The Myth of Gun Liability Insurance

Since I first wrote about gun liability insurance in the wake of the Newtown massacre, three states -- Connecticut, Massachusetts and California -- have introduced bills to require that gun owners purchase liability insurance.

The proposal is designed to protect both owners and society from the misuse of firearms.

As some gun owners and lobbyists maintain, this is a covert way of banning or confiscating guns. This is untrue. In fact, you would be able to buy as many guns as you wanted. Like a house or car, you'd need an insurance policy to own them.

Would this prevent anyone from purchasing a gun? Again, no, because the insurance company wouldn't make that decision, nor would any governmental agency. The risk pricing component of this transaction would be thoroughly privatized.

Would guns still have to be licensed and background checks performed? Of course. That's the case today, but the process could be vastly improved and President Obama has championed better background checks.

What about the second amendment? There's nothing about this proposal that would prevent you from buying guns. Again, there's no restriction imposed by the government. You could buy an arsenal. The insurance requirement is analogous to buying a home and getting a mortgage. No lender will give you a mortgage unless you insure the home. That's to protect them from a loss. Gun insurance protects you from a loss. The constitution says nothing about what can or can't be insured.

Wouldn't this penalize responsible gun owners? The opposite is true. If they had gun locks, training or safes for their weapons, insurance companies would likely give them premium discounts. So they'd be rewarded for responsible practices. I imagine hunters and collectors would receive the biggest discounts. It's akin to getting homeowner policy discounts for smoke detectors, being near a fire hydrant, etc.

The most difficult-to-resolve aspect of the gun insurance proposal is preventing criminals and gang bangers from getting guns. Naturally, they wouldn't bother with insurance and try to obtain weapons through the black market. One half-way measure would be to require that all sellers also have liability insurance, so they'd have to know their buyers.  That might cut down on the straw purchases.

Surprisingly, though, even Chicago police chief Garry McCarthy recently said that he favors gun liability insurance.  Although he also made some ill-advised comments that gun owners who send money to lobby elected officials are "agents of political corruption," it's clear that Chicago could benefit from gun insurance.

As you can imagine, gun groups were not amused by McCarthy's remarks.

“Garry McCarthy ‘s understanding of our Constitution barely qualifies him as a meter maid, never mind the chief of the nation’s third largest police department,” commented ISRA Executive Director Richard Pearson . “What on earth would possess McCarthy to assert that constitutional rights should be meted out based on public opinion polls?"

In the interim, the death toll is growing in big cities. We're losing far too many young people in an epidemic of violence that has taken more lives than the Viet Nam war over the past decade.

The Windy City lost 500 people to gun violence in 2012 alone and neither the police nor city hall have a single idea on how to stop it. More police might help, but it won't diminish the turf wars between hundreds of street gangs vying for the drug trade. Gang bangers need only leave the city limits to get a gun. So if liability insurance was required of every dealer in the state and neighboring states, it could make a difference. Sellers would pay more attention to background checks. They'd have to keep good records.

Gun insurance is a win-win proposal because of its reliance upon the market to assign and price risk. Gun manufacturers would have incentives to "customize" guns to the owner through biometric safeties. That would raise the price of guns, yes, but it would also boost their profits and probably sell more guns. Safety sells in every consumer product. Wouldn't  you want to pay a little extra for a safer car, ladder or baby seat?

Insurance companies would see that insuring 300 million-plus guns is a huge market. Once they get on board with liability laws, they will unleash their 1 million-plus agents to sell a new product line worth hundreds of billions in premium revenue. Remember some towns may not have a doctor or pharmacy, but they probably have someone selling insurance.

Homes would also be safer places because guns would be stored in more secured ways. Insurance companies would reward those who are the most safety-conscious owners. Keep in mind that some 20,000 of the 30,000 annual gun fatalities are due to suicide, according to the Centers for Disease Control. Children''s lives are lost because of accidents. If insurance guidelines compel people to take greater safety measures, all of society benefits.

The most troubling dilemma that a lawyer friend posed to me is the question of moral hazard. If you had insurance coverage, would that give you carte blanche to commit a crime? I would think that liability coverage, like all insurance, would have an exclusion that might preclude payments under certain conditions. Maybe a conviction for a gun crime would nullify coverage the same way your survivors wouldn't be able to collect on your life insurance if you committed suicide.

In any case, liability coverage would offer great protection if a gun was lost, stolen or used by a third party to commit a crime.  It's about public and private protection, not gun control. It's an idea that seeks to shield the public from harm without intruding upon private rights.