One of the things that opponents of gun insurance or insurance trade representatives often say is that insurance cannot cover intentional or criminal acts.  This is simply false.

There are many kinds of insurance that cover such acts.  The key is that the insurance pays to the victim and not the wrongdoer.  It doesn’t have to matter if the deed is done by the purchaser of the insurance or another insured person.  It is important the the policy be written to make this clear; policies that exist at least partially for the benefit of third parties typically work that way.  Insurance that is compelled by law for an activity often applies in these cases even if it’s not spelled out in the policy, but courts differ on this point and an explicit requirement in the legislation and in policy language is a good idea.

Insurance textbooks teach that whether an act is accidental or willful is determined from the viewpoint of the insured.  Mandatory insurance should treat a victim as an also insured party. This is necessary because the purpose of many kinds of insurance is to protect the insured against the willful acts of outsiders. An example would be a day care center that is negligent in screening visitors who might commit an abuse against a child.  From that viewpoint, a act that is deliberate on the part of the abuser is an accident to the victim.

Insurance that pays to innocent victims for willful, intentional or even criminal acts is common when the purpose of the insurance is to protect third parties. Despite the statements from insurance industry representatives– “if you use your car as a weapon to intentionally run down a pedestrian or another motorist, there is no coverage”, motor vehicle insurance in many states would in fact cover exactly that case. The case commonly cited in legal discussions to illustrate this point is Wheeler v. O’Connell, 297 Mass. 549 , 553 (1937) This case held that compulsory insurance was very different than voluntary insurance, that public policy considerations did not prevent coverage of intentional acts, and that the insurance terms should be interpreted in light of the intention of the compulsory insurance law. Many later cases in various states have taken the same position even in situations where insured persons committed serious crimes including murder.

It was also often stated that insurance would not pay if a homeowner intentionally burned down his or her house. Banks and mortgage holders were not willing to take on this risk and demanded coverage.  There are two types of mortgage clauses in homeowner’s insurance. The most common type today is the “union” or “standard” or “New York” mortgage clause, which would pay a mortgagee such a case. My own homeowners insurance (USAA) has such a clause stating:

If we deny your claim because you or any other “insured” has failed to comply with the terms and conditions of this policy that denial shall not apply to a valid claim of the mortgagee.

Standard insurance text books discuss this mortgage clause and point out that it is included specifically to pay lenders in cases of arson or other misbehavior on the part of the insured homeowner.  Because homeowners insurance is not mandatory, policies vary on whether they will pay to one owner when a co-owner burns down the house occupied by a spouse in a domestic violence incident.  This can hinge on details of the policy language such as whether it says “an insured” or “the insured” and illustrates the importance of requiring the right terms.

Other examples of insurance that pay to victims for criminal acts of policyholders or otherwise insured persons include worker’s compensation for acts of co-workers and often by employers, businesses for acts of employees and bonds by Locksmiths or fiduciaries.

The point of these examples is that liability and other kinds of insurance can pay innocent third parties for intentional acts of otherwise insured parties.   Mandatory firearm insurance should be designed like the examples above to protect the victims. Public policy, which is often said to prohibit such insurance, only prevents the malefactor from benefiting.  In light of these and of many other kinds of insurance that pay innocent parties regardless of the intent of others, there is no problem with public policy for providing insurance covering willful acts. It may, however, be appropriate for insurance regulators to allow insurers to have subrogation clauses to recover their money working against the misfeasors themselves.