Insurance broker Lockton will pay a $7 million fine for administering National Rifle Association (NRA) member insurance programs in New York that officials say violate several state laws.
The settlement with Lockton is the first in what is a broader investigation by New York regulators that is also looking into the involvement of Chubb, Lloyd’s and the NRA in insurance programs for NRA members.
The main NRA program of concern in New York, Carry Guard, is underwritten by Illinois Union Insurance Co., an excess and surplus lines carrier subsidiary of Chubb Ltd. Lockton administered it through its Lockton Affinity subsidiary, which is a licensed excess line broker in New York.
The program provides NRA members with personal liability insurance protection in the event they are charged with a crime after defending themselves with a firearm. The program also includes a safety training program. Those who purchase the program also receive a free one-year NRA membership. The insurance promises to mitigate the financial and legal consequences that might arise from armed encounters, even if the member did everything right.
Carry Guard came in for scrutiny following the mass shooting at Parkland high school in Florida on February 14. Gun safety advocates called for the NRA to stop offering the program and for Chubb and Lockton to withdraw from it. One gun control group has referred to the program as “murder insurance.”
New York Department of Financial Services (DFS) officials determined that some of the coverages themselves and limits are not permissible under the state’s law; that the NRA is not a licensed broker in the state yet Lockton paid the group royalties and profit-sharing; that the tying of the insurance to a free membership valued at more than $25 is illegal; and that Lockton Affinity neglected to obtain the necessary declinations from standard markets on policies placed in the excess and surplus lines market.
‘Improperly Provided’ Coverage
As for the coverage, the DFS said the Carry Guard program “improperly provided” coverage in any criminal proceeding against the policyholder including coverage for bail money, premiums on bonds, attorney consultation fee and retainer expenses, expenses incurred for the investigation or defense of criminal charges, and costs taxed against the insured or the insured’s resident family member in a criminal proceeding arising out of a shooting.
In response to the consent order, Lockton issued a statement stressing its commitment to compliance. “It is our responsibility to ensure we are fully compliant. We believe this settlement is the best way to resolve these issues,” the company said.
The Lockton statement, provided by Dean Davison, director of communications, further stated in part:
“When we learned of New York regulatory issues in our Affinity business in the course of an investigation by the New York DFS, we immediately went to work to begin resolving them. As part of our settlement, we will continue to cooperate with the New York regulators to remediate any issues or concerns.”
In February, Chubb said it had pulled out of the NRA gun insurance program several months earlier. In February, Lockton tweeted that it was also withdrawing from the program: “Lockton Affinity has notified the NRA that it will discontinue providing brokerage services for NRA-endorsed insurance programs under the terms of its contract.”
The NRA website suggests that the withdrawals are still in progress and that the insurance programs are still available in other states. The site continues to identify Chubb’s Illinois Union Insurance Co. as the insurer for the program and Lockton Affinity as the administrator. The site does say that the program is no longer available in New York.
No other state insurance regulators have indicated they are probing the NRA programs.
The New York DFS investigation found that Lockton issued 680 Carry Guard insurance policies to New York residents between April and November 2017. As administrator for the Carry Guard program, Lockton handled marketing the insurance, binding the insurance, collecting and distributing premiums and delivering policies to insureds.
According to New York officials, Carry Guard was not the only program Lockton ran for the NRA. From approximately January 2000 through March 2018, Lockton and the NRA offered at least 11 additional insurance programs through Lloyd’s to new and existing NRA members in New York and elsewhere.
Between approximately January 2000 and March 2018, Lockton collected $12,056,627 in premiums and $785,460 in administrative fees from insureds, under the Carry Guard Program and other NRA programs.
No claims have been filed under the Carry Guard program, according to the DFS report.
As part of he settlement, Lockton agreed to cooperate with Chubb and Lloyd’s in canceling any New York policies in the NRA programs and refunding premiums. The broker also agreed to not offer any similar program in the state in the future.
New York officials did not indicate what, if any, action will be taken against others involved in the NRA program but the order does confirm that the department has been investigating Chubb, Lloyd’s and the NRA, as well as Lockton, since October 2017.
DFS found that the NRA marketed the Carry Guard and other programs even though it is not a licensed broker in New York.
“The NRA acted appropriately at all times,” said William A. Brewer III, partner at Brewer, Attorneys & Counselors and counsel for the NRA, in a prepared statement. “The NRA relied upon Lockton and its assurances that the program complied with all applicable state regulations. Lockton, as the subject matter expert, was obligated to oversee the administration, marketing and promotion of this insurance program.”
Brewer added that the NRA “will continue to work cooperatively with the DFS in connection with its inquiry and to promote the interests of NRA members and law-abiding gun owners who participated in this program.”
Chubb had not responded to a request for comment by press time.
In the wake of the Florida tragedy, MetLife, United Airlines, several car rental firms and banks announced they were ending benefit offerings for NRA members as did Symantec, which offered an identity protection product called Lifelock.
*This story appeared previously in our sister publication Insurance Journal.