(Article from Insurance Law Alert, April 2025)
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Holding
A New York district court ruled that an insurer was not required to defend or indemnify underlying lawsuits relating to the sale of ghost gun components. Granite State Insurance Co. v. Rainer Arms LLC, No. 2025 U.S. Dist. LEXIS 57651 (S.D.N.Y. Mar. 27, 2025).
Background
Rainer, a Washington-based gun retailer, was a defendant in several suits for its alleged involvement in the sale of unfinished firearms, receivers, and frames that can be used to assemble “ghost guns” (guns that lack serial numbers, registration, or other means of tracing). The suits, filed by several municipalities in New York, all contain similar allegations relating to Rainer’s marketing and sale of “unfinished” parts that are easily convertible into a ghost gun. The complaints further allege that Rainer evaded federal and state laws pertaining to the sale of firearms and that the target audience for such parts was consumers who otherwise could not legally purchase a firearm from a licensed retailer. Because of these and other actions, the suits alleged that New York faces a public health and safety crisis caused in part by violence involving ghost guns.
Rainer sought coverage from Granite, its general liability insurer. Granite disclaimed coverage on several bases, including that the suits did not allege a covered “occurrence.” In ensuing litigation, Granite sought a declaration that it had no duty to defend Rainer in the underlying suits and moved for summary judgment on that issue. The court granted the motion.
Decision
The policies defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Under Washington law, an “accident” (where, as here, undefined in the policy) means “an unusual, unexpected, and unforeseen happening.” Further, a deliberate act can never constitute an “occurrence” unless “some additional unexpected, independent and unforeseen happening occurs which produces or brings about the result of injury or death.”
Applying this legal standard, the court concluded that the ghost gun suits alleged only deliberate conduct. In particular, the court emphasized allegations relating to intentional, repeated, and longstanding actions involved in the marketing and sale of gun components in contravention of applicable laws. The court rejected Rainer’s assertion that the suits nonetheless alleged an occurrence because the injuries were not intended by Rainer, explaining that “case law makes clear that the relevant inquiry . . . is whether the conduct was deliberate, not whether the injuries that resulted were intended” (emphasis in original).
The court also rejected Rainer’s contention that claims for negligence in the underlying suits give rise to a possible “occurrence.” Emphasizing that courts must look to the nature of the conduct rather than labels or causes of action, the court concluded that “the complaints are devoid of facts alleging non-deliberate conduct,” even as to the negligence claims.
Additionally, the court held that the alleged conduct did not include any independent and unforeseen happening that could give rise to an “occurrence” notwithstanding Rainer’s intentional conduct. The court stated that “no reasonably prudent person could find that the harms alleged were unforeseeable—certainly not to an experienced firearms retailer like Rainer,” adding that the various harms alleged by the municipalities were “the entirely predictable result” of Rainer’s conduct.
Finally, the court rejected Rainer’s assertion that coverage was available under a “products-completed operations hazard” (“PCOH”) provision. Rainer argued that the PCOH clause specifically contemplated the intentional sale of products that ultimately caused injury or damage. The court rejected this argument as unsupported by both caselaw and the factual allegations at issue, including the absence of allegations of product defects in the underlying suits.
Comments
As discussed in last month’s Alert, a California federal district court employed similar reasoning relating to the “occurrence” analysis and ruled that injuries arising from a school shooting were not an “occurrence” and therefore that the insurer had no duty to defend a suit against the manufacturer of the gun used in the shooting.