Tuesday, June 19, 2012

Gun Nuts Wonderful World: Don't Know Much About History, Don't Know Much Geography,... and Don't Know Economics Either

So here is an excerpt from Wikipedia; good ol' Wikipedia, I can count on it being written at a simple enough level to be clear to those foreign readers, for whom English in not their first language, and for our American readers who just have a poor education.

from Wikipedia, Moral Hazard entry:

In economic theory, a moral hazard is a situation where there is a tendency to take undue risks because the costs are not borne by the party taking the risk. A moral hazard may occur where the behavior of one party may change to the detriment of another after a transaction has taken place. For example, persons with insurance against automobile theft may be less cautious about locking their car, because the negative consequences of vehicle theft are now (partially) the responsibility of the insurance company. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.
Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.

Economist Paul Krugman described moral hazard as "any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly."[3]

and from the Insuance Coverage Law Blog, where hitting is comparable, but less serious than shooting someone.  If this is true of simply hitting someone, it is even more true of shooting another person intentionally, and therefore not an insurable action or an insurable risk::

David Rossmiller

Court: Intentional Acts Preclude Homeowners' Coverage

An insurer had no duty under a homeowners' policy to indemnify a man who pre-emptively struck another man, an Oregon federal judge ruled. The case is Allstate Ins. Co. v. Daniken, 2006 WL 516814 (D.Or. March 1, 2006). In the case, Daniken, the insured, admitted that he struck first against another man, Horton, but said he did so in self-defense. Daniken pleaded no contest to criminal charges of fourth-degree assault, and was later sued by Horton. The insurer, Allstate, brought a declaratory action to dispute defense and indemnity.
Judge Ann Aiken said that because Daniken pleaded no contest, his conviction did not definitively establish that his actions were criminal, only that he consented to the conviction. Therefore, Judge Aiken found that, because the complaint alleged negligent as well as intentional conduct, Allstate had a duty to defend. In Oregon, the duty to defend is determined solely with reference to the allegations of the complaint and the language of the policy, and extrinsic facts are not considered.  However, the duty to indemnify depends on the facts. Judge Aiken found that Daniken's intentional acts of striking Horton precluded coverage under the exclusion for intentional acts.
A basic premise of Oregon law is that an intentional acts exclusion precludes coverage for "acts done with the subjective intent to cause harm.

The concept of intentional acts exclusion is not unique to Oregon, it is consistent in every state in the U.S., and is a world wide business and legal premise.  Therefore there should be no possibility of coverage under insurance industry insurance.

So..........why don't gun nuts know their history better?  And why don't they understand the basics of adult life like why it is unlikely that the NRA can actually sell stand your ground insurance that is legit, and that lives up to the expectations of the policy holder.


  1. So, why is it that the NRA can sell insurance that has a rider that denies coverage to a drunken motor vehicle operator......... an intentional act.

    1. The NRA sells auto insurance? Since when?

      And why do you want me to object to them denying coverage to a drunkine motor vehicle operator?

      You DO distinguish right, between a drunk driver hitting someone accidentally, and someone drunk or sober hitting someone with their vehicle deliberately?

      THAT is where the distinction coes in, and apparently Thomas YOU don't understand it. IF someone does drive drunk, and is caught, they are subject to cancelation of their insurance, far higher premiums (on a policy which requires them NOT to drive drunk) etc. It is the reason many repeat drunk drivers are also cited for driving without insurance - a chronic problem.

      Without insurance to indemnify them they risk losing everything they own, and ever future dime they might earn.

      What all of you fail to understan utterly apparently as a fundamental concept in economics, not just insurance, is the moral hazard.

      Insuring anything is a transfer of risk/responsibility for an action --- someone else is paying for what you do or the results of what you do.

      ANYTHING that makes it more likely that, because the cost doesn't come out of your pocket, you might be more likely to do something that costs them money -- take a risk, harm someone, do something that could get you sued, or arrested and put in jail, not maintain property to the appropriate level of safety, or engage in risky financial transactions (think credit default swaps) is a MORAL HAZARD. Those are customarily ILLEGAL, in most states, or alternatively NOT insured by insurance companies.

      So if having insurance for your legal expenses would make you more likely to risk driving drunk, because your arse is covered if you get arrested or in an accident, THAT would be a moral hazard for an intentional act.

      to be continued.

