The answer to the question of whether we need to mandate gun insurance at the federal or the state level is to have the mandate at the federal level and the regulation of the insurance at a state level. The special problems that guns have of illegally traveling across state lines to do their damage and of states varying so much in their willingness to regulate guns can be solved by this structure. The federal mandate should implement the top-down process for continuing insurer responsibility advocated by this blog. It should require that the insurance pay benefits to victims in accordance with the gun insurance requirement in the state where the shooting occurs.
One of the special difficulties that makes guns different than almost any other risk, is that move around from state to state so easily once they are in illegal hands. Much of the country has a relatively small problem with illegal guns and people there see no need to make access difficult. In other parts of the country, there is a major problem with death and injuries from illegal guns. No matter how carefully places like New York, Chicago and Washington, DC work to stop the transfer of firearms to dangerous people they cannot control the flood of weapons that come in from areas with more permissive policies. The process has been named the Iron Pipeline.
This blog believes that requiring insurance is a practical way to deal with the problem. Insurers that remain responsible for deaths and injuries from guns after they pass into illegal hands will set up conditions to prevent that passage. They will find ways to do this that are minimal inconveniences to legitimate gun owners. The question is how to get a requirement for such insurance into place in this environment. The states that sell the most guns are least likely to make such a mandate.
Insurance in this country is normally regulated by the states. The McCarran-Ferguson Act requires that if Congress wants to regulate insurance on a federal level, it must do so explicitly. The two major models for gun insurance, worker’s compensation and motor vehicles, are handled by the states. It’s likely that gun insurance will also be state based but will require a federal mandate to make certain it is in place. The certainty should come from a “top-down” requirement that makes a insurer retain responsibility for a particular gun until and unless responsibility is picked up by another insurer, regardless of any intervening events such as loss, theft or illegal sale.
The way to handle the need of some states for strong protection from the consequences of firearm injuries and of the desire of other states to put no expenses or limitation on the acquisition of firearms is to have the federal requirement specify that the benefits paid by the mandated insurance be set by the insurance requirement of the state in which the gun causes the injury. If an insurer does not want to be exposed to the more generous requirements of some states then that insurer will take steps in the terms of the insurance to insure that the gun does not travel to those states. For example, if Virginia has small benefits and New York State has generous benefits, then insurers will have an incentive to make sure that guns are not illegally sold to people who will take them to New York and sell them on the streets.
Once Congress is considering such a requirement the states will have an incentive to adopt a gun insurance requirement for guns sold in their own states in order to protect their citizens from illegal guns that come from outside their borders.
Senators Dingfelder and Burdick with Representative Denbrow have introduced a bill in the Oregon Legislature (SB-758) which is the first effective plan for gun insurance that would provide for victims. It works by imposing strict liability on a gun owner for injuries associated with a gun even for one year after the gun is lost or stolen. There is no limitation to economic damages as is typical of no-fault motor vehicle insurance. The limits are set quite high at $250,000 for physical injury or death. Continue reading
An article in Bloomberg by Elizabeth Bunn titled “U.S. Insurers Resist Push to Make Gun Owners Get Coverage” has been picked up by various sites on the web. The American Insurance Association, a property-casualty trade association is quoted as saying that gun insurance could have an effect of more gun violence by owners who have less at stake and that “Property and casualty insurance does not and cannot cover gun crimes.” They must be talking about current liability insurance which is written for the benefit of the first party insurance (and gun) owners. They also quote Bob Hartwig president of the Insurance Information Institute as saying “Insurers will not insure illegal acts.”
Insurance which is required for the benefit of third parties injured by some kind of activity often works differently. For example, if in some incident of road rage an insured person intentionally smashes into your car can you collect from his (probably not her) insurance? It varies from state to state. In Texas you can’t, in Massachusetts you can as decided in Cannon v. Commerce Insurance Company, 18 Mass. App. Ct. 984 (1984). In other states there has not been any court decision on the matter and it may depend on the details of language concerning who is an insured party.
In many business situations an intentional act on the part of one insured (often an employee) may create a liability on the part of another insured (the business or corporation itself). Businesses want to protect against such situations and insist that insurers put a “separation of interests” clause in the insurance contract. For an example of a court decision applying that to intentional acts see Minkler v. Safeco Insurance Company of America, (Cal. Sup. Ct., S174016, June 16, 2010). The effect of this is to treat each insured party separately so the the business is insured even if the employee has done an illegal and intentional act which cannot be insured for the employees benefit because of a doctrine of public policy. A more wide ranging example might be a performance bond taken out by a construction company for the benefit of their customer. It protects the customer even if the contractor cheats and steals funds.
The point is that insurance to protect victims of gun violence can and should be structured for that purpose. The model of first party liability insurance is not very good here. No-Fault insurance is a better model. It’s not necessary to have all the characteristics of No-Fault such as the victim’s insurance(if any) paying first, but that would be OK. The use of a pool to cover unknown or uninsured gun owners is very desirable. The one in use many No-Fault states would work for guns.
The proposed laws in various states, most recently in NY, which would mandate liability insurance as a condition of having a gun license do not give details in the type of insurance required other than “liability” and a specified limit. It’s probably for this reason that the Insurance Industry is not yet taking the possibility of requiring insurance to protect victims of gun violence seriously. The insurance industry has found a way to help with almost any risk in the past, except perhaps for flood insurance which would also be possible if universally mandated. There are many published lists of “Principles of Insurability.” Gun insurance measures up well to them. In particular, a general requirement for such insurance will prevent adverse selection. Bob Hartwig also stated “they can’t require companies to offer that coverage.” Insurance companies require a suitable market and insurance structure to provide coverage. That is quite possible for gun insurance. The insurance industry needs to be a part of designing that structure, so far they have not engaged.
Eugene Robinson has an article “Stop the gun madness” in the Washington Post opinion section. It calls for regulation but does not mention regulation. It’s of interest to this blog because of the flood of comments. There are over 2000 comments in about 24 hours as of 4:45 EST on Jan 1, 2013 and it is getting several comments a minute. A rough scan of the comments shows a mixture with more in favor of increased regulation. I think this reflects Robinson’s usual readership but is different than the bulk of comments in other places which are typically hostle and opposed to all gun regulation. It raises the question of whether the dialog will permenently change after Newtown.