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September 05, 2023 Feature

Mandating Gun Insurance

Adam Shniderman
Insurance has limits in regulating gun violence, including exclusions for intentional acts and other insureds; mandates face constitutional challenge.

Insurance has limits in regulating gun violence, including exclusions for intentional acts and other insureds; mandates face constitutional challenge.

Getty Images/Moment/fhm

Gun injuries in the United States cause more than $1 billion per year in hospital costs. Physician costs are estimated to add about 20% to that figure. Medicaid and other public coverage sources are responsible for paying more than half of these costs. In response to the U.S. Supreme Court’s Second Amendment decisions, the federal, state, and local governments are searching for creative solutions to the problem of gun violence. Looking to reduce the funds coming from the public coffers, some legislators and executives believe that liability insurance will shift the costs of gun violence onto gun owners—where they say it belongs. But, until recently, no city or state had ever required gun owners to purchase liability insurance.

Two such laws have now been passed: one local in San Jose, California, and one statewide in New Jersey. The laws differ slightly in their specifics. San Jose requires all owners, with certain limited exceptions, to purchase liability insurance to own a firearm. The city’s then mayor Sam Liccardo said, “With this measure, we won’t suddenly end gun violence. But we’re going to stop paying for it.” Liccardo “was hopeful that the legislation would lead insurance companies to mandate behavioral changes among gun owners, such as requiring that firearms be stored in locked safes and include trigger locks.” Liccardo added, “This works best if we can scale it. We need to get insurance companies into the game of incentivizing safety among gun owners.” New Jersey requires only those who wish to carry their gun in public to purchase insurance.

This article addresses two overarching questions: First, will requiring gun owners to purchase liability insurance do anything to stem the tide of gun violence and minimize the significant adverse economic consequences of such incidents? Liccardo’s sound bite and enthusiasm for insurance as a method of gun regulation aside, gun insurance mandates are unlikely to have any meaningful impact on gun violence. Exclusions for injuries caused to others in an insured’s household and for intentional acts leave all but a small number of gun violence incidents outside the scope of insurance coverage.

Second, are these measures doomed to be declared an unconstitutional restriction on Second Amendment rights, regardless of what many view as a laudable goal? The Supreme Court’s decision in New York State Rifle & Pistol Ass’n v. Bruen has sown much confusion among the district courts. The Court’s decision mandates that lower courts engage in a historical inquiry to determine whether the modern regulation can be traced back to the founding era—either directly or by analogy to similar regulations. Under Bruen’s test, gun insurance mandates face an uphill battle to survive inevitable challenges in the courts.

Both San Jose’s and New Jersey’s laws have already been the subject of lawsuits in federal court. The two district courts faced with these insurance mandates arrived at different conclusions regarding the constitutionality of substantially similar laws. Litigation underway in New Jersey (Koons) struck down the state’s gun insurance mandate. The Northern District of California (NAGR), however, upheld San Jose’s insurance mandate. As the chief judge for the District of New Jersey noted in her decision, the Northern District of California upheld the San Jose law based on incorrect assumptions about details of the underwriting process.

But even on a clear understanding of the facts, courts arrive at different conclusions applying Bruen’s complicated and unclear historical test. The Court’s lack of clarity regarding the level of generality for conducting the historical inquiry is sure to be a significant problem for courts. As the Court recognized, at some level “[e]verything is similar in infinite ways to everything else.” But too powerful a zoom lens and everything is unique. The Court’s how and why discussion provides relatively little guidance on this issue.

Gun regulation is sure to be a frequent visitor in the courts, and there is certain to be more in the insurance mandate saga—New Jersey has filed its notice of appeal in the Third Circuit.

Gun Insurance Mandates

Gun regulation has become an intractable problem in the United States. Newton’s third law tells us that for every action there is an equal and opposite reaction. And it seems that for every gun law passed in the United States there is a lawsuit challenging that law under the Second and Fourteenth Amendments. Driven at least in part by the Supreme Court’s recent opinions in Heller, McDonald, and Bruen, and the spate of challenges across the country, state and local officials are searching for clever solutions to reduce gun harm.

