Insuring Against Guns?

Abstract

This Article examines whether mandating liability insurance for firearm owners would meet its avowed goals of efficiently compensating shooting victims and deterring unlawful and accidental shootings without creating a net social loss by chilling socially beneficial gun use. In the process, the Article also examines whether nonmandatory liability insurance may enable socially desirable, but potentially risky, firearm-related activities.

The analysis indicates that a compulsory firearm-liability insurance regime is unlikely to attain its goals, and may in fact exacerbate the problems it seeks to solve by incentivizing firearm owners to take less care with their weapons. It also shows that it is markedly unlikely that such a mandate would achieve a significant level of compliance. Optional forms of firearm-liability insurance can, however, enable socially desirable activities by those who would otherwise be unable to bear the risks inherent in those activities.

One of the best ways to incentivize an activity is to compensate it or to remove its financial consequences. Well-meaning legislators, regulators, and industry members would therefore best serve their constituencies by encouraging optional insurance that covers liability risks arising from socially useful activities, rather than pushing for unhelpful mandates that may aggravate the firearm violence that they seek to remedy.

Keywords: insurance, moral hazard, adverse selection, law and economics, private regulation, efficiencies, claims administration, second amendment, firearms, risk, firearm registration, self-defense, negligence, theft