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Months after getting out of the NRA insurance business, headaches pile up for Lockton

The National Rifle Association has sued an affiliate of Kansas City-based Lockton Cos., accusing the insurance broker of breaching its fiduciary duty to the gun rights organization when it announced earlier this year that it would drop services to an NRA-branded insurance line.

The NRA's lawsuit, filed last Friday in the U.S. Eastern District of Virginia, said that Lockton Affinity made "tens of millions of dollars" in brokerage commissions through its 17-year relationship with the NRA but then abandoned the NRA under pressure from gun control advocates. The NRA in turn is seeking "tens of millions of dollars" in damages from Lockton for backing out of a contract that was set to run until 2024.

"The NRA believes that Lockton violated its fiduciary obligations – to the detriment of the organization, insurance program it was entrusted to run, and the policyholders who obtained protections by those insurance products," said William Brewer III, a partner at Brewer, Attorneys & Counselors who is representing NRA in its litigation against Lockton. "For almost 20 years, the NRA relied on Lockton as the subject-matter expert with respect to various insurance products that were offered to NRA members and other law-abiding gun owners."

A spokesman for Lockton Cos. said the company could not comment on pending litigation.

Lockton Affinity was the broker and administrator of NRA Carry Guard, an insurance product marketed to NRA members. Carry Guard offers coverage for civil and criminal legal defense, bail, psychological support and clean up costs associated with "the use of a legally possessed firearm — including an act of self-defense."

Lockton Affinity announced in February that it would discontinue the relationship with the NRA. The announcement came nearly two weeks after a Feb. 14 shooting at Marjory Stoneman Douglas High School in Parkland, Fla., that left 17 students and teachers dead.

The Parkland shooting reignited a national debate over gun control and focused attention once again at the NRA, which critics say has aligned its interests more toward profits of gun manufacturers than its stated goal of promoting gun safety. Several other companies backed away from their associations with the NRA.


The NRA's lawsuit comes days after Lockton Cos. agreed to pay a $7 million fine to the New York Department of Financial Services for violating New York insurance laws through its administration of NRA Carry Guard.

A New York Department of Financial Services investigation said Carry Guard offered insurance coverage for "acts of intentional wrongdoing" and "criminal defense" in violation of New York law. The department also said the NRA promoted Carry Guard in New York despite not having an insurance license in the state.

An announcement by the department said 680 New York residents bought Carry Guard from April 2017 to November 2017, and that since 2000 Lockton collected nearly $13 million in premiums and administrative fees from Carry Guard and other NRA-branded products.

"DFS will not tolerate conduct by any entity, licensed or otherwise, in contravention of New York Insurance Law, especially when that conduct is such an egregious violation of public policy designed to protect all citizens," New York Department of Financial Services Superintendent Maria Vullo said in a statement. "Today's action is part of the Department’s continuing investigation into this matter to uphold and preserve the integrity of New York law."

A Lockton spokesman said in a statement that the company is committed to remaining compliant and that the company believed the New York settlement was the best way to resolve the Carry Guard issues.

"Lockton has been in business for more than 50 years, and we take compliance matters seriously," Lockton spokesman Dean Davison said in a statement. "When we learned of New York regulatory issues in our Affinity business in the course of an investigation by the New York DFS, we immediately went to work to begin resolving them. As part of our settlement, we will continue to cooperate with the New York regulators to remediate any issues or concerns."

The NRA's lawsuit takes note of the New York settlement, accusing Lockton of breaching its fiduciary duty by reaching an agreement with the state regulator that puts its own interests ahead of the NRA's.

The NRA said that NRA-branded insurance products have not changed in the last two years, but "the political landscape has changed."

"A politically connected, anti-NRA activist, organization known as Everytown for Gun Safety conceived and openly orchestrated regulatory inquiries concerning NRA-endorsed insurance products marketed and administered by Lockton," the NRA said in its lawsuit against Lockton. "...In the face of this politically motivated coercion, Lockton should have honored its fiduciary obligations and longstanding business relationship with the NRA and taken full responsibility for any compliance related concerns."

Instead, the NRA said Lockton took to Twitter to announce it would stop offering its services to the NRA.

"Speaking more broadly, Lockton’s sudden U-turn and the short-term issues it creates regarding the availability of insurance interferes with rights guaranteed by the Second Amendment," Brewer said. "Such actions unduly burden the free market system and impact law-abiding members of the NRA. The resolve of the NRA will only grow stronger in the face of these developments."

The NYDFS consent order with Lockton will likely receive scrutiny in other states where Carry Guard is offered.

Robert Hartwig, director of the Risk and Uncertainty Management Center at the Darla Moore School of Business at the University of South Carolina, said other states were unlikely to follow New York's lead.

"I think they will look at it but I think that New York is unlikely to be followed by many states," Hartwig said. "I think its interpretation is somewhat unique. Between the coasts...I think it is unlikely that there will be action against the Carry Guard product."

Insurance companies are generally prohibited from covering people involved in criminal activity because it's against public policy to encourage or protect people involved in illegal acts.

While most homeowners insurance policies will respond to insureds involved in civil litigation stemming from an accidental shooting or someone protecting themselves in a home invasion, Hartwig said Carry Guard goes further by offering criminal defense until there's a pleading or a finding of guilt.

"What the state (of New York) is in effect saying is we are not going to allow you to fund your defense, you're going to potentially go into bankruptcy, mortgage your house," Hartwig said. "If you're found innocent or the case is dismissed, you're financially ruined."

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