New York’s Assault on the NRA Sets a Dangerous Precedent

From: Gene Poole ([email protected])

One can imagine similar actions targeting Planned Parenthood,
tobacco companies, or even rival political campaigns.
The National Rifle Association announced May 11 that it has
filed suit against the New York State Department of Financial
Services; its superintendent, Maria T. Vullo; and the state’s
governor, Andrew Cuomo, alleging the state and its agents
violated the NRA’s First Amendment rights in a recent regulatory

I will leave to constitutional scholars to debate the First
Amendment question. But in terms of regulating the business of
insurance in an effective, efficient, and nonpoliticized manner
— a topic about which I am the author of an annual report — the
department’s behavior sets a dangerous precedent that should
trouble citizens across the political spectrum.

The lawsuit stems from settlements the DFS reached earlier this
month with Kansas City–based insurance broker Lockton Cos. and
underwriter Chubb Ltd. The companies were fined $7 million and
$1.3 million, respectively, in connection with alleged
violations of New York insurance law. The purported wrongdoing
stemmed from Lockton’s work as broker for the NRA’s “Carry
Guard” insurance program, which provides liability insurance to
NRA members for firearm-related accidents and for legal costs in
self-defense cases.

The charges against Lockton varied from the technical to the
flimsy to the picayune, but they all give the appearance of
pretext for what the department was actually seeking, and got: a
consent decree in which the broker agrees “not to participate in
the Carry Guard Program, any similar programs, or any other NRA-
endorsed programs with regard to New York State.”

In fact, Lockton had already cut ties with the NRA, one of a
number of corporate partners to do so in the wake of the mass
shooting at Marjory Stoneman Douglas High School in Parkland,
Fla. But the Department of Financial Services has made clear its
willingness to pressure other firms to do the same. In an April
letter from Vullo to the state’s banks and insurance companies,
she wrote that the department “encourages its chartered and
licensed financial institutions to continue evaluating and
managing their risks, including reputational risks, that may
arise from their dealings with the NRA or similar gun promotion

Ironically, we have simultaneously seen recent legislative
efforts by some gun-control advocates, including in the general
assembly of neighboring Connecticut, to actually require gun
owners to maintain liability insurance. The type of coverage
usually envisioned by such proposals, which would compensate the
victims of offensive uses of firearms, is unlikely ever to come
to market, as intentional acts are generally agreed to be
uninsurable. But as a result of the New York regulator’s action,
one expects a chilling effect that would cause insurers to
withdraw from offering even the more limited coverage included
in the NRA program, or in many homeowners insurance policies.

Indeed, Lloyd’s of London, the world’s largest market for hard-
to-place risks, has responded by directing its underwriters “to
terminate any existing programs of this type and not to enter
into any new ones,” with specific reference to concerns about
the New York DFS inquiry into “programs offered, marketed,
endorsed or otherwise made available through the National Rifle
Association of America.” The Lloyd’s decision was a feature, not
a bug, of the department’s action. The goal pretty clearly was
to use the regulator’s office, which is supposed to apply
impartial, technocratic rules to see to it that insurance
companies responsibly and competently manage their underwriting
and investment risks and that they deal with consumers in good
faith, to achieve political ends.

This temptation is not unique to the political Left. In early
2015, Oklahoma insurance commissioner John Doak issued a warning
shot to property insurers in the state who might seek to invoke
exclusions for “manmade” earthquakes stemming from oil and gas
exploration. Despite strong evidence that deep-well injections
play a role in the thousands of earthquakes Oklahoma experiences
every year, Doak asserted there was “no agreement at a
scientific or governmental level concerning any connection
between injection wells or fracking and ‘earthquakes.'”

Seeing regulators open this Pandora’s box should be deeply
concerning to those on both the right and the left. One easily
could imagine similar motivated prosecutions of financial-
services firms that do business with Planned Parenthood, tobacco
companies, tech firms, the solar industry, or even the political
campaigns of rival parties. The precedent set by these blatantly
political regulatory actions undermines not only the insurance
market, but the rule of law.;

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