Insurance is supposed to be the safety net you pay for, so it catches you when the lawsuits come. For companies that sell parts used to build privately manufactured firearms, that net now has a hole in it. Federal courts have ruled that when a firearms retailer gets sued over so-called “ghost gun” kits, its insurers don’t have to defend or pay out. The reasoning is simple and, for gun-friendly readers, infuriating: the courts say selling those parts was intentional conduct, not an accident, so standard liability policies never kicked in.
That distinction between an accident and an intentional act is the whole ballgame. Understanding it explains why two of the largest insurers in the country got to walk away from paying, and why the ruling matters far beyond a couple of gun retailers.
Why the “Accident” Question Decides Everything
Commercial general liability policies cover an “occurrence,” which the policies define as an “accident.” When an insurer sues to get out of paying, that word does the heavy lifting. If the harm came from an accident, coverage applies. If it came from a deliberate act with predictable consequences, it doesn’t.
In the case against KM Tactical, a Missouri retailer, a federal judge in New York ruled that units of AIG and Berkshire Hathaway had no duty to defend or indemnify the company. U.S. District Judge Andrew L. Carter Jr. concluded the underlying lawsuits didn’t claim injuries from an accident. The company argued its conduct should be seen as negligent. Carter rejected that, pointing to allegations that the retailer engaged in intentional acts and made misrepresentations to reach customers who couldn’t legally buy firearms.
The same logic sank a Texas seller. In Granite State Insurance Co. v. Primary Arms, LLC, the Second Circuit affirmed that insurers had no duty to defend or indemnify because the underlying suits didn’t allege an “accident.” Under Texas law, an “accident” is a “fortuitous, unexpected, and unintended event.” An act isn’t an accident if it is intentional and results in injuries that ordinarily follow from that act.
The Second Circuit found Primary Arms committed intentional acts — selling and marketing products in New York to people who would otherwise be disqualified from buying finished firearms — and those acts produced injuries that could be reasonably anticipated. Increased gun-related incidents and the financial burdens that followed were, in the court’s view, foreseeable.
What the Lawsuits Actually Claimed
The litigation started with government plaintiffs. In June 2022, New York AG Letitia James sued KM Tactical and nine other firearms retailers, accusing them of deliberately marketing and selling unfinished receivers and frames that buyers could assemble into untraceable firearms. The cities of Buffalo and Rochester filed a separate suit, though KM Tactical was later dismissed from that one.
Primary Arms faced the same kind of attack. New York state and the two cities sued to recover economic losses from a surge of gun violence they linked to the company’s products. Because Primary Arms sells parts rather than finished firearms, buyers received no background check or license check before purchase, and the assembled gun carried no serial number. The suits alleged the company marketed to consumers who wanted to skirt background checks and obtain untraceable firearms.
The insurers — Granite State Insurance Company and National Union Fire Insurance Company of Pittsburgh, both AIG subsidiaries — went to Manhattan federal court seeking a declaration that they owed nothing. They won at the trial level and again on appeal.
The Judges’ Reasoning
The courts kept circling back to intent. U.S. District Judge Lorna Schofield, who granted summary judgment to the insurers, wrote that Primary Arms “took deliberate action to enable the anonymous acquisition of uncontrolled firearms with the predictable outcome of increasing gun violence.” She added that the failure to run checks on customers “was not a mistake, but rather a deliberate part of defendant’s business and marketing model in order to maximize sales.”
On appeal, Circuit Judge Denny Chin drove the point home during oral arguments. “The products are intentionally shipped into New York. They’re intentionally designed, so they do not fit the definition of a firearm. The intent is to avoid the gun requirements, background check, serialization,” he said. “How is that accidental conduct?”
Primary Arms argued that the underlying complaints raised theories of negligence, thereby triggering coverage. The Second Circuit rejected that too, calling the negligence allegations “conclusory legal labels” that didn’t match the basic facts of the claims. In other words, dressing up an intentional business model in the language of negligence didn’t change what the model was.
Why This Reaches Beyond Guns
The legal principle here is broader than firearms, and that’s what makes the rulings worth watching. The law firm analyzing the Primary Arms decision noted that policyholders often argue an event is accidental because they didn’t subjectively intend to cause harm. This decision reinforces that coverage turns on whether the initial acts were intentional and whether the resulting harm could be reasonably anticipated, not on whether the company intended the specific consequences.
That same framework shows up in coverage disputes over the opioid epidemic, environmental damage, and social media cases. Firearms retailers are now caught in the same net as pharmaceutical distributors and chemical companies when plaintiffs frame a lawful business as a public nuisance. Once a court accepts that a legal product causes foreseeable social harm, the insurance a company bought to protect itself can vanish.
The Case for Coverage
Tom Knighton at Bearing Arms argues the insurers should pay, and the argument rests on a straightforward point about legality. What KM Tactical was doing wasn’t particularly illegal at the time. The company wasn’t required to run background checks on parts sales, and by all indications it followed the law. Selling unfinished receivers and frames doesn’t make you subject to the same federal and state requirements that apply to finished firearms, because those parts aren’t guns.
There’s also the empirical question buried under the “gun violence” claims. Knighton points to a study suggesting there was no correlation between ghost gun recoveries and homicides. Correlation doesn’t prove causation, but causation should at least produce correlation. If privately manufactured firearms were driving rising violence, the numbers should show it, and the argument is that they don’t.
That undercuts the courts’ foundational assumption that harm from these sales was foreseeable. If lawful sales of legal parts don’t actually fuel violence, then treating that violence as a predictable consequence of the business rests on a premise the data doesn’t support. From that view, KM Tactical sold legal products, got sued for what third parties later did with them, and then watched its insurers refuse to cover the fight.
What This Means for You
If you own or operate a business in the firearms industry, treat these rulings as a warning about what your liability policy will and won’t cover. The word “accident” in a commercial general liability policy is doing more work than you might assume, and courts in at least two federal circuits have now read it to exclude intentional business conduct that plaintiffs frame as foreseeable harm.
Read your policy language closely, ask your broker directly whether public nuisance claims are covered, and don’t assume that paying high premiums for products-completed operations coverage guarantees a defense when a state attorney general comes calling. Primary Arms made exactly that assumption, argued it had paid for protection against suits claiming its products caused bodily injury, and lost anyway.
If your current carrier can’t answer those questions to your satisfaction, a specialty firearms-industry broker is worth a call. Clandestine Insurance Agency — an independent shop that markets itself as “for shooters by shooters” — works with more than twenty carriers active in the firearms space and understands the specific risks these rulings expose. When the generalist market treats your business as an intentional-conduct liability, agencies built around this industry are the ones still writing coverage.
The larger fight isn’t over. Courts have addressed the insurance question, but the underlying campaign to hold lawful sellers responsible for criminals’ acts continues. Watch how legislatures and higher courts treat the distinction between selling a legal product and enabling a crime, because that line is where the next round of these battles will be fought.