“One [approach]—long advocated by some economists—is to require gun owners to purchase liability insurance.” At first blush, this approach makes sense. A gun insurance mandate replicates how states address other societal harms, e.g., the risk of injury from motor vehicle accidents. Forty-eight states mandate that drivers carry some minimum level of insurance. But, as discussed in the next section, unlike auto insurance, the insurance policies gun owners have or could purchase don’t cover the harms caused by gun violence, and no policy exists that would cover such harms. In fact, some states have sued insurers to prevent coverage even for self-defense.

For more than a decade, gun insurance mandates have garnered the interest of legislatures across the country. In 2009, Illinois State Representative Kenneth Dunkin proposed amending the state’s insurance code to require at least $1,000,000 of insurance for “any damages resulting from negligent or willful acts involving the use of [a] firearm” by an individual with a Firearm Owners Identification (FOID) card. More recently, Illinois House members proposed amendments to the state’s insurance code that would bar excess insurance providers from covering “legal fees, costs, or expenses related to the investigation, indictment, or prosecution of any criminal charge arising out of the use of a firearm.” And the amended code would require individuals seeking a FOID card—a card required to legally possess firearms and ammunition in the state—to prove that they have coverage for at least $1,000,000 for accidental injuries caused by a firearm. Neither bill became law.

By February 2013, insurance requirements for gun ownership were introduced in at least half a dozen states. And in every New York State Senate session since 2013, Senator Kevin Parker has introduced bills that would require firearms owners to have at least $1,000,000 in liability insurance coverage. In the 2013–2014 session, the proposed bill would have required owners to maintain coverage for both negligent and willful acts involving a firearm. Later versions of the statute included the same requirement until 2019, when Senator Parker’s proposed bill dropped the willful act coverage requirement. Each proposal since would require firearm owners to obtain insurance coverage only for negligent acts.

With a sea change in Second Amendment jurisprudence, two insurance mandates have now been signed into law. In early 2022, San Jose became the first city to enact an insurance mandate for gun owners. The law requires firearms owners to purchase a “homeowner’s, renter’s or gun liability insurance policy from an admitted insurer or insurer as defined by the California Insurance Code, specifically covering losses or damages resulting from any accidental use of the Firearm, including but not limited to death, injury or property damage.” Failure to comply with the law “trigger[s] a report by the police department and may result in administrative citation. Fees start at $250.” Fines increase with subsequent citations.

The messaging surrounding this law, at times, suggests a failure to understand the realities of the insurance market. San Jose’s mayor, Sam Liccardo, noted the high costs of gun violence, including the cost of emergency services borne by the city’s residents and government, as one of the driving forces behind the insurance mandate. The costs, he said, should fall on gun owners. Liccardo also commented that “[i]nsurance . . . incentivizes safe gun ownership, where risk-adjusted premiums might encourage owners to take gun-safety courses, use gun safes or install child-safety locks.” As discussed in the next section, neither is likely to happen—exclusions in policies, public policy prohibitions on insuring intentional misconduct, and lack of risk-adjusted premiums leave Liccardo’s statements as little more than political sound bites.

In December 2022, in response to the Supreme Court’s decision in Bruen, New Jersey governor Phil Murphy signed into law concealed-carry legislation, which includes an insurance mandate that will require “[e]very private citizen who carries a handgun in public . . . [to] maintain liability insurance coverage insuring against loss resulting from liability imposed by law for bodily injury, death, and property damage sustained by any person arising out of the ownership, maintenance, operation or use of a firearm carried in public.” Failure to comply with the law carries a penalty of up to 18 months in jail and $10,000 in fines. The text of the law could be interpreted to require gun owners to purchase insurance that covers intentional, criminal acts involving a handgun. That possibility contradicts the state’s efforts from just a few years before to prevent insurers from offering coverage that even comes close to insuring intentional acts.

In 2019, responding to the gun violence crisis in New Jersey, Governor Murphy authorized the insurance commissioner “to take all appropriate action within her authority to prohibit and/or limit the sale, procurement, marketing or distribution of insurance products that may serve to encourage the improper use of firearms.” The state barred the sale of firearm self-defense insurance policies, which advanced defense costs to insureds charged with a crime involving use of a firearm who plead self-defense. According to the state’s insurance commissioner, “[t]hese policies may encourage reckless use of firearms by members of the public if firearm owners believe they will have no liability if they intentionally shoot a person and allege they acted in self-defense.” The commissioner also noted that it was contrary to public policy to insure the intentional infliction of injury. Yet, the state has failed to clarify whether it intended to require insurance that does not exist and that it bans from being sold.

