In today’s highly litigious
environment, finding and securing the proper insurance is a vital
component of any shooting, hunting and outdoor trade retailer’s
business decisions. While there are many sources of insurance, two firms
have emerged in the forefront to provide specialized services for
By Robert M. Hausman
from Petersen's Shot Business • August 2000
a recent membership services survey, the National Shooting Sports
Foundation (NSSF) was surprised at the high percentage of retailers who
expressed dissatisfaction in the product liability and fire and theft
insurance that was available to them. In fact, 82 percent of retailers
said they were not satisfied with their product liability insurance
coverage and rates.
In response to that
overwhelming dissatisfaction, the NSSF explored the possibility of
offering an industry-sponsored retail insurance program-an insurance
program by the industry for the industry. Because of that study, the
NSSF Board of Governors has unanimously approved the NSSF-sponsored
Retail Insurance Program. It is underwritten by one of the world’s
leading "A+" rated underwriters and offered through Pavenstedt
& Pauli, a highly respected insurance broker based in Lexington,
The NSSF has no interest
in selling members any service they don’t need. The goal is the
opposite-to help members save on important business services they do
need. NSSF realizes most manufacturers carry liability insurance for the
products they manufacture and extend that coverage to retailers. There
are reasons, however, many retailers feel the need to carry their own
having insurance does not mean you cannot be sued. And even if you win
the case, you can still be responsible for substantial legal expenses.
There are also circumstances when a manufacturer’s policy may not
cover you. Two examples are:
Example 1: The
manufacturer ships a firearm to the retailer and encloses detailed
printed instructions and warnings. A store employee sells the gun
without including the original box and instructions. The buyer is later
injured because he does something that the warnings normally enclosed
with the firearm could have prevented if the buyer had been informed of
them. The retailer could be found negligent.
Example 2: The retailer
receives information from a manufacturer regarding a recall. He does not
pass the information along to the purchaser (or the purchaser claims he
never received it) and a shooter is injured because of the defect. The
retailer could be found at fault.
insurance plan, developed in cooperation with Pavenstedt & Pauli,
features: a "no claims bonus"—up to a 10 percent discount on
renewal if you have no claims; low minimums; and NSSF oversight—since
Pavenstedt & Pauli is an NSSF partner, they share NSSF’s strong
commitment to your business’ success.
The NSSF believes this
new package can save you thousands of dollars and can collectively save
retailers an estimated one million dollars that can be invested back in
your businesses and in our industry. Pavenstedt & Pauli (U.S.A.),
Inc., the plan administrators, has been active in the firearms industry
for over ten years, insuring such industry leaders as Sturm, Ruger &
NSSF-sponsored insurance program’s general liability (including
products) limits of insurance are $2 million for products-completed
operations aggregate limit; $1 million general aggregate limit (other
than products-completed operations); and a $1 million limit for personal
and advertising injury, as well as a $1 million per occurrence limit. No
sub-limits are placed on fire, legal liability and medical payments in
the liability policy. While there are no deductibles in the liability
policy, there are optional deductibles in the fire and theft portion
from $500 to $2,500.
insurance—If inventory is taken to a
gun show or other event, coverage is extended to insure the property
while off premises. Inventory is not otherwise insured once it leaves
the insured premises.
reimburses the insured for profits that would have been earned if an
insured loss had not occurred, including
reimbursements for necessary continuing expenses.
covers expenses incurred to continue normal operations when a covered
loss occurs, including additional expenses while operating in temporary
quarters due to damages from a covered peril.
provides coverage for property while in transit, either while being
delivered to the insured or while en route from the insured to a
customer, or, if the insured has more than one location, while being
transported between locations.
Liability—Coverage for an actual or
alleged error, misstatement, misleading statement, act or omission, or
neglect or breach of duty by any of the insureds arising out of the
firearms instruction and/or training classes conducted by the insured.
J. Chiarello & Co., Inc.
Over 1,600 retailers,
wholesalers, gun-smiths, ammunition manufacturers and ranges look to
Joseph Chiarello & Co., Inc. to provide commercial insurance. The
firm has provided insurance to the firearms industry for over 20 years
and offers a commercial package combining property coverages with
premises and products liability. If property coverages are not desired,
Chiarello can also offer a monoline Commercial General Liability policy.
The liability coverages are written with minimum limits of $1 million
per occurrence, but higher limits are also available
Chiarello can also insure
sporting ammunition manufacturers and reloaders, gunsmiths including
repair and assembly of firearms, indoor/outdoor ranges, trap, skeet and
sporting clays fields and sporting goods stores with hunting, target and
other shooting supplies who may have policies excluding products
liability or "municipal lawsuits."
