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.

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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Gun Insurance for Willful, Intentional & Criminal Acts.

One of the things that opponents of gun insurance or insurance trade representatives often say is that insurance cannot cover intentional or criminal acts.  This is simply false.

There are many kinds of insurance that cover such acts.  The key is that the insurance pays to the victim and not the wrongdoer.  It doesn’t have to matter if the deed is done by the purchaser of the insurance or another insured person.  It is important the the policy be written to make this clear; policies that exist at least partially for the benefit of third parties typically work that way.  Insurance that is compelled by law for an activity often applies in these cases even if it’s not spelled out in the policy, but courts differ on this point and an explicit requirement in the legislation and in policy language is a good idea.

Insurance textbooks teach that whether an act is accidental or willful is determined from the viewpoint of the insured.  Mandatory insurance should treat a victim as an also insured party. This is necessary because the purpose of many kinds of insurance is to protect the insured against the willful acts of outsiders. An example would be a day care center that is negligent in screening visitors who might commit an abuse against a child.  From that viewpoint, a act that is deliberate on the part of the abuser is an accident to the victim.

Insurance that pays to innocent victims for willful, intentional or even criminal acts is common when the purpose of the insurance is to protect third parties. Despite the statements from insurance industry representatives– “if you use your car as a weapon to intentionally run down a pedestrian or another motorist, there is no coverage”, motor vehicle insurance in many states would in fact cover exactly that case. The case commonly cited in legal discussions to illustrate this point is Wheeler v. O’Connell, 297 Mass. 549 , 553 (1937) This case held that compulsory insurance was very different than voluntary insurance, that public policy considerations did not prevent coverage of intentional acts, and that the insurance terms should be interpreted in light of the intention of the compulsory insurance law. Many later cases in various states have taken the same position even in situations where insured persons committed serious crimes including murder.

It was also often stated that insurance would not pay if a homeowner intentionally burned down his or her house. Banks and mortgage holders were not willing to take on this risk and demanded coverage.  There are two types of mortgage clauses in homeowner’s insurance. The most common type today is the “union” or “standard” or “New York” mortgage clause, which would pay a mortgagee such a case. My own homeowners insurance (USAA) has such a clause stating:

If we deny your claim because you or any other “insured” has failed to comply with the terms and conditions of this policy that denial shall not apply to a valid claim of the mortgagee.

Standard insurance text books discuss this mortgage clause and point out that it is included specifically to pay lenders in cases of arson or other misbehavior on the part of the insured homeowner.  Because homeowners insurance is not mandatory, policies vary on whether they will pay to one owner when a co-owner burns down the house occupied by a spouse in a domestic violence incident.  This can hinge on details of the policy language such as whether it says “an insured” or “the insured” and illustrates the importance of requiring the right terms.

Other examples of insurance that pay to victims for criminal acts of policyholders or otherwise insured persons include worker’s compensation for acts of co-workers and often by employers, businesses for acts of employees and bonds by Locksmiths or fiduciaries.

The point of these examples is that liability and other kinds of insurance can pay innocent third parties for intentional acts of otherwise insured parties.   Mandatory firearm insurance should be designed like the examples above to protect the victims. Public policy, which is often said to prohibit such insurance, only prevents the malefactor from benefiting.  In light of these and of many other kinds of insurance that pay innocent parties regardless of the intent of others, there is no problem with public policy for providing insurance covering willful acts. It may, however, be appropriate for insurance regulators to allow insurers to have subrogation clauses to recover their money working against the misfeasors themselves.

Paths to Adopting Gun Insurance, General and Concealed Carry

While it would be best to adopt gun insurance in the United States by national legislation that puts into place a full blown no-fault plan with the “Top-Down” provisions to guarantee that it covers all of the millions of guns in the country, it is not necessary to wait until that is politically feasible to make progress in protecting victims.  There are several paths where an important part of this protection can be implemented both for it’s own value and to demonstrate the practicality of more complete plans.