The state’s insurance mandate is already the subject of a lawsuit. And, unlike the San Jose law, New Jersey’s insurance mandate carries criminal penalties for failure to comply. In May 2023, Chief Judge Renée Marie Bumb struck down the mandate in a 289-page opinion, citing a longer version of this article. Her analysis largely mirrors the final section of this article.

Those who propose and support gun insurance mandates echo Liccardo’s statements. Their goal is to reduce acts of violence involving guns by changing behavior. Proponents contend that requiring insurance would create incentives that influence the behavior of gun owners in positive ways. For example, Felix Ortiz of Brooklyn, in support of a mandate, stated that requiring insurance would “serve as an incentive for firearm owners to implement safety measures in order to conduct the activity as safely as possible and only when necessary.” Proponents even believe that “the cost of insurance could affect gun-buying decisions, including whether or not to purchase what those proponents view as more dangerous or safer guns.” And insurers, through risk-adjusted premiums, could promote safety measures, including trigger locks and gun safes.

A theme for proponents is that insurance could be used to reduce gun violence in the same way that insurance has promoted safety in other areas. Many point to auto insurance as a source of inspiration. According to one insurance expert, “insurers have a real incentive to understand the risks, what increases the risk of a car accident, what steps can be taken to reduce it, and then to decide whether they underwrite the cost.” Proponents “hope . . . that insurers will serve a private governance or private regulatory function—private because they can’t tell anyone what to do, they can just make decisions about what to insure and at what price.” But insurance is unlikely to cover the costs of gun violence or provide any incentive for gun owners to behave differently than they would in the absence of such mandate.

Insurance—Indemnity and Regulation

Insurance serves two general purposes: (1) providing indemnity for covered losses, and (2) encouraging and assisting in risk mitigation before and after losses. Proponents of gun insurance mandates hope to capitalize on both purposes to shift the cost of gun violence and to reduce its incidence.

Indemnity for covered losses. Insurance for covered losses can be divided into two types: first-party and third-party coverage. First-party coverage pays for an insured’s own losses. If a pipe bursts in the insured’s home, homeowners insurance may pay for the cost of repairing the structure and replacing damaged personal property. Perhaps less familiar to the lay public, insurance also may pay for the cost of a lawyer if an insured is sued. If someone is injured on the owner’s or renter’s property, homeowners insurance may select and pay for a lawyer to defend against the tort lawsuit. Third-party coverage pays any covered losses to an injured party. If an insured causes an accident, third-party coverage may pay for the damage to the other person’s property, any medical bills they incur, and other costs related to the covered incident.

But insurance does not cover all losses. Policies contain a variety of exclusions. Two exclusions are likely to arise in the context of gun injuries and deaths: (1) the “other insured” exclusion, and (2) the “intentional acts” exclusion. The other insured exclusion bars coverage if an insured negligently injures another person in their household; for example, the insured accidentally shoots a family member while cleaning a gun in the home.

Perhaps most significant for gun violence victims, homeowners insurance excludes coverage for many intentional harms. Most gun injuries and gun deaths result from intentional acts. Insurance companies rely on fortuity to make a profit. And fortuity “unravels when the insured has complete control over whether a risk will materialize.”

The “HO3” standard-form homeowners insurance policy excludes:

“[b]odily injury” or “property damage” which is expected or intended by an “insured,” even if the resulting “bodily injury” or “property damage”:

a. Is of a different kind, quality or degree than initially expected or intended; or

b. Is sustained by a different person, entity or property than initially expected or intended.

A prior version of this policy excluded only an intended liability-producing harm, not merely the act. But current language in many policies expanded the scope of the exclusion. A negligent or reckless act may be excluded, particularly if the court distinguishes between “expected” and “intended.” For example, courts have allowed insurers to avoid coverage even if the policyholder intended only to scare the victim. And some insurers go a step further—they exclude coverage for harm resulting from criminal acts, irrespective of whether the harm was intentional.

Excluding intentional acts minimizes moral hazard—“the general problem of individuals and firms failing to take all appropriate measures in terms of increased care levels or reduced activity levels, to minimize risks.” The presence of insurance may increase moral hazard. And coverage for intentional acts could further increase moral hazard. This is likely true for first-party insurance. Paying an insured for the house they intentionally burned down rewards and encourages misconduct. But there are significant consequences for criminal conduct, including the risk of going to prison. These consequences can counter the risk of increased moral hazard for insuring intentional acts.

