NRA Seeks to Block New York’s ‘Political’ Enforcement Over Liability Insurance Programs

By | March 2, 2020

The National Rifle Association of America (NRA) is seeking a preliminary injunction in federal court in an attempt to stop the New York State Department of Financial Services (DFS) from conducting enforcement proceedings against the association.

This comes after DFS served a statement of charges against the NRA on February 5. The charges allege the association violated New York state insurance law by acting as an insurance producer without a license and engaged in deceptive marketing practices regarding its self-defense liability insurance programs, including Carry Guard.

The NRA’s motion, filed on February 28, 2020, claims DFS’ actions are a politically motivated attempt to single out the association.

“The evidence supports the NRA’s belief that this is part of a coordinated effort in opposition to the NRA’s political point of view,” William A. Brewer III, outside counsel to the NRA, said in an emailed statement to Insurance Journal.

In its court filing, the NRA says DFS’ investigation into its insurance products, commenced in 2017, has broadened into a blacklisting campaign that coerced insurers, banks and others to cut ties with the association. In May 2018, DFS fined Lockton $7 million for serving as the administrator of the program. In a December 2018 consent order, 10 Lloyd’s of London underwriters also entered into an agreement to pay $5 million to DFS for underwriting firearms liability insurance programs branded by the NRA.

The NRA initially brought a federal lawsuit against DFS, former DFS Superintendent Maria T. Vullo and Governor Andrew Cuomo in May 2018, alleging a regulatory overreach by New York officials that resulted in violations of the NRA’s First Amendment rights. The February 28 filing is the NRA’s latest move to push back against DFS’ actions.

A spokeswoman from DFS said in an email that the NRA’s most recent filing is “an attempt to distract and deflect from the serious allegations brought by DFS asserting that the NRA violated state law.”

“The charges announced by DFS on February 5 allege the NRA violated state law by acting as an unlicensed insurance broker and deceiving consumers,” the spokeswoman stated. “This state matter is entirely separate from the NRA’s meritless lawsuit in federal court.”

In DFS’ statement of charges issued this month, the department alleges the NRA has worked with the broker Lockton Companies since 2000 to offer a variety of insurance products to NRA members, their families and affiliated businesses, which it endorsed and marketed to its members without having an insurance producer license from DFS. The charges claim the association participated in generating more than 28,000 insurance policies for New York consumers and unlawfully received royalties of about $1.8 million between 2000 and 2018 from Lockton on the policies issued in New York.

Additionally, DFS alleges the NRA misrepresented the insurance offerings to its members, claiming they were being offered at the lowest cost possible when the organization was actually receiving royalties based on a percentage of the premiums paid by its members. Under the relevant state insurance laws, the NRA faces civil monetary penalties of up to $500 for each of the 28,000 policies.

Namely, the NRA’s self-defense liability insurance program – Carry Guard – was allegedly marketed and sold throughout the U.S. with about 680 policies unlawfully issued to New York residents, according to a DFS press release. The charges state the Carry Guard program offered coverage for losses associated with the aftermath of the purposeful use of a firearm, including defense costs in a criminal prosecution. Under New York law, these types of intentional acts cannot be insured.

Several other states have taken issue with the Carry Guard program as well. An investigation by the New Jersey Department of Banking and Insurance found Lockton Affinity violated certain state laws and regulations through administering Carry Guard in the state on behalf of the NRA. In September, Lockton Affinity agreed to pay a $1 million fine as part of a consent order with the department.

The NRA also agreed in May to stop soliciting Carry Guard in California without a license, addressing allegations made in a 2018 cease and desist order issued by the California Department of Insurance. In Washington state, Illinois Union Insurance Co. – a Chubb subsidiary – paid a $102,000 fine after Washington Insurance Commissioner Mike Kreidler in March ordered the company to stop underwriting Carry Guard. The company reportedly sold 811 policies to Washington consumers.

Through its charges against the NRA issued earlier this month, DFS is seeking civil monetary penalties as well as injunctive and other appropriate relief. A hearing is set to be held at the department’s office on April 6.

“The NRA acted appropriately at all times,” Brewer said. “The NRA did not underwrite, sell, or administer any insurance programs, period. Instead, like countless other affinity groups, the NRA relied on insurance-industry experts to oversee and market products tailored for its members.”

Brewer said he believes the NRA has been treated more harshly by DFS than other regulated entities in an effort to weaken gun-rights advocacy in New York.

“DFS’ actions are about politics, not protecting consumers,” he said.

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About Elizabeth Blosfield

Elizabeth Blosfield is the East region editor for Insurance Journal. She can be reached at eblosfield@wellsmedia.com. More from Elizabeth Blosfield

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