Guns don’t kill people,” says the bumper sticker, “people kill people.” That may be true, but in 10 states in 2009, more people used guns than cars or other implements to kill other people. And unlike car accidents, most firearm deaths occur on purpose. Sometimes it’s criminals shooting innocent people or criminals shooting each other. Other times, both perpetrators and victims are ordinary folks. Both forms of gun violence are perceived as being on the rise, but the latter seems to produce the most outrage and generates the greatest number of headlines.
There appears to be nowhere in the United States safe from shootings. They happen in small towns, in big cities and in suburbs; on college campuses, in high schools, in elementary schools, in government buildings, in restaurants, in shopping malls, in big-box stores, in business offices, in TV stations and even on military bases. Shooters may be mentally ill or just angry about something, may be political or religious extremists, or may exhibit a combination of these attributes. Victims are students, teachers, children, police, employees—just about anybody.
No one pretends to like the situation and discussing prevention options often sparks emotional debate. Advocates on both sides marshal statistics to support their positions. But so far no one has come up with a way to fix the problem that doesn’t infringe on the constitutional right to bear arms.
According to data from the Centers for Disease Control and Prevention (CDC), there are approximately 81,300 nonfatal injuries and more than 30,000 deaths every year involving guns. That works out to over 300 shootings and over 80 deaths every day. Mass shootings tend to get the most media attention and media coverage makes it seem as if gun violence is on the rise. That is not the case, however, according to an article in the Washington Post by University of Virginia professor Dewey Cornell. FBI statistics show that gun violence is lower than it was 20 years ago and that school shootings—no matter how horrific they are—are statistically rare. “Children are almost 100 times more likely to be murdered outside of school than at school,” he says, “which makes massive expenditures for school building security seem like a misallocation of tax dollars.”
No matter how often or where it happens, gun violence in America still makes the news. It arouses emotional debates from all sides, all equipped with their own statistics supporting their viewpoints. What role can insurance play in this grave problem?
In addition to the emotional toll of gun violence, there are also economic consequences beyond the allocation of tax dollars for security. The people of Newtown, Connecticut, could not bear to enter Sandy Hook Elementary School where 20 children and six adults had been murdered. They voted to spend between $50 million and $60 million to tear down the school and build another at a different site. Columbine High School, the site of a 1999 massacre in Colorado, was renovated at a cost of $1.2 million.
Further, the CDC estimated that $37 billion in health care costs resulted from firearm violence in 2005. The cost of caring for the survivors of gun violence was around $3.7 billion. The overall cost of gun violence, including lost work time, medical care, insurance, criminal-justice expenses, pain and suffering and lost quality of life, amounted to about $174 billion in 2010. Assaults and homicides accounted for 65 percent of the costs, followed by suicides, accounting for 31 percent of the costs of all injuries caused by firearms. Unintentional acts, legal intervention and acts of undetermined intent account for the remainder. Fatal injuries accounted for $153.3 billion, or nearly 90 percent of the costs.
Whether gun violence is on the rise or is merely overreported, it is clearly a problem, and there are various approaches to what we as a country and a society ought to do about it. Some see gun control—which encompasses tighter monitoring and outright prohibition of firearms—as the answer. Others advocate improved mental health treatment and better threat assessment measures. Some assert that the only deterrent is more people carrying weapons.
Other countries—United Kingdom, Japan, Australia, and others—have much stricter anti-gun laws and the incidence of gun violence is much lower. What they don’t have, however, is the United States Constitution. And if Social Security reform is the proverbial third rail of American politics, messing around anywhere near the Second Amendment has to be just as lethal.
The Market Forces Solution
Last year, not long after the tragedy in Newtown, a new approach appeared among the usual ones. Legislators in seven states and the District of Columbia introduced bills that, among other things, would require gun owners to purchase “gun liability insurance.” Though each of the bills was different in detail, most of them required gun owners to buy policies that would cover damages resulting from negligent or willful acts.
