Author: Patrick Wraight
Once again, we find ourselves in the deeply political and emotional debate about guns, the second amendment, gun control, and safety. This is not the place for my feelings about gun control, so I'm not engaging in it.
However, it is important to clear up some misconceptions about guns, insurance, and the place of the insurance industry. We may have to deal with some misinformation from a popular (and growing) insurance company. Rather than referring to guns, handguns, rifles, etc. I will use a term that seems a little less inflammatory. I will refer to firearms.
Question #1: Is the firearm covered for loss or damage?
Let's start from a property standpoint because when you boil it down, firearms are personal property. When an individual owns a firearm and keeps it in their home with the rest of their property, the homeowners' policy applies. What's covered on the HO-3?
Coverage C – Personal Property, 1. Covered Property
We cover personal property owned or used by an “insured" while it is anywhere in the world.
That's the broad statement of coverage. Now we have to look for exclusions and limitations on this coverage that would apply to a firearm.
3. Special Limits of Liability
$2,500 for loss by theft of firearms and related equipment.
Now we have a limitation based only on the (otherwise) covered peril insured against, theft. Looking through the rest of the exclusions and limitation on the HO-3, I haven't found any other exclusions or limitations. Different carriers may have filed different coverage forms and for those, you would have to refer to the carrier to find out what changes they have made to this form. Without diving into the other perils insured against, we find that firearms (and related property) are treated like other personal property on the homeowners' policy. If they are destroyed in a fire or hurricane, there is no limit on coverage.
Question #2: Is there coverage if someone uses the firearm in a way to injure someone?
This gets a little blurry so let's get into some policy language and maybe some situations. Like before, we have to find out what coverage might apply related to a firearm. Let's start with the broad situation where someone was injured or property was damaged by an insured using a firearm.
Coverage E – Personal Liability
If a claim is made or a suit is brought against an “insured" for damages because of “bodily injury" or “property damage" caused by an “occurrence" to which this coverage applies, we will: pay up to our limit of liability for the damages for which an “insured" is legally liable….and Provide a defense at our expense by counsel of our choice…
Just like any other liability issue, there must be a claim or suit brought against an insured. Broadly, we could say that as long as there is bodily injury or property damage caused by an insured, there is coverage at this point. Before we look for exclusions, we have to discuss the definition of insured. If you're familiar with the homeowners' policy, you're aware that the definition of insured includes any resident relatives, or people under 21 and in the care of a resident relative. It also extends that definition to students enrolled in school full time living at the school until they reach 24. Now that we've spoken to that issue, we need to look for applicable exclusions.
Expected or Intended Injury
“Bodily injury" or “property damage" which is expected or intended by an “insured" even if the resulting “bodily injury" or “property damage" is of a different kind, quality or degree than initially expected or intended; or is sustained by a different person, entity or property than initially expected or intended.
However, this exclusion does not apply to “bodily injury" or “property damage" resulting from the use of reasonable force by an “insured" to protect persons or property;
So, there is this possible exclusion that we have to deal with, but to do that, we have to set aside the insurance language and put some street clothes on this scene. Consider what appears to be the expected situation that liability may be assessed when it comes to firearms. A person buys a firearm and is using it, whether in practice, for sport, or home or personal defense. The homeowners' policy expects this exposure and provides for it.
The owner of the firearm is hunting in an area where people normally hunt and trips, setting off his shotgun and he accidentally injures someone. This doesn't fall under the expected or intended injury exclusion because it's an accident. Something happened that wasn't planned, and bodily injury was the result. This policy anticipates that this might happen and provides coverage.
A homeowner is awakened by noises at the front door. She gets out of bed, grabs her handgun and a flashlight to find out what's going on. In the living room, she finds someone has broken into her home. The burglar lunges at her and she uses her handgun, injuring him. This fits into the exception to the expected or intended injury. She expected (and arguably intended) that someone would get hurt when she discharged her firearm. Yet, we find that she was using her firearm to protect herself and her property. It could certainly be argued that she used reasonable force in this manner. This policy anticipates that this might happen and provides coverage.
It's worth noting that different jurisdictions define reasonable force differently. This is where we meet terms like the “castle doctrine" or “stand your ground." Some states require that you make an attempt to escape before using deadly force. Other states don't require this. Some states have written their laws such that if you are on your private property, you have the right to defend it and yourself without warning or seeking to escape a situation. Again, it's not our purpose to debate any of these, just to introduce them.