They can also provide
coverage for barrel, accessory (scope, holsters, slings) and other part
Chiarello’s first big
industry account was O.F. Mossberg & Sons. Since 1980, the firm has
assembled an elite national team of claim adjusters, defense attorneys
and defense experts (for whom firearms industry liability is their
primary focus) to help policyholders successfully and efficiently
control claims. The firm also provides insurance to some 50 firearms
manufacturers and importers.
Firearms Dealer Insurance Program combines property coverage with
premises/products liability and other essential coverages. Among the
coverages available in the program are: coverage for firearms
instructors, hunting/fishing license surety bonds, property (including
burglary, theft and fidelity), and commercial general liability
including products and completed operations. The program has been
underwritten completely since 1987 by companies of the American
International Group (AIG) and rated A++XV (Superior) by American Best
For those retailers
operating shooting ranges, "Training classes would be covered under
a general liability policy as long as such courses are part of the store’s
normal course of business," says Bob Chiarello, principal of Joseph
Chiarello & Co.
Coverage for independent
instructors can be provided as a separate firearm instructor’s policy.
This includes general as well as professional liability.
instructor’s insurance policy covers only the liability incurred by
the instructor, as a separate entity from the retail store. The
instructor can name others on the policy, such as the range or classroom
owner, as additional insured. The policy contemplates
that effective instruction requires live-fire exercises using firearms
and ammunition, and that the instructor may provide the gun and ammo to
the student. The incidental sales of ammunition is contemplated in the
policy’s rating structure. "The things not covered include
dishonest, illegal acts by the instructor," Chiarello says.
Insured instructors must
be qualified in the field in which they intend to instruct by a
recognized certification authority. These may be the National Rifle
Association, a state or municipal firearm safety licensing authority, or
others to be determined acceptable to the insurance company.
should make sure the instructors they hire are fully-qualified to give
firearms and self-defense instruction," Chiarello continues. Sales
personnel working behind the counter should receive as much education
about the guns they are selling, as possible. This training, for sales
personnel, can be had from many larger firearms manufacturers.
Otherwise, if your personnel are called into a courtroom to testify in a
suit, they will not be able to provide knowledgeable answers to opposing
worth his salt will pro-vide customers who buy guns some basic safety
instruction in loading, handling, carrying, and storing the firearm,
besides pointing out the instruction manual. Though general liability
coverage is broad, with few exclusions, if there is a continuing series
of lawsuits or claims filed against a particular retailer alleging a
failure to warn customers of the need to employ safe gunhandling
practices, the insurance company may consider cancellation of their
coverage. You and your employees must be able to project a degree of
professionalism if your sales policies or training methods are ever
called into question," Chiarello advises.
Read Your Policy
The lack of knowledge
about the intricacies of the firearms industry from general insurance
agents and companies is the reason firearms industry specialist firms,
like Joseph Chiarello & Co., Inc., and Pavenstedt & Pauli are in
business. Those retailers maintaining insurance with general firms
should read their policies carefully and question their agents as to the
insurance company’s ability to defend them in a legal situation
arising out of the use of a firearm. If your agent cannot answer your
questions adequately, both Pavenstedt & Pauli and Joseph Chiarello
& Co., Inc. can work with your agent to ensure you have the proper
Some general insurance
companies are moving away from providing firearms insurance to gun
retailers altogether, as they feel the firearms industry is
"politically incorrect." If this occurs, either of these two
specialized gun industry insurance brokers can provide you with a good
Business Practice Tips
Both Bob Chiarello and
Jim Falkenstine, a representative of the Pavenstedt & Pauli agency,
participated in a detailed firearm retailers’ insurance seminar during
the 2000 SHOT Show. For those retailers who did not attend, some of the
tips they provided are presented here.
When selling a new
firearm, make sure you give your customers all the instructional
materials the manufacturer intended to be given to the buyer. This
practice helps negate "failure to warn" claims (about the
proper operational use of the firearm). An easy way to ensure this is
done is to develop a preprinted checklist that your employees go over
and mark as they handle a firearm transfer. The checklist would include
a demonstration to the customer of how to use the gun lock packed with
the firearm if one is present.
It is also a good idea to
have each customer sign an acknowledgement that they were presented with
all instructional materials along with the firearm. The checklist should
also include a buyer’s age verification document. A copy of each
filled out checklist should be kept along with a copy of the 4473 form
for future reference.