Democratic Sen. Jamie Raskin of Maryland introduced one such bill in his constituent state. The Washington Post quoted him saying that “the insurance mandate would be similar to that required to drive a car. It would be designed in part to bring market forces to bear on gun ownership. Actuaries and insurance adjusters would eventually build a model of who is a safe gun owner, and the price of insurance would follow.”
“This year, one state, Illinois, has introduced legislation on the topic,” says Jon Griffin, policy specialist with the National Conference of State Legislatures (NCSL). “In 2013, Connecticut, Illinois, Maryland, Massachusetts, North Carolina, New York, Oregon, Pennsylvania and the District of Columbia introduced legislation, but those bills have either failed or are still pending in the legislature.
“Massachusetts and New York have introduced the most legislation regarding state-required liability insurance for firearms, with Massachusetts introducing at least five bills since 2003. New York has introduced at least 15 bills in that same time frame. In addition, Illinois introduced legislation in 2009 that required liability insurance for firearms, and Pennsylvania did the same in 2012.”
The idea for this came from an unlikely source: a 1987 Alabama Law Review article written by a George Mason University School of Law professor named Nelson Lund. His article, “The Second Amendment, Political Liberty, and the Right to Self-Preservation,” proposed the idea that mandatory liability insurance might be a way to curb gun violence that would not interfere with the constitutional right to bear arms.
“If this were done,” Lund wrote, “the private insurance market would quickly and efficiently make it prohibitively expensive for people with a record of irresponsible ownership of guns to possess them legally, but would not impose unreasonable burdens on those who have the self-discipline to exercise their liberty in a responsible fashion.”
Writing in 2012 in Forbes, financial columnist John Wasik also advocated the use of social economics to reduce the number of deaths caused by firearms. “Market-based risk pricing is the partial answer,” said Wasik. “Let’s agree that guns as weapons are inherently dangerous to society and owners should bear the risk and true social costs. Translation: Require both owners and sellers to purchase liability insurance that is universally underwritten by actuaries according to relative risk.”
Wasik’s point was that it might be possible to ameliorate the problem of gun violence by using the same actuarial/risk management processes used by insurers to ameliorate other risks, such as automobile accidents, hurricanes and floods.
If Social Security reform is the proverbial third rail of American politics, messing around anywhere near the Second Amendment has to be just as lethal.
“Those most at risk to commit a gun crime would be known to the actuaries doing the research for insurers,” he said. “They would be underwritten according to age, mental health, place of residence, credit/bankruptcy record and marital status. Keep in mind that insurance companies have mountains of data and know how to use it to price policies, or in industry parlance, to reduce the risk/loss ratio.”
Mandatory liability insurance sounds logical on the surface, but as of 19 months after the Sandy Hook massacre that inspired this flurry of legislation, Robert Hartwig, president of the Insurance Information Institute (III) in New York, observes that there has not been a single instance of legislation passed that would require gun owners to purchase such insurance. Why is that?
What the authors of mandatory gun insurance laws, and even Lund himself, seem to have overlooked is that liability insurance is not designed to cover deliberate acts. “Intentional acts, especially suicides, would not be covered by liability insurance,” says Joseph Harrington, director of corporate communications for the American Association of Insurance Services (AAIS). “Accidental firearms injury is far less frequent than other kinds of injury. Dog bites and drowning are far more common. Almost all the injury arising from gun violence is deliberately inflicted. So it wouldn’t have much impact on recovery for victims or have a deterrent quality. It would impose on insurers something different from the way the private voluntary insurance market operates.”
“When this issue came up in 2013, we received many calls about it,” says Hartwig. “We had discussions with various legislative aides in various states and explained to them what insurance does and does not cover. For most of them it was eye-opening; they had never had this discussion before. Some of them then did back away from the idea that insurance would cover intentional or illegal acts. But that was exactly the situation Sandy Hook was.
