New York Regulator Alleges NRA Violated State Insurance Laws

February 6, 2020

The New York Department of Financial Services (DFS) announced that it has served a statement of charges against the National Rifle Association (NRA).

The Department alleges that the NRA, which does not have a license to conduct insurance business in New York, violated various New York State Insurance Laws, among other things, by acting as an insurance producer without a license in endorsing and marketing insurance programs, including “Carry Guard.”

DFS also alleges that the NRA engaged in misleading marketing practices, deceiving its members.

The department is seeking civil monetary penalties, as well as injunctive and other appropriate relief.

In the statement of charges, DFS alleges that since 2000, the NRA has worked with the Kansas City Series of Lockton Companies LLC to offer a variety of insurance products to NRA members, their families and affiliated businesses.

According to the statement of charges, the NRA endorsed the programs as well as marketed them to its members through NRA-affiliated websites and email marketing, despite the fact that the NRA does not hold an insurance producer license from DFS. In return, the NRA received substantial compensation, including royalties based on a percentage of the insurance premiums paid by its members. An entity is required to be licensed by DFS to engage in these activities related to the sale and marketing of insurance products in New York State.

The statement of charges alleges that in 2016, the NRA partnered with Lockton to create what would become the Carry Guard insurance program. Between about April 1, 2017, and November 17, 2017, Carry Guard was marketed and sold throughout the U.S., with about 680 policies unlawfully issued to New York residents.

It also alleges the NRA engaged in substantial marketing and solicitation in connection with the Carry Guard program, including directing the NRA’s primary marketing vendor, Ackerman McQueen, to create and place television commercials promoting the Carry Guard program, sending promotional emails from the NRA CEO, and operating the NRA Carry Guard website. In May 2018, DFS fined Lockton $7 million for serving as the administrator of the NRA-branded Carry Guard insurance program.

The charges further allege that the Carry Guard program was primarily offered to firearms owners, in particular those with concealed carry permits, to provide insurance coverage that is unlawful in New York State. In particular, Carry Guard offered coverage for losses and costs associated with the aftermath of the purposeful use of a firearm, including defense costs in a criminal prosecution. Under New York law, such intentional acts cannot be insured.

The charges are not confined to the Carry Guard program. DFS alleges that the NRA participated in soliciting its members with respect to many other insurance products, going back to approximately 2000. For example, the charges allege that the NRA participated in offering its members insurance products involving coverage for firearms instructors, gun collectors, gun clubs, gun shows, federal firearms dealers, and other aspects involving firearms, as well as life, health, and property offerings for their members.

The charges allege that the NRA participated in the generation of more than 28,000 such policies for New York consumers and that the NRA unlawfully received royalties of about $1.8 million between 2000 and 2018 from Lockton on such policies in New York.

In addition, DFS alleges that the NRA misrepresented that the insurance offerings to its members was at the lowest cost possible, when the NRA was taking for itself substantial royalties, sometimes more than 20 percent of the premiums paid.

Under the relevant insurance laws, the NRA faces civil monetary penalties of up to $500 for each of the 28,000 policies – with respect to each of the three charges that carry such penalties.

A hearing will be held at the office of the New York State Department of Financial Services on April 6, 2020.

Source: New York State Department of Financial Services

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