NY Dept of Financial Services

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NRA Settles CarryGuard Debacle With NY State

November 19, 2020 by 5 Comments

The National Rifle Association entered into a consent order with the New York State Department of Financial Services today. The Department of Financial Services had charged the NRA with violating New York insurance law with its CarryGuard program as well as with its affiliate insurance programs.

From the NY DFS new release:

Superintendent of Financial Services Linda A. Lacewell today announced that the New York State Department of Financial Services (DFS) has entered into a consent order with the National Rifle Association (NRA). 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 CarryGuard program was rushed into the market under the management of former Executive Director of General Operations and former Chief of Staff Josh Powell. As I understand it, his predecessor Kyle Weaver, then Director of General Operations, was building the program out step by step which wasn’t fast enough for the powers that be. The thought behind the program was that the NRA had helped get shall-issue concealed carry introduced in many states. However, they saw groups like USCCA offering legal defense programs which the NRA saw as making money off their hard work and they wanted in on it.

Then, Powell replaced Weaver and rushed the product to market with big fanfare at the NRA Annual Meeting in Atlanta. That rush has now cost the NRA $2.5 million it can ill afford to spend.

In a story from Reuters on this consent order, NRA outside counsel William Brewer III tries to put a positive spin on it.

The NRA has said it did not underwrite its insurance programs, and that like “countless” affinity groups it relied on industry experts to market products to members.. It did not admit wrongdoing in agreeing to settle.

William Brewer, a lawyer for the NRA, said in a statement: “The DFS inquiry, which began with a roar, ends with a whimper.” He said the settlement has no effect on other litigation pending between New York state and the NRA.

That story also has this from Superintendent Lacewell regarding the other insurance offered through the NRA.

She also accused the NRA of misleading gun collectors, dealers, instructors, clubs and shows by promising coverage at the “lowest possible cost,” when the group typically kept between 13.7% and 21.9% of premiums paid.

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NY Department Of Financial Services Files Charges Against NRA

February 5, 2020 by 2 Comments

The New York State Department of Financial Services has charged the National Rifle Association with violating the state’s insurance laws. The NRA is accused of acting as an unlicensed insurance broker. DFS is seeking civil penalties as well as injunctions against the NRA.

From their press release issued today:

The Department of Financial Services (DFS) today announced that it has served a statement of charges against the National Rifle Association (NRA). The Department alleges that the NRA, which does not have a license to conduct insurance business in New York, violated various New York State Insurance Laws, among other things by acting as an insurance producer without a license in endorsing and marketing insurance programs, including “Carry Guard.” DFS also alleges that the NRA engaged in misleading marketing practices, deceiving its members. The Department is seeking civil monetary penalties, as well as injunctive and other appropriate relief.

In the statement of charges announced today, DFS alleges that, since 2000, the NRA has worked with the Kansas City Series of Lockton Companies LLC (Lockton) to offer a variety of insurance products to NRA members, their families and affiliated businesses. According to the statement of charges, the NRA endorsed the programs as well as marketed them to its members through NRA-affiliated websites and email marketing, despite the fact that the NRA does 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. An entity is required to be licensed by DFS to engage in these activities related to the sale and marketing of insurance products in New York State.

DFS alleges that not only did the NRA act as an “unlicensed insurance broker” with regard to its Carry Guard product, the insurance itself was unlawful. According to the DFS, since a self-defense shooting is an intentional act, it cannot be covered under the state’s insurance laws.

The complaint does not limit itself to Carry Guard. It goes on to include other insurance offerings such as liability insurance for ranges and instructors and theft insurance for gun collectors.

The charges are not confined to the Carry Guard program. DFS alleges that the NRA participated in soliciting its members with respect to many other insurance products, going back to approximately 2000. For example, the charges allege that the NRA participated in offering its members insurance products involving coverage for firearms instructors, gun collectors, gun clubs, gun shows, federal firearms dealers, and other aspects involving firearms, as well as life, health, and property offerings for their members. The charges allege that the NRA participated in the generation of more than 28,000 such policies for New York consumers and allege that the NRA unlawfully received royalties of about $1.8 million between 2000 and 2018 from Lockton on such policies in New York.

In addition, DFS alleges that the NRA misrepresented that the insurance offerings to its members was at the lowest cost possible, when in fact the NRA was taking for itself substantial royalties, sometimes more than 20 percent of the premiums paid.

The Department of Financial Services is seeking up to a $500 penalty for each of the 28,000 policies issued to New York residents.

A hearing is set for April 6th in Manhattan on these charges.

The full complaint can be found here.

The NRA responded through their outside counsel William Brewer III:

“Today’s announcement is about politics, not protecting consumers,” William Brewer, a lawyer for the NRA, said in a statement. “The NRA acted appropriately at all times.”

Brewer goes on to say:

Brewer said the NRA did not underwrite, sell or administer insurance programs, and “like countless other affinity groups … relied on insurance-industry experts to oversee and market products tailored for its members.”