Another rationale for the intentional acts exclusion is that wrongdoers should be punished, or at the very least held financially responsible, for the intentional harms they cause. “[B]y placing financial responsibility on an insured rather than on the insurance company, the public partially achieves its objectives of punishing and deterring those acting against societal interests.”

States have even sued to stop insurers from selling insurance that may cover intentional acts involving guns. In 2018, New York brought an enforcement action against the National Rifle Association (NRA) for its Carry Guard insurance policy. That insurance policy “included up to $1 million of insurance protection against civil lawsuits; immediate access to supplemental funds for bail, attorney retainer fees and other criminal defense costs; up to $150,000 in criminal liability reimbursement upon acquittal; and automatic protection for a spouse at no extra cost.” According to the state, the policy violated New York insurance law:

The Carry Guard Program . . . provided insurance coverage that [the Department of Financial Services] finds may not legally be offered in the New York excess line market, specifically: (a) defense coverage in a criminal proceeding that is not permitted by law; (b) liability coverage for bodily injury or property damage expected or intended, from the insured’s standpoint, in an insurance policy limited to use of firearms and that was beyond the use of reasonable force to protect persons or property; and (c) coverage for expenses incurred by the insured for psychological counseling support.

The NRA pushed back. It contended that the policy covered legal gun owners who alleged they used a gun in self-defense. The parties ultimately reached a consent decree, and the NRA stopped offering Carry Guard.

Just a year later, New Jersey fined Lockton Affinity $1,000,000 for administering the NRA’s Carry Guard insurance. Washington State also fined two insurers, including the underwriter for the NRA’s Carry Guard policy, for violating state insurance laws. The problem, according to a spokesperson for the state’s insurance commissioner, was that “[i]t is illegal in Washington state to insure criminal activity. And there was no clear way for policyholders to pay the insurance company back for legal costs if they were convicted.”

Forcing insurers to cover intentional acts could lead to unintended consequences. Insurers may respond in two ways. First, insurers could do what they do with any new line—collect data, determine the relevant information to ask insureds during the application process, and set rates accordingly. At least some proponents would be happy to see this. Insuring intentional acts would require states to eliminate, or except gun violence from, prohibitions on insuring intentional conduct. States could decide that victim compensation is more important than the potential negative consequences of such insurance, e.g., increased moral hazard or reduced punitive effect. But it seems unlikely that insurers would find this model financially viable. Second, insurers could determine that it is not profitable to insure intentional acts, particularly gun violence. In response, insurers may leave the homeowners and renters insurance market in that state. We have seen this play out in Florida, where increased costs of insurance litigation have made offering homeowners insurance unprofitable.

At least one state, however, is trying to roll back an over-expansive version of the intentional acts exclusion. The Oregon Department of Consumer and Business Services, Division of Financial Regulation (DFR), has narrowed the scope of the exclusion. The DFR issued a bulletin that prohibits exclusions for negligent or unintentional harms resulting from intentional acts. The bulletin provides: “Exclusionary language that applies to losses beyond what the insured intended encompasses not only intentional acts but could exclude coverage of negligence or unintended acts or harms. This is not how intentional acts exclusions have been interpreted by Oregon courts.” Such an expansive exclusion is “inconsistent with Oregon Supreme Court authority holding that the exclusions ‘apply only when the insured intended or purposefully caused the specific injury or harm that resulted from the act, as opposed to merely intending the act.’” The DFR’s bulletin informs insurers that language like that commonly found in homeowners policies, described above, will be disallowed. The effect of this rollback remains to be seen.

Insurance as regulation. Insurance also provides significant risk mitigation and regulation before a loss. This second purpose is perhaps less familiar to the general public. As a result of their ability to aggregate claims data, insurers often have significant expertise in what causes losses. One way insurers encourage insureds to reduce the risk of loss is through risk-adjusted premiums. Insurers “tailor and adjust their premiums according to each policyholder’s risk characteristics and ongoing behavior.” They charge lower premiums to careful policyholders—those who take effective measures to reduce the risks of loss. To determine individuals’ relative risks, insurers collect information about the insured. They begin with the application process, requiring the insured to fill out long applications that are designed to determine the insured’s likelihood for a loss, allowing the insurer to price premiums accordingly.

