Lloyd's of London has also announced that it will tellits syndicates to stop writing or offering all insurancemade available or endorsed by the NRA. (Photo:sundrawalex / iStock)

The New York Department of Financial Services has finedan insurance broker, Lockton Affinity, $7 million in connectionwith sales of a National Rifle Association (NRA)-branded “CarryGuard” insurance program and similar products for gun owners, andalso separately fined a subsidiary of Chubb GroupHoldings $1.3 million for underwriting the same type ofinsurance, as part of consent orders with the companies.

FinancialServices Superintendent Maria Vullosaid in statement earlierthis week the actions followed a DFS probe, which found that theNRA “Carry Guard” program sold by the Chubb subsidiary IllinoisUnion and broker Lockton Affinity provided liability insurance togun owners and resident family members for legal costs connectedwith criminal defense for using a legally owned firearm, violatingstate law.

Lockton Affinity is licensed asan excess lines insurer in New York. The NRA is not licensed tooperate as a business in New York state, DFS said.

'Egregious violation of public policy'

Vullo said, “DFS will nottolerate conduct by any entity, licensed or otherwise, incontravention of New York Insurance Law, especially when thatconduct is such an egregious violation of public policy designed toprotect all citizens,” in an announcement.

An attorney for the NRA, WilliamBrewer III, signaled a looming battle over gun liability policieson Wednesday, saying in an emailed statement, “The NRA will takeappropriate steps to make sure law-abiding gun owners in New Yorkand across the country have access to the insurance coverage theyneed.” The organization has filed a lawsuit in federal district court inVirginia against Lockton Affinity over its discontinuance of theNRA-branded insurance program.

The “Carry Guard” insurancepolicies brokered by Lockton and issued by Chubb and Illinois UnionInsurance Co. provided coverage for policyholders and their familymembers for bail, attorney fees and retainer expenses anddefense of criminal charges among other costs connected withbeing criminally prosecuted for using a legallyowned weapon.

DFS asserts the policies violatestate law because they offered defense coverage in a criminalproceeding and liability coverage for bodily injury or propertydamage intended by the policyholder beyond the use of reasonableforce; as well as coverage for psychological counseling support,which is not permitted in excess lines coverage in the state.(Civil litigation coverage is permitted, a DFS spokesmansaid.)

Policyholder notifications & premium refunds

As part of the order, theinsurance companies agreed to notify policyholders within 10business days that they are canceling all Carry Guard policieswithin 90 days from the date of notice, and returning thepremiums.

Dean Davison, senior vicepresident for communications at Lockton Affinity, said in anemailed statement Wednesday, “When we learned of New Yorkregulatory issues in our Affinity business in the course of aninvestigation by the New York DFS, we immediately went to work tobegin resolving them. As part of our settlement, we will continueto cooperate with the New York regulators to remediate any issuesor concerns.”

NRA lawsuit against Lockton

Following the Parkland, Florida,mass school school shooting, Lockton notifiedthe NRA in February that it would nolonger broker NRA co-branded insurance programs. On May 4, the NRAfiled a federal civil lawsuit (1:18cv-542-AJT/TCB) againstLockton in the Eastern District of Virginia, Alexandria division,alleging the brokerage breached its contract with the organizationby discontinuing the programs. A Lockton spokesman said it was notappropriate to comment on pending litigation.

Related: NRA sues insurance broker behind 'CarryGuard'

NRA counsel Brewer, partner atBrewer, Attorneys & Counselors in New York, said in an emailedstatement Wednesday of the lawsuit: “The NRA believes that Locktonviolated its fiduciary obligations — to the detriment of theorganization, insurance program it was entrusted to run, and thepolicyholders who obtained protections by those insuranceproducts.” He said Lockton had provided expertise and variousinsurance products with the NRA for more than 20 years. “Forreasons that are unclear to us — and were never communicated to theNRA in accordance with Lockton's contractual obligations—thecompany is beating a retreat from its prior advice that theseproducts complied with applicable state regulations in allrespects.”

Lloyd's of London: Stop writing or offering NRA insurance

Meanwhile, Reuters reported onWednesday that Lloyd's ofLondon also announcedthat it would tell its syndicates to stop writing oroffering all insurance made available or endorsed by the NRA. Thecompany said it also is under inquiry by New York'sDFS. Chubb providednotice in October 2017 that it was voluntarily terminating itsparticipation nationally in the Carry Guard program, a spokesmansaid.

Lockton Affinity and the NRAwrote or offered at least 11 other firearms-related insuranceprograms to NRA members in New York state from January 2000 toMarch 2018, issuing more than 28,000 policies and collecting morethan $12 million in premiums during that period, according to theconsent order.

Received no claims

Chubb, Illinois Union and Locktonsaid they had sold 680 Carry Guard policies between April andNovember 2017 to New York residents but had received no claims. TheNRA also received royalties from the program.

Chubb and Illinois Union agreedunder their consent orderto stop selling “Carry Guard”policies in New York state or to its residents. The companiesalso agreed not to enter into any other agreements for NRAco-branded insurance in New York. Additionally, LocktonAffinity agreed in its consentorder not to distributepolicies from other insurers for residents that provide the bannedcoverages.

Chubb said in an emailedstatement Wednesday about the DFS order that “Chubb at all timesintended and believed its coverage to be in full compliance withNew York law. Chubb believes that this settlement is the best wayto resolve the coverage questions raised by the department and isfully committed to cooperating with the department to remediate anyissues or concerns regarding the Carry Guard program.”

MP McQueen is a deputy editor on the legal regulatory deskwith our parent company ALM Media. Contact MP at [email protected].