The insurance industry through its trade group spokespersons has been very negative on the possibilities of dealing with the gun violence problem by means of requiring insurance. The legislative proposals made so far have all been very narrow calls for conventional liability insurance sometimes with high limits. The trade groups have been quick to jump on the limitations of that approach and on projected difficulties with implementation. The quotes in various new articles have been very hostile to gun (and actually all) insurance.
In a statement made to the Connecticut State Legislature on March 19, 2013 the Property Casualty Insurers Association of America (PCI) made a more carefully worded opposition to such insurance. This allows an analysis of the reasons for the reservations of the insurance industry on this matter.
PCI opposes this legislation because it will be ineffective in curbing gun violence and will create significant burdens for law abiding gun owners and insurers. As a general rule, PCI opposes mandating the purchase of liability insurance. We have found that mandatory insurance requirements are often ineffective and serve only to add enforcement and administrative costs for both government entities and insurers.
The comparison with motor vehicle insurance is relevant here in showing that this is a ridiculous statement. While it varies greatly from state to state, in many states motor vehicle insurance is mandatory, enforced and highly effective in compensating injured persons. In states where it is not effective, it is because insufficient insurance is mandated or enforced.
A particular objection made in this document was that “it is also unnecessary because homeowners and renters insurance policies often provide coverage for accidental discharges and negligent acts by gun owners….” While this coverage usually exists it’s way too narrow to protect victims because most shootings are not accidents. Also to say it’s unnecessary ignores the great number of gun owners who don’t have homeowners and renters insurance. It’s exactly those gun owners who would not voluntarily buy insurance that a mandate seeks to reach.
They then get to the core issue.
While homeowner’s insurance policies often cover an accidental firearms discharge, they also contain a general liability exclusion for intentional and/or criminal acts. This common sense exclusion prevents a criminal from being protected by the insurance policy. In fact, insurance policies generally do not cover intentional acts, as such coverage is contrary to the very premise of insurance — providing coverage only upon the occurrence of a fortuitous event.
This is the reason that insurance specifically designed for protection of victims is needed. Insurance that is to protect the buyer of the insurance is usually written to exclude benefits that can only go to third parties. It is certainly possible to have insurance terms that exclude intentional acts. If written that way it won’t even pay an innocent victim for deliberate shootings by an insured person or often by anyone. It’s not necessary to write insurance that way. If insurance is written to protect victims as it should be mandated to do, then “fortuitous event” in the quote above refers to an event that is fortuitous from the standpoint of the victim. This does not call for an unusual or novel kind of insurance. It’s the usual way to write insurance for this purpose. It only requires to be adapted to the specifics of this situation.
There are many kinds of insurance that do cover intentional and/or criminal acts and are designed to protect victims other than the insurance owner. They don’t, however, pay out directly to the misfeasor. Some have coverage that is mandated by law and some have coverage that is required by a business relationship. There are many, many law decisions on this matter with a simple pattern. The court looks at the terms of the policy and if it allows such coverage it is enforced. It’s very important that laws mandating insurance for guns explicitly mandate that the insurance pay to innocent parties no matter what the intent of the shooter or who the shooter is. A few examples are:
- In some states required liability insurance for motor pays innocent parties harmed intentionally by insured drivers.
- Standard homeowners insurance usually has an “open mortgage clause” that would pay a lender for a house burned down by the owner.
- Business liability insurance often has a “separation of interests clause” that protects the company in the case of intentional acts of employees.
- Performance bonds often pay if the contractor absconds with the funds.
- Workers compensation insurance generally covers intentional acts by co-workers.
So why is the insurance industry so resistant to required insurance? I can’t read the minds of the spokespersons, but I can think of several possible reasons.
- Any requirement or restriction around guns is offensive to a very vocal minority of gun owners and insurers don’t want to offend them.
- The insurance industry doesn’t want to seem greedy or looking for a source of revenues.
- Mandatory insurance seems to be a long way from implemented at the moment even though it’s one of the few ways to have both a large number of guns and increased responsibility.
- People in the trade organizations with strong personal feelings about guns may take over the issue within the organization.
A little bit about me:
Because I write exclusively about guns and insurance, I have people who comment thinking that I’m some kind of shill for the insurance industry. I have never worked in that field, but I’m a retired businessman who has bought a lot of many kinds of insurance in my career. I appreciate the things that insurance can do to facilitate and improve activities associated with risks. I have seen insurance companies be reasonable and unreasonable, good and bad, trustworthy and untrustworthy. We need them, but we need to closely watch and regulate them. I think that well designed insurance that is would be a great help in reducing gun deaths and injuries and not be a great burden on gun owners.
It should applied to the gun in such a way that no matter how the gun changes hands it remains in effect until a new insurer takes it over. It should cover all injury done by the gun in a no fault way to eliminate lawsuits. It can replace the need to register guns in many cases so that, if gun owners who don’t trust the government buy their insurance from someone they do trust such as the NRA, a system of responsibility will result.
Published 5/6/2013 on Daily Kos by guninsuranceblog