Insurers typically make significant inquiries during the application process to accurately price premiums. But homeowners insurance providers do not ask prospective insureds about gun ownership, or their gun safety practices during the application process. Homeowners insurers “will ask whether you have a swimming pool, trampoline or an aggressive breed dog. . . . But they won’t ask if you keep a firearm in your home or how it’s stored.” Florida law goes so far as to prohibit insurers from asking about gun ownership. Despite its apparent oddity, the practice makes sense. Only a small percentage of gun injuries could plausibly be covered under homeowners insurance policies. True, insurers could discount premiums for behaviors that reduce some gun injuries and deaths—safes, trigger locks, taking gun safety courses—that could reduce the risk of negligent, liability-producing injuries. “But, given the relatively low cost of the liability insurance portion of homeowners’ insurance (as compared to the property insurance portion) and the relatively small number of accidental gun injuries,” that seems unlikely to happen.

Gun Insurance Mandates Are Likely to Be Struck Down

Requiring gun owners to purchase insurance that does not exist, e.g., insurance covering intentional acts, will require courts to apply Bruen’s text, history, and tradition test. Bruen’s inquiry is guided by two questions: How does the mandate burden the Second Amendment right? Why is that burden being imposed?

How does the mandate burden the Second Amendment right? Modern insurance mandates are not directly traceable to the founding era. As a result, as Justice Thomas noted in Bruen, courts will reason by analogy to determine whether gun insurance mandates are consistent with the history of regulating guns in the United States.

As the parties in NAGR and Koons contended, the most likely analogue for courts to consider is the founding era surety of the peace. In the late 17th century, Massachusetts enacted a surety law:

[E]very justice of the peace . . . may cause to be stayed and arrested all affrayers, rioters, disturbers or breakers of the peace, and such as shall ride, or go armed offensively before any of their majesties’ justices, . . . or elsewhere, by night or by day, in fear or affray of their majesties’ liege people; and . . . shall commit the offender to prison, until he find sureties for the peace and good behaviour; and seize and take away his armour or weapons . . . .

Several years later, Pennsylvania passed a similar law—“An Act about Binding the Peace.” The law served as the foundation for later acts in the Commonwealth. An action under these laws began with a threatened individual bringing a complaint against the accused. The accused was subsequently brought before the justice of the peace. If the justice of the peace believed that the accused made the threats, and the victim was in actual fear, the justice could require the accused to post a surety of the peace. The accused had to post the surety or be confined in jail. If the accused performed some expressly forbidden act during a definite period after the bond was posted, the bond would be forfeited.

Between 1836 and 1891, several additional states adopted surety laws specifically targeting dangerous weapons. Massachusetts’s statute provided:

If any person shall go armed with a dirk, dagger, sword, pistol or other offensive and dangerous weapon, without reasonable cause to fear an assault or other injury, or violence to his person, or to his family or property, he may, on complaint of any person having reasonable cause to fear an injury, or breach of the peace, be required to find sureties for keeping the peace, for a term not exceeding six months, with the right of appealing as before provided.

Under these statutes, if a person possessed one of an enumerated list of weapons, or any other “offensive and dangerous weapon,” then “any person having reasonable cause to fear an injury, or breach of the peace,” could file a complaint. Following the complaint, “a magistrate could issue a warrant for the apprehension of the person accused of threatening the peace.” The accused would be brought before the court. If he could not show “‘reasonable cause’ to fear for himself, his family, or his property, then the magistrate could require the accused to post ‘sufficient sureties . . . to keep the peace towards all the people of this Commonwealth, and especially towards the person requiring such security.’” That is, the accused would pay money to insure against his future conduct. If the accused did not post a surety, he was imprisoned for a term not to exceed six months. And if he breached the peace, the surety was forfeited.