The first and the one that already in the public eye is to adopt compulsory liability insurance for gun owners who are registered in particular states.  This is the plan that is being offered in state legislatures.  It would apply to a fairly small subset of the injuries and killings because it has no way to be in effect for illegal guns.  But, as the proportion of gun injuries from legally possessed guns is going up due to a downward trend of crime in general and a greatly increased spread of legal guns, it would have a substantial value.  It may very will be accomplished in some places in the next few years.  This is the type of adoption that is seen by most writers who suggest insurance in the mass media.

The most promising step by step path at this point starts with requiring insurance for concealed carry permit holders.  Because they are already registered in all but a very few states, there is not the privacy concern that applies in other cases.  It is also likely to be more acceptable because it only burdens gun owners with a clear and increased interaction with the community.  Because many state legislatures have adopted laws legalizing concealed carrying of weapons in recent years and because the problems widespread guns in public places have been made more clear by the killing of Trayvon Martin and the acquittal of George Zimmerman, this may be the most political feasible path. It is also an approach which will work well on a state by state basis.

This blog is planning to advocate for concealed carry insurance in this and the coming state legislative seasons.  To repeat the recommended provisions in the recommended legislation from the blog above, they will include:

  1. It should pay injured persons without the need for establishing negligence.  i.e. it should be no-fault insurance.
  2. It should cover economic losses, survivor’s needs, disability and pain and suffering and have a substantial death benefit.
  3. It should apply not only to the injuries caused by the legal carrier’s gun but to injuries caused by others including a criminal attacker during an incident involving the use of the covered persons gun.
  4. It should cover legal liabilities of third parties that arise from gun use incidents.
  5. Insurers should be required to report discountenance of the insurance to the permitting authorities 30 days before the insurance goes out of effect.
  6. Insurers offering homeowners insurance will be required to offer concealed carry insurance riders with exclusions and qualifications regulated by state insurance commissioners.

The way most analyzed in this blog is adoption of insurance with a sequence of structures that make it apply a larger and larger set incidents and victims.  This sequence which is detailed in other posts in this blog goes as follows:

  • Step 0 – Adopt laws clarifying the legal liability of shooters and gun owners.  This is needed for itself and for the effectiveness of liability insurance.
  • Step 1 – Liability insurance for guns.  Because this depends on fault by gun owners and the tort law system, it gives limited protection to victims.
  • Step 2 – Liability insurance with direct payment to victims.  This allows easy coverage of intentional acts and guns that are used by others than the owner.
  • Step 3 – No-fault insurance to protect victims.  This eliminates the need to use the tort law system and to establish negligence.  It can cover all of the injuries from legal guns but has no way to get the large number of incidents that are produced by illegal guns.
  • Step 4 – Insurance that covers guns with a “Top-Down” guarantee that is in place for lost, stolen or diverted guns.

Insurance at the Step 3 level exists in various states for motor vehicles and worker’s compensation insurance is designed to work at this level.  The need for the the last step is much less for these activities because regulation and registration of car owners and employers is nearly always available.

Self-Defense Gun Insurance

Persons who carry guns for self defense or who keep guns in their homes often worry about the liability should they shoot someone.  This motivates the drive by the NRA and other pro-gun organizations to adopt laws that immunize shooters, but it is also makes a substantial market for legal protection. It’s likely that steady publicity given to dubious claims of millions of defensive uses of guns make many people think that such protection is needed.  There have sprung up a number of organizations which attempt to fill this market with products which may contain an insurance component or, if not claimed to be insurance, are similar to it in most respects.

An example of this is Second Defense Alliance which is a membership organization.  It specifically states that it is not an insurance company and it’s benefits are not insurance, but the benefits and terms offered are so similar to insurance that most members would consider it to be insurance.  It only covers use of firearms in the home against a person who has made an illegal entry.  There are benefits up to $50,000 but most of this is in the form of legal defense costs.  The cost is about ten dollars a month.  Since there are about 30 million homes with guns and only a couple of hundred justified non-law enforcement homicides a year most of which are not based on unlawful entry, the number of times this organization will have to pay must be very small.  It’s a profit making business, but it may give a feeling of protection to its customers.

