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Out-of-State Insurer Fined $1M for Peddling Policies to NJ Gun Owners

Lockton Affinity gets rapped for selling Carry Guard, personal-liability insurance, a product of the NRA

gun shop
Credit: Creative Commons

New Jersey insurance regulators have slapped a $1 million fine on an out-of-state insurance company that worked with the National Rifle Association to market controversial policies to gun owners in ways that violated state law.

The fine, which Kansas-based Lockton Affinity has already agreed to pay, was detailed in a five-page consent order issued last week by the state Department of Banking and Insurance.

Among other allegations, the consent order accused the insurance company of allowing the Virginia-based NRA to market personal-firearms liability insurance branded as “Carry Guard” in New Jersey even though the gun-rights group is not licensed by the state to offer insurance policies or solicit business as an insurance provider.

License to kill?

The Carry Guard insurance program, which has also drawn scrutiny in other states, was marketed as self-defense coverage for lawful gun carriers and their families, according to DOBI. But it has inspired harsh criticism from anti-gun-violence activists who’ve labeled the policies “murder insurance.”

The filing of the consent order by New Jersey insurance regulators comes as the state has been ramping up efforts to combat gun violence across several fronts since Gov. Phil Murphy, a Democrat, took office in early 2018.

For example, Murphy has enacted a series of laws designed to enhance public safety, including forcing individuals deemed dangerous to surrender firearms and limiting the number of bullets that can be fired without reloading. He has also praised state pension-fund managers for dropping an investment in a company that manufactures semi-automatic weapons for civilian use. Further, Murphy has endorsed legislation that would prohibit New Jersey public-worker pension funds from being invested in any company that manufactures guns or ammunition.

“As regulators we have a responsibility to ensure that companies that profit from having guns on the streets are not conducting business in our state in violation of the law,” said Marlene Caride, the commissioner of DOBI, in a statement issued the same day the consent order was filed. “Entities regulated by the department are expected to fully comply with the statutory and regulatory requirements of the state and will be held accountable if they fail to do so,” Caride said.

lockton affinity logo
Credit: Lockton Affinity

Lockton Affinity also issued a statement that said it has “fully cooperated with the New Jersey Department of Banking Insurance from the time they first raised this issue with us.”

“We are pleased this matter is now concluded,” the statement said.

DOBI did not announce any fines or penalties issued against the NRA.

According to the September 5 consent order, the NRA launched Carry Guard insurance backed by Lockton Affinity in April 2017 as part of a broader program that also involved firearms training, access to an emergency hotline, and free, one-year NRA membership. Carry Guard was advertised as personal-firearms liability insurance that could provide, among other things, help with the costs of mounting a legal defense and access to attorney referrals, according to DOBI.

The NRA marketed Carry Guard to members nationwide on a website and in direct solicitation emails, according to the consent order. Under the arrangement with the NRA, Lockton Affinity collected a Carry Guard membership fee on behalf of the NRA, an insurance premium, and an administrative fee, the order said.

100 G’s in insurance premiums

In all, more than 300 Carry Guard insurance certificates worth a combined premium value of $104,000 were issued to New Jersey residents as of June 30, 2019, according to DOBI.

While Lockton Affinity is licensed by the state to offer surplus insurance lines, state law prohibits licensed insurance providers from allowing an unlicensed person or entity to “transact the business of an insurance producer in the state,” DOBI said in a news release. The NRA’s marketing of the insurance policies in New Jersey constituted “solicitations of insurance by an entity not licensed as an insurance producer,” according to the consent order.

Carry Guard also involved some health-insurance benefits, and surplus-line insurers are not permitted under New Jersey law to offer health-insurance benefits to state residents, the consent order said.

In addition to paying the $1 million fine, Lockton Affinity has also agreed to take more steps in the future to prevent “any future solicitation of insurance by unlicensed persons or entities for insurance products for which Lockton Affinity is the producer,” according to the consent order.

The news release issued by DOBI said that the agency “is continuing to investigate other firearm-related insurance programs for potential violations of state insurance laws.” It did not provide any additional details.

Also left unclear is whether the NRA is facing any punishment; DOBI officials did not immediately address questions about the gun-rights organization when reached yesterday.

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