Identifying an appropriate analogue doesn’t end the difficult inquiry. Courts have disagreed about the significance of the surety statutes, generally. For example, the D.C. Circuit compared the surety law to modern penalties for minor public-safety infractions like speeding or jaywalking. But sureties employ a precrime model—they do not enforce violations of the criminal law. “The Supreme Court has denied that indirect or purely civil burdens shed much light on the historical right embedded by the [Second] Amendment.” Thus, these laws would provide little insight into the scope of the Second Amendment. And there is little evidence that these laws were ever enforced. The Ninth Circuit, however, found the same mid-19th century surety laws significant, concluding that the “surety of the peace . . . was a substantive restraint on anyone who was the subject of a complaint for openly carrying arms or other dangerous weapons. . . . No one would describe such regulations as ‘akin to modern penalties for minor public-safety infractions like speeding or jaywalking.’” The Supreme Court in Bruen sided with the D.C. Circuit’s interpretation of the surety laws, concluding that they were a minimal burden on the Second Amendment right, particularly given the little evidence of enforcement. It is clear from the D.C. Circuit’s and Ninth Circuit’s decisions, and subsequent cases challenging various gun laws, that even looking at the same historical record, judges can arrive at opposite conclusions.

The two cases deciding the constitutionality of San Jose’s and New Jersey’s relatively similar insurance mandates also came to opposite conclusions. That is due, in part, to a lack of understanding of insurance that infected the comparison of insurance to sureties.

Surety laws are distinguishable from modern insurance mandates in several ways—insurance mandates are broader in scope and duration. In contrast to the broadly applicable insurance mandates—applying to all but a small subset of gun owners—surety statutes required an individualized inquiry. “[S]urety statutes presumed that individuals had a right to public carry.” Sureties were required only of a person who (1) was the subject of a complaint that the complainant, or the public, had reason to fear the individual would breach the peace; and (2) could not justify possessing an enumerated weapon. The Supreme Court also highlighted the temporal aspect of surety laws—“a showing of special need was required only after an individual was reasonably accused of intending to injure another or breach the peace.”

Risk-adjusted insurance premiums might create a somewhat similar system—only those at significant risk of a loss would be significantly burdened. Indeed, the Northern District of California seemed to think that would be the case. Judge Beth Labson Freeman wrote that “the actual amount of the financial burden (i.e., insurance premiums) involves a risk evaluation that is tailored to the individual and analogous to ‘reasonable cause’ determinations under surety statutes.” But homeowners and renters insurance—the most likely policies gun owners would purchase to comply with the mandate—take no account of gun ownership. As noted above, while insurers make significant inquiries in the application process to determine premiums, homeowners insurance providers do not ask about gun ownership, or ask any questions related to safe gun storage when determining rates. And contrary to Stephen Gilles and Nelson Lund’s claim, insurance experts believe insurance companies are unlikely to ever account for these behaviors, especially “given the relatively low cost of the liability insurance portion of homeowners insurance . . . and the relatively small number of accidental gun injuries.”

The risk of property loss, not a liability determination, has a more significant impact on homeowners and renters insurance premiums. Factors such as the age of the home, crime rate in the area, and response time of the fire and police departments have a far more significant impact on premiums. As a result, some owners may be unable to obtain or afford coverage based on factors unrelated to their gun ownership behaviors. “The conditions that produce expensive home insurance rates for anyone, regardless of income level, may be exacerbated in low-income areas.” Contrary to Judge Freeman’s opinion in NAGR, insurance fails to adequately replicate the particularized suspicion component of the surety statutes. It cannot be said that “everyone start[s] out with robust carrying rights” under a broad insurance mandate. The difference in individualized tailoring likely dooms insurance mandates under Bruen, particularly if the penalty for failing to possess insurance has any teeth—loss of the firearm or criminal sanctions—as is the case in New Jersey.

For example, Illinois’s proposed insurance mandate required revocation of the FOID card if the owner failed to provide evidence of sufficient insurance. And possession of a firearm without such a valid card carries criminal penalties. Under the state’s FOID Act, it “is a Class 3 felony when: (1) the person’s Firearm Owner’s Identification Card is revoked or subject to revocation under Section 8.” Section 8 of the act includes cancellation of the individual’s FOID card for administrative reasons, which could cover seizure and revocation for failure to possess the required insurance. The loss of the right to own a firearm and the potential commission of a felony could not be deemed a “minor inconvenience.”