Another example which, while it’s actually a for-profit business, is organized with member protection as a primary goal is the United States Concealed Carry Association.  Its insurance is as a membership organization with a group policy from an actual Insurance company.  With the basic membership with an insurance limit of $75,000 it costs $12 a month or less and comes with their magazine.   Its terms cover self-defense and are not limited to in-home incidents.  It seems to be a bit broader and cheaper that the NRA sponsored self-defense insurance.

A few additional sources of self-defense insurance include SecondCall Defense, Texas Law Shield Program and the NRA sponsored Lockton Affinity Insurance.

None of these insurance plans are designed to give any help to victims, but they may provide a source of funds and a possibility of settlement in some cases.  They do work to show that insuring guns is feasible.  Their costs are not large but they cover such a minority of shootings and have such small loss ratios that they cannot be a model for potential costs of insurance designed to protect victims.

A Progression of Kinds of Insurance for Guns

The purpose of having insurance for victims of gun violence is to provide money for the many needs they have after they suffer from a shooting. The insurance should be structured to pay in the various situations that occur, for the various needs that are faced and in a timely manner. There are lots of kinds of insurance in use today and several ones will be examined in the chapters that follow. Starting with the most basic insurance designed only to protect the buyer of the insurance, we will add features until we see that it is possible to create a system that works to provide the needed protection. We’ll start with the simplest in the progression.

Simple Liability Insurance

Simple liability insurance is the kind of insurance that a gun owner would buy voluntarily to protect himself or herself. If the gun owner is sued by a victim, the insurer is obligated to defend the gun owner in court. It’s necessary for the victim to prove fault on the part of the gun owner. The degree of blamelessness required on the part of the victim varies. If there are terms in the policy excluding coverage because of any situation of action by the gun owner, they will prevent recovery even if they are very arbitrary. The insurance company will probably fight tooth and nail to blame the victim, deny responsibility or get out of having to pay by any means available. If it looks like the victim will win the suit than there may be an offer of settlement and if the victim does win the money to pay will be available. This is a considerably better situation than trying to sue a gun owner or user who does not have any money. The existence of insurance is usually a major part of getting legal representation for an injured person without the victim having to prepay an attorney.

Liability Insurance for Paying to Victims

When insurance is mandated or otherwise designed to protect victims, then it should work differently. The victim in effect becomes an additional insured. It’s still necessary to show that the gun owner was at fault in the incident, but other acts by the insurance purchaser usually don’t prevent payment. The most important is that reasonable system for compelling insurance will pay if the gun and insurance owner intentionally do the shooting. In addition, the mandate should restrict the arbitrary exclusions that could become a barrier. The insurer normally pays directly to the victim. This is the way that the required motor vehicle insurance works in most states that do not have no-fault systems.

No-Fault Insurance

As its name implies, no-fault insurance does not depend on negligence or other fault on the part of the shooter. It pays to the victim on the basis of the losses and injuries received. In the case of motor vehicles, most no fault has an injured person collect first from their own insurance. This makes since because most of the time there are either two cars involved or the driver or a passenger of the one car is the injured person. But for situations where a car hits a pedestrian, the driver’s or the car owner’s insurance is the one to pay. This is the way it would work for guns. It should be clear that there is no problem with requiring the insurance to pay for intentional or criminal shooting on the part of the gun owner. One serious problem remains, the gun may be in the hands of someone other than a responsible owner who can be required to have insurance.

Insurance Guaranteed to Follow the Gun

If no-fault insurance as described above is mandated and it applies to particular guns rather than guns in the hands of an insured person, there is a cure for the uninsured gun problem. The insurance can stay in effect after the gun is diverted, lost or stolen as long as necessary. Various calls in state legislatures do this directly until the loss is reported to police, but the rule can be that the only way an insurer relinquishes responsibility for a gun is to have a new insurer take it up. Of course, insurers would take steps to guarantee that a gun owner does not lose control of a gun without getting that new insurer in place. This would also eliminate the need for the government mandating the insurance to follow up or track guns and owners directly. It would only need to track the insurers.

The last form of insurance is the one needed to provide for the broad array of victims of shootings.