“People who proposed this legislation believed fervently that they would reduce gun violence in their states,” he adds. “But the idea of doing it through insurance wasn’t particularly well thought through. The bills required a product that doesn’t exist and that you can’t compel anyone to sell. They never bothered to check whether any such products were on the market or whether insurers would ever be willing to offer them.”
“A mandatory insurance regulation might at least have some effect in deterring negligence, though it would probably not be very great,” Lund admitted twenty-five years later in Engage, the journal of the Federalist Society. “Such regulations therefore hardly deserve to be among the highest of legislative priorities. Nevertheless, they would increase the chances that those who suffer accidental injuries at the hands of negligent gun-owners would receive some compensation.”
Insurance experts point out that accidental deaths and injuries are already covered by most homeowners’ policies and even some automobile policies. Since the number of willful, deliberate acts far outweighs the number of accidents, the deterrent effect is minimal.
Mandating insurance to cover intentional acts of violence by firearms also raises the issue of moral hazard, the idea that people are more likely to take risks if they know that somebody else is going to be covering the cost of those risks. This is the same argument many use against other forms of liability insurance—flood insurance, for instance. People continue to build homes in floodplains because they know they will be covered, and they may be more likely, not less likely, to use firearms if they know the damage they cause will be paid for by an insurance company.
Creating a fund to compensate victims, as some have proposed, is different from an insurance product that mathematically looks at occurrences, estimates the losses likely to arise from them, and prices coverage accordingly, says Harrington. That might be a public policy matter, but it is not insurance.
Wasik, however, remains hopeful. “The legal community needs to huddle with some progressive insurance experts,” he says. But as Robert Hartwig points out, no matter how progressive the experts may be, they can’t change the fundamental way insurance works.
“Insurance is not going to be the principal means by which we reduce gun violence in the United States,” asserts Hartwig. But that does not mean insurance will not play a role in the future.
Self-Defense Insurance
In the wake of the Newtown massacre, America was told that the only way to stop a bad guy with a gun is a good guy with a gun. Forty-four states currently allow people to openly carry firearms, either with or without a permit. The rules regarding the ability to carry concealed guns are somewhat more complicated, but only American Samoa, the District of Columbia and the Mariana Islands prohibit the practice altogether.
Something called the “Castle Doctrine” has traditionally allowed people to use deadly force to protect their homes. “Stand-your-ground” laws effectively allow people to use deadly force to defend themselves if they feel their lives are threatened, or even if they feel they might be hurt, wherever they happen to be. Florida was the first state to pass a stand-your-ground law in 2005, but now more than 30 states have them. Critics say the number of justifiable homicides in Florida has tripled since the law was passed; defenders point to a 23 percent drop in the violent crime rate.
In any case, there are now just as many opportunities for good guys to carry guns as there are for bad guys, which raises its own set of problems. Even though it may be legal for good guys to kill or injure someone in self-defense, they can still get into big trouble, both legally and financially. George Zimmerman, who was acquitted of shooting the unarmed Trayvon Martin in self-defense, was on the hook for an estimated $2.5 million in legal fees, according the New York Daily News. Only part of that was covered by donations; reports are unclear about how he plans to pay off the rest.
And there’s no mention of Zimmerman having any insurance. Even if he had a traditional liability policy, it would cover only accidental harm caused by firearms and exclude deliberate acts, no matter how lawful. And even if the policy includes acts of self-defense, proving it, as Zimmerman found out, can be time-consuming and costly.
It’s not clear whether Zimmerman was a member of the National Rifle Association (NRA). If so, he could have had access to a range of policies the NRA offers through an affiliate, Lockton Affinity, LLC, which is underwritten by Lloyds of London and purportedly the largest independently owned insurance brokerage in the world. The policies cover criminal legal costs of up to $100,000 and up to $1 million in civil and other legal costs, depending on the premium. One drawback is that the criminal legal costs are covered only after acquittal.