Question #3: What is the insurance industry's place in this conversation?
People get emotional when they talk about this subject. It makes sense. People have gotten hurt in some horrible situations. Other people get emotional because they perceive any regulation of firearms as an infringement upon their personal liberty. Personally, having served in the US Army, and having lived in the home of two hunter safety instructors, I know what can happen. I know how accidents occur and I know what happens when we are careless. I also know what it looks like when people use firearms in anger and fear.
I believe that the insurance industry doesn't have much place in this conversation. I don't think that a company should come out publicly and say anything. If they want to do something, here's what I recommend. Nothing. Insurance companies already have the data on bodily injury losses related to the use of firearms. They know that the risk is already manageable. I also think that companies that openly write blogs on the subject before they've done anything are only looking for attention. Beside that, I think insurance companies often work best when we work in the background.
Question #4: What do you mean, “misinformation"?
After the Las Vegas incident, Lemonade wrote a blog post about firearms. I'd like to pull some quotes from their post and offer some commentary.
Quote #1: “But while we respect gun ownership, we're not into gun worship."
Response: This is just meant to be inflammatory. It doesn't help and it really doesn't fit into the context of the post. It is set aside and backlinked so that it can be tweeted and retweeted by fans of their product and that sort of language use.
Quote #2: “[O]ur policies limit the amount we will pay out for the damage or theft of firearms to an entirely adequate $2,500. …They seem to all offer additional coverage. We don't.
Response: That's partially accurate. I've reviewed their filed policy forms. Their forms mimic other ISO-based forms and the ISO homeowners' program. They do have a special coverage limit of $2,500 for firearms, but it is limited to theft, not damage. For other covered perils insured against, they have no limitation.
As to the idea that other carriers offer additional coverage and they don't, that's just not true. Again, in reviewing their filings (which anyone can do), I found that they have filed two forms worth noting here.
Form #1: Coverage C Increased Special Limits of Liability. This form amends the Special Limits of Liability, including the limit for firearms. This form doesn't provide any restriction on the amount that these limits can be raised to. So, no Lemonade, it does appear that you will provide a higher limit.
Form #2: Scheduled Personal Property Endorsement. This form provides open perils coverage for any personal property that is scheduled on the form. Line 13 allows the insured to enter a specific type of property, a description, and an amount of insurance. So, it also appears that you will provide broader coverage, like your competitors will.
You might wonder what their underwriting guidelines say. I looked there, too. All I found in their underwriting guidelines is the rate per $100 in value for increased limits on firearms. So it appears that they will allow higher limits, contrary to their public image. This doesn't speak of transparency and trust to me.
Quote #3: “Our policy already excludes coverage for any illegal guns or gun use, but in our next version we plan to add more protections around firearms: …exclude assault rifles altogether, … add requirements that firearms be stored securely and used responsibly…"
Response: Yep. Homeowners' policies exclude the illegal use of anything and illegal property can't be insured on any policy. I'm concerned about the term assault rifles or military-grade weapons. I will hold off the rest of my judgment until I see how their policy defines those terms. As to the requirements that firearms be stored securely and used responsibly, I can't argue with that.
Here's where my argument comes in. This blog post was written in October 2017 and we are well into 2018. I searched and haven't found any filings with these updated requirements. Maybe they were busy getting filings for new states ready and they didn't have time to create and file those revised rules and forms to exclude the firearms they stand against. I don't know.
This isn't the end of this conversation, but if I may I'd like to make one more observation. Let's keep talking about it, but let's do it in a civilized way. I recommend the return to civil discourse, rather than the style of the day, where both sides yell at each other across widening ideological chasms. That's the only way we are going to fix issues. It wouldn't hurt if we stopped writing and speaking for tweets and sound bites.
This article is an update of an article originally published on Insurance Journal's Academy Journal Blog here.
Patrick Wraight is director of Insurance Journal's Academy of Insurance. During his career he has taught insurance topics ranging from underwriting basics to understanding insurance policies to catastrophe claims orientation. Wraight writes a weekly blog on insurance coverage issues and other items of interest to the insurance community and is a contributor to other insurance blogs. He holds the CIC, CRM, CISR, AU and AINS designations.
Last Updated: August 31, 2018