Understanding Firearms Liabilities in Your Pawn Shop

header-SSweeney.jpgToday I would like to discuss the topic of firearms and the types of liability that firearms create for you and your business. Many of our Pawnbrokers who deal in firearms and ammunition and or conceal or open carry weapons in their stores must understand the increase in liability it creates when running their business.

In today’s litigious society  where politically, guns are a very hot topic, I thought it be a good idea to address how having the proper insurance in place can make a difference of keeping you in business or putting you out of it.

Over the years, we have had our fair share of claims relating from firearms. These include:

  • An innocent customer being shot in an attempted robbery
  • The sale of a weapon used to commit a crime
  • A gun accidentally discharging in a store
  • A gun malfunctioning after its purchase causing injury

I am going to talk about what we see in the market place and how you can properly protect yourself and your business when a claim occurs. I will follow this article up with an article about preventative measures and security procedures that can be taken to limit liability from occurring in the first place.

Currently the companies specializing in insuring the pawn industry (there are 3 of us) will generally put a limitation on their policies when it comes to firearms and ammunition. It is important to understand these limitations and also understand what insurance is available to you and your business.

Let me first explain the different types of liability you are exposed to as an operator dealing in firearms and ammo.

Liability from Firearms Created on Premise

Incidents that could cause premise liability claims could result from things like a customer being shot in a robbery, a gun accidently discharging in the store while doing a transaction, an owner or employee using a firearm to protect people or property. Your premise liability is part of your general liability occurrence limit and should be covered on a per occurrence basis for at least $1,000,000.

Products and completed operations liability related claims

These are claims that result from the completed sale of a firearm or ammunition that result in bodily injury or property damage to a 3rd party. Incidents that could cause products liability claims could result from things like a customer purchasing a gun and then taking it to a range and the gun malfunctioning causing injury or the sale of a gun to someone who later commits a crime with that firearm. It is the products liability limit for guns and ammunition that most Pawn insurers will limit in some way. Typically we see limits ranging for products liability for guns and ammo at $100,000 to $500,000; and from time to time we see it being $1,000,000.  For any pawnbroker that sells firearms it is important to understand what limit you have and to discuss that limit with your agent to make sure you feel comfortable with it. Most of the insurance carriers in the pawn business have the ability to increase that limit up to many millions of dollars.  Here at Marshall & Sterling our program includes $500,000 automatically for no charge and we can usually increase the amount to $1,000,000 for a small additional premium.

Umbrella insurance

Umbrella insurance is available to purchase which gives you the ability to increase your liability coverage. This type of policy is separate from the business policy you purchase and allows you to purchase many millions more of liability coverage if you so desire. It is important to note that not all umbrella policies are created equal and that you need to pay close attention to what is being covered and not covered. Many of these types of policies will exclude coverage for firearms and ammunition which if you sell guns would be one of the main reasons why you would purchase this additional coverage in the first place.  A firearm claim is just the type of claim that could easily exhaust your business policy’s liability limits and without an umbrella policy in place your business assets become at risk and thus so does your business.

I cannot begin to tell you how important it is to make sure you understand your coverage and what is and is not being covered. I have seen a lot over the years and I will tell you that all insurance companies treat guns differently. Some will downright exclude liability for guns, some will only cover it at locations you ask them to cover it at, and some will only cover guns if you sell less than a certain percentage as part of your overall sales.

Here at Marshall & Sterling we consult with you to make sure we understand your business. We understand that not every pawnbroker runs their business the same way. We are here to advise you on your options and what those options cost you. There is no one size fits all.