(1) He or she reasonably believes that such force is necessary to prevent imminent death or great bodily harm to himself or herself or another or to prevent the imminent commission of a forcible felony;

And:

(1) A person who uses force as permitted in s. 776.012, s. 776.013, or s. 776.031 is justified in using such force and is immune from criminal prosecution and civil action for the use of such force. . . .

The courts have not yet ruled on whether this immunity is as absolute at it appears to be on it’s face.

The law does say that it have to be a reasonable belief, but one can have a reasonable belief for the few seconds it takes to shoot and still have a chance to avoid the killing if they took a few seconds to more deeply assess the situation.  The black object being drawn from a hip pocket may turn out to be a cell phone.  Retreat probably does include holding off till you’re sure of the situation.  And then there is the situation of missing and shooting a third party.  If immunizing a person against civil action has any real meaning, it that a person who is negligent in not retreating or holding off till the situation is more clear or the danger to bystanders is reduced is the person protected.  Regardless of whether one thinks that this law is good policy, protection of the innocent requires that insurance be available to protect those victims.  Not liability insurance; liability is removed by this law, but no-fault insurance for the benefit of the innocent victim.

Unfortunately, the political situation in exactly those states which pass this kind of law is one that would be most resistant to any requirement of gun owner or permit holder insurance; but we should press legislatures anyway.