Why is that burden being imposed? The why of modern insurance mandates is also distinguishable from founding-era surety laws. As discussed above, proponents believe that gun insurance mandates will deter gun violence. But the ways in which sureties and insurance differ addressed above highlight that the why is equally dissimilar. Surety laws’ deterrence mechanism is simple. Indeed, they operate much like modern bail bonds—there is a financial stake in abiding by the terms of the bond. Breaching the peace within the specified period forfeited the surety. If concerns about moral hazard and insurance are justified, the opposite may be true for liability insurance mandates. But, at best, insurance may have no impact on insureds’ conduct.

Economists contend that the presence of insurance increases the likelihood of adverse events—insureds exercise less care to avoid losses. Unlike the surety bond, insurance would not provide a deterrent effect. “Rivers of ink have been spilled discussing the moral hazard problem of insurance and ways to mitigate it.” Insurance scholars disagree.

Prominent insurance scholars have argued that insurance is an effective tool of conduct regulation. Kenneth Abraham coined the term “surrogate regulation” to describe the regulatory role liability insurers play in toxic tort and environmental risks. Tom Baker has written extensively about methods insurers use to reduce the risks that they insure. Steven Shavell has demonstrated that insurers are able to create significant incentives for care. And Omri Ben-Shahar and Kyle Logue have suggested that private insurers may be in a better position to reduce losses and moral hazard than the government.

Insurance providers collect large amounts of data. This information allows them to accurately price policies, assemble insurance pools, and verify claims. This superior access to information provides another function—encouraging risk‐reducing behavior. “The same data that goes into the risk-spreading and risk-shifting computations are relevant and informative in determining how to reduce risk. Insurers, therefore, perform the additional information‐heavy function of identifying and administering a system of safety improvements.”

Insurers perform risk reduction in two ways. First, regulation before a loss includes risk-adjusted premiums, copayments and deductibles, refusal to insure, and coaching safer conduct. Second, insurers have various tools available to engage in ex post conduct regulation, including claims management, mitigating covered losses, and excluding certain losses. Insurance scholars, therefore, believe that insurance can reduce the risk of loss.

But insurance is unlikely to do so for gun owners. The individualized pre-loss regulation is not present—insurers don’t ask about gun ownership or gun-related behaviors. Premiums are not risk-adjusted, nor do insurers help reduce the insured’s gun-related risks. And even if insurance generally deters loss-inducing conduct—insurance actually regulates—liability insurance covers a limited subset of gun injuries and deaths. Recall that insurance excludes coverage for intentional acts and injuries to others in the insured’s household. The threat of increased premiums or cancellation of coverage is unlikely to help ensure safe and lawful firearm use. Rather, the threat of criminal punishment and uncovered judgments the owner would be liable for from their own pocket provides the deterrence for gun injuries. The deterrence value, therefore, is substantially less than that of surety laws. Thus, the why is sufficiently unlike sureties of the peace that courts would struggle to find the two laws sufficiently similar under Bruen’s mandate.


Gun violence plagues the United States. Despite recent successful efforts to enact gun insurance mandates in San Jose, California, and New Jersey, such laws are unlikely to reduce gun violence or reallocate the costs of gun injuries and deaths. Exclusions in homeowners and renters insurance policies remove the overwhelming majority of gun violence from coverage. Neither intentional acts nor accidental injury to others in the insured’s family will be covered. States have banned insurance that covers any aspect of intentional gun violence—effectively shutting down the NRA’s Carry Guard self-defense insurance.

And insurance mandates are sure to face challenges in the courts. They already have. On a full understanding of the mechanics of insurance, judges will likely follow the District of New Jersey’s lead to distinguish insurance mandates from founding-era sureties. The how and why are a radical departure. Insurance mandates lack sureties’ individualization. The two mandates passed and those previously proposed apply to all, or nearly all, gun owners. And premiums are not risk-adjusted. There is, therefore, little financial incentive to avoid breaching the peace. Rather, the criminal law and the risk of uncovered judgments are likely to do more to reduce moral hazard and intentional misconduct.

True, the constitutionality of insurance mandates turns on courts’ assessment of the characteristics most important for the right to keep and bear arms. And those characteristics remain a bit murky after Bruen. But perhaps political capital is best spent where it is more likely to make a difference.

    The material in all ABA publications is copyrighted and may be reprinted by permission only. Request reprint permission here.

    Adam Shniderman

    Winston & Strawn LLP

    Adam Shniderman is a litigation associate in Winston & Strawn LLP’s Dallas office. The views expressed are the author’s own and do not represent the views of his employer.