On Wednesday, Superintendent of Financial Services Linda A. Lacewell announced that the New York State Department of Financial Services entered into a consent order with the National Rifle Association.
On February 5, 2020, DFS served a statement of charges and notice of hearing to the NRA over violations of New York Insurance Law. That case is now resolved by a consent order that includes a civil monetary penalty of $2.5 million for violations of New York insurance laws.
In addition, the NRA is banned from marketing insurance in the State or receiving compensation in connection with any newly issued New York insurance policies for five years, irrespective of whether the NRA obtains a license. This brings to a close a three-year investigation.
In the consent order, DFS found that, despite lacking a license to conduct insurance business in New York, the NRA violated various New York insurance laws and regulations by, among other things, acting as an insurance producer without a license in participating in efforts to solicit and market the sale of insurance products, including the NRA’s Carry Guard insurance program.
“The NRA operated as an unlicensed insurance producer and broke the New York Insurance Law by soliciting insurance products and receiving compensation,” said Superintendent Lacewell. “Even worse, the NRA violated the New York Insurance Law by soliciting dangerous and impermissible insurance products, including those within its Carry Guard program that purported to insure intentional acts and criminal defense costs. The Department will continue to protect the integrity of the insurance market for the purposes of safety and soundness and the good of all consumers.”
The DFS investigation found that, from 2000 to 2018, the NRA worked with the Lockton Affinity Series of Lockton Affinity, LLC (Lockton) to offer a variety of insurance products to NRA members, their families, and affiliated businesses in New York. The NRA endorsed these products as well as played a role in marketing them to its members through NRA-affiliated websites and email marketing, despite the fact that the NRA did 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. The NRA thus acted as an insurance producer under New York Insurance Law, thereby requiring it to be licensed and regulated by DFS.
More than 28,000 NRA-endorsed policies were placed in New York through Lockton. One insurance program that the NRA participated in marketing, and received compensation for, was the “Carry Guard” insurance program. Between about April 1, 2017, and November 17, 2017, Carry Guard was marketed and sold throughout the United States, with about 680 policies issued to New York residents. In the Consent Order, DFS found that the Carry Guard program offered coverage that is unlawful in New York State, namely coverage for losses and costs associated with the aftermath of the purposeful use of the firearm, including defense costs in a criminal prosecution. Under New York law, intentional acts cannot be insured.
DFS’s investigation also found that the NRA had aided unauthorized insurers in participating in efforts to market insurance in New York State, as well as called attention to unauthorized insurers in violation of the New York Insurance Law.
This consent order is a result of a multi-year investigation that resulted several prior settlements: DFS fined Lockton Companies and its affiliate Lockton Affinity $7 million for serving as the producer and administrator of various NRA-branded insurance products in May 2018; certain underwriters at Lloyd’s of London $5 million for underwriting NRA-branded insurance products in December 2018; and Chubb subsidiary Illinois Union Insurance Company $1.3 million for underwriting Carry Guard in May 2018.
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