The United States Concealed Carry Association (USCCA) also offers optional insurance coverage to its members through a prepaid policy called the Self-Defense SHIELD. The USCCA itself is the insured, but, for an additional fee, it will designate members as policy “beneficiaries” who receive the benefits if they get in trouble. There are no individual underwriting requirements. The maximum limits for civil liability range from $250,000 for the Silver plan to $1 million for the Platinum Plus plan. USCCA members who legally own a gun (convicted felons are out of luck) can also receive reimbursement for criminal defense, an immediate criminal defense retainer of up to $10,000, bail funding for the same amount, and compensation of up to $500 a day for however long they have to spend in court.
Hiring an armed security firm to protect you or your business can also carry unintended consequences. The Brownyard Group is a firm that specializes in insurance for firms that employ security guards.
“There is little evidence any organization can prevent mass shootings by hiring security officers who carry firearms,” writes company president Torrence Brownyard in an article in Security Magazine. “A single armed officer in a school is unlikely to prevent an armed person with malicious intent from causing harm. For insurers, this means the risks of armed officers are difficult to justify in most settings, and they charge higher rates for security officer firms that employ armed officers.”
While insurers recognize that armed guards may be needed in banks and federal buildings, he says, putting them in retail stores, schools and restaurants increases, rather than decreases, the risk of deadly violence.
Workplace Violence Insurance
On Sept. 16, 2013, a Navy contractor named Aaron Alexis walked into a building at the Washington Navy Yard in the District of Columbia, shot 12 people dead, and injured three others before shooting himself. On May 14, 2014, Vladimir Baptiste, a mentally disturbed man who claimed he was God, drove a stolen pickup truck into the lobby of the ABC network affiliate in Baltimore. Though he was armed with nothing more lethal than a golf club (and, of course, a pickup truck), he wandered the building for five hours before police arrested him.
Although one incident was lethal and one was not, both happened at the workplace and each left a wake of destruction, both physical and psychical, with related attendant costs. The Federal Bureau of Investigation (FBI) estimates that workplace violence, much of it involving firearms, costs the American workforce $36 billion per year.
Workplace violence insurance isn’t intended to prevent or even curtail gun violence; it applies in cases where no guns are used. But with limits of between $1 million and $5 million, it can be a considerable expense for a business.
Workplace violence insurance coverage protects against the expenses a company can face resulting from those incidents of workplace violence. It is designed to get an organization back on its feet, up and running as soon as possible. Coverage includes health care expenses, counseling, the cost of hiring independent security consultants and public relations experts, as well as the payment of death benefits and business interruption expenses. It does not cover the legal expenses of being sued by victims’ loved ones.
“Workplace violence insurers assess the exposure from two aspects,” says Greg Bangs, product manager for workplace violence expense insurance with the Chubb Group. “One, what’s the specific nature of the business or organization? Does it attract more threats than other businesses? Does it operate 24 hours? Does it serve alcohol? Is it a high-stress environment? Is it in the process of conducting layoffs or restructuring? Insurers also look at controls that are already in place. Does the company have an employee assistance program, for example? How does it handle layoffs? Does it have a progressive discipline policy that might lessen the shock of a firing?”
Workplace violence insurance isn’t intended to prevent or even curtail gun violence; it applies in cases where no guns are used. But with limits of between $1 million and $5 million, it can be a considerable expense for a business. Though Bangs won’t say how many policies Chubb has sold, he does say the number of these policies in the market is increasing, particularly with the prevalence of 24/7 media coverage. A possible consequence of this, speculates one surplus lines actuary, is that as the risk keeps increasing, and coverage becomes more and more expensive, economic arguments may become more vocal. Whether those arguments would ever carry more weight than the moral or emotional ones (which haven’t carried much impact so far) is anybody’s guess.
“It’s very difficult to deliver an insurance solution to the problem of gun violence,” says James Lynch, chief actuary at the Insurance Information Institute in New York. “Most of the considerable costs of handgun violence reside outside of the insurance world, and it would be difficult, if not impossible, to bring them into it.”
Steven Sullivan is a freelance writer and editor in Baltimore, Maryland.