Many firearms retailers
already feel overburdened with the federal (and sometimes state and
local) paperwork they have to fill out and maintain for each sale, but
the extra effort you make can pay for itself if a lawsuit is filed
against your store.
"After an accident,
the truth doesn’t always come out. The truth may be massaged by an
attorney who is trying to collect money for someone. Sometimes people
forget what really happened. Retailers should be able to show they are
absolutely sure that the way they handled the sale in question was right
and that no one can question it. If you appear thoroughly professional
in everything you do, the jury will weigh that against what the other
guy did," Chiarello says.
When selling a used
gun, the customer should be given verbal safety warnings along with the
telephone number of the manufacturer so the buyer can request an
instructional manual. Author’s note: If
the manufacturer is no longer in business, you should advise the
customer of this and use your discretion in determining the buyer’s
level of firearm expertise in deciding whether to sell the gun to this
used guns are considered to be selling the
firearm with an implied warranty that it is fitted for its intended
purpose. Under this legal theory, firearms dealers are automatically
considered "experts" since within the practice of their trade
they are thought to have acquired more knowledge about firearms than the
average person. Thus, if you are not sure if a used firearm is
functional and safe, you should have it checked by a competent gunsmith
before you offer it for sale.
If you sell gun
locks, make sure you sell models with quality features. Don’t sell a
gun lock if its advertising claims the product is
"child-proof." Chiarello advises, "‘Child-resistant’
would be a better term. Nothing is child-proof, foolproof or
idiot-proof. The warnings on the gun lock are as important as its
quality. Advise your customers that no gun
lock is totally resistant to being disabled."
As always, sell
quality. Make sure you maintain a clean and orderly shop and do not have
merchandise on the floor that people can trip over. If you do
gunsmithing, make sure all the machines’ safety
guards are in place and there is no excessive oil or grease
accumulations which can pose a fire hazard.
Since theft is the most
serious of the property exposures for retailers, all Chiarello-insured
dealers are required to have central station alarm systems as these
allow police to respond quickly to a break-in. For stores with large
plate glass windows or doors, it is highly recommended that crash guards
are installed around the building’s perimeter to prevent crash and run
burglars using a pickup truck.
Some retailers who have
kept their handguns in glass showcases at night and have had a couple of
smash and grab losses, are now required by Chiarello to lock their
handguns in a safe at night. Some showcase manufacturers have developed
protective covers which prevent theft and may be a good choice for some
While retailers who
maintain their own on-premises gunsmithing operations would be covered
under their general liability policies, those who send jobs to an
off-premises gunsmith should make sure the gunsmith has commercial
liability insurance. If you give all your repair work to one gunsmith,
it is recommended you ask to be named as an additional insured on the
gunsmith’s policy. The same applies for retailers buying ammunition
from a commercial reloader.
Retailers are generally
not required to have manufacturer certificates of insurance for every
item sold. By dealing with distributors who do have such certificates,
however, retailers can feel confident that manufacturers will defend
them (through their insurance companies) if an action is brought against
them for a product failure in which the retailer played no part.
retailers should look closely at
manufacturers who are selling dealer-direct, as sometimes they may not
have liability insurance.
All retailers, no matter
how small their operations, should be incorporated. Otherwise, their
past business actions can come back to haunt them. The determination of
whether an insurance policy will cover you is the date that the accident
happened. To illustrate this concept, Chiarello cites the case of a
gunsmith doing business as a sole proprietor who decided to retire and
notified the insurance company he would not renew. The gunsmith was
advised to retain his insurance for a couple of years although he was
not in business any more.
Luckily for the gunsmith,
he renewed. A short time later, a gun he had worked on two years
previously blew up and the owner filed a suit. Since the ‘smith had
elected to continue his insurance policy, he was considered insured and
the insurance company defended the action against him. Had the gunsmith
not renewed the policy, he would have had to finance his defense out of
his own pocket.
advises, "Insurance is financial
responsibility. All shooting, hunting and outdoor sports retailers
should make sure they are covered by the proper insurance. We can’t
afford to have any uninsured or undefended lawsuits that could result in
the creation of bad law because someone did not have the financial
resources to mount a defense that was appropriate to the claim."
Editor’s note: Coverage
described in the above article may not be available in all states. The
product descriptions are not a complete description of all terms,
exclusions and conditions in the policy. Policy terms may be changed by
insurers, and the preceding descriptions are not intended to be relied
upon by potential clients. Issuance of coverage is subject to