    2. part deux

      Insurance for the legal costs of shooting someone, stand your ground or not, that makes it MORE likely the insurer/ insurance carrier will have to pay out money to cover the conduct of the insured - the buyer of the insurance coverage -- is a MORAL HAZARD, and NOT something that any reputable, licensed real-world insurance carrier would do.

      This particularly includes pre-emptive defensive acts, as in the case cited in Oregon where someone hit another person -- even though the person who bought the insurance claimed it was in self-defense.

      Does that make it more clear?

      Wikipedia has an article that sort of covers moral hazards, although not imho one of their better efforts. There is a lot left out that I think should be in there.

      While I haven't looked more closely at this, to see who the insurance carrier is, if any, I would be very skeptical that this is really a legitimate insurance policy.

      What I expect is the case is that the NRA is willing out of pocket, no doubt backed by the manufacturers of guns and ammo they REALLY represent, to pay something towards defense of people facing charges for shooting in what they claim is self-defense.

      That is not really insurance.

      There is no shared risk, no calculations of what that risk is, no reserve amounts of money required to pay claims, no requirements of risk management to control risk exposure, etc.

      Just from my own knowledge of insurance, I'd bet from what I have read so far, that the limits of what they pay is very low, that there is a very high deductible, that they don't pay up front, that it would be damned hard to collect (they find ways not to pay up, or to delay or litigate you against paying --- lot and lots of little fine print loopholes), etc.

      I'd also lay you odds that this ill-conceived and probably not factually marketed little scheme is one where by CREATING a moral hazard, the NRA is leaving themselves open to some really BIG BIG BIG law suits as well, and that whoever came up with this turkey isn't going to be around long, nor will the 'insurace'.

      IF they sell a lot of this insurance, given the steep rise in these shootings in shoot first states, they are going to be bleeding cash, even with a high deductible, even with a low cap on coverage.

      More than that if they are not doing this through a real insurance company, one that is large enough to be in the reinsurance markets (like Lloydes of London) they are not going to be able to reinsure this load of crap --- shift a portion of the risk to multiple secondary insurers, which would cause the to hemorrhage even MORE money.

      There is a reason this is a 'little known' NRA 'product', and it is not a positive reason. That they would try this tactic AT ALL is a testemant to how scared they are that George Zimmerman's defense is going to cost massive amounts of money AND he is still going to lose. This is their feeble attempt to whistle in the dark, to appear to support those who pushed through this disasterous kind of laws in so many places.

      Do you get it now? And because YOU don't see and understand the significance of this stuff, you don't and apparently CAN'T think critically in evaluating this stuff -- NOW do you begin to see why Laci and I don't think your lot is very smart, or very well educated, and why we think you are exploited by the NRA?

      What a bunch of low-information, low-level-thinking stooges you all are. Dangle a gun in front of you, and your eyes and minds go blank, and you drool a little, and mutter like gun zombies "must have guns" like other zombies repeat "must have brains".

      That should be our new term for you -- not gun nuts or gun loons --- gun ZOMBIES.

  2. The NRA is not actually selling any of these policies. They endorse certain products offered by a third party insurance company.

    Mike complained about the NRA denying payment on a life insurance policy in this post: http://mikeb302000.blogspot.com/2012/06/minnesota-widow-sues-nra-for-refulal-to.html

    The guy was driving his tractor drunk and killed himself. Insurance said the policy did not cover death while driving a motor vehicle drunk.

    From Mike's other post about the Stand Your Ground insurance, you can see that it is Lockton Insurance Company that is actually offering the policies, they are just endorsed by the NRA. http://www.locktonrisk.com/nrains/about.htm

  3. @ dog gone -

    I'm not really clear on your point here: Are you saying that the NRA is offering some sort of insurance coverage that is marketed towards its members. These people may be involved in a defensive gun use and because of that insurance coverage there is a moral hazard created that leads to a situation where people with said coverage would be more inclined to get into situations where they will have to use their firearm because they have coverage?

    1. The states where the shoot first laws have passed have shown a very large increase in the number of shootings being called defensive.

      In example after example, instance after instance, many of these are where someone with a gun pursued a confrontation, like George Zimmerman with Trayvon Martin, and like the man in Houston who was just convicted, like the guy in Florida who shot the father on the playground because the shooter didn't like a kid skateboarding.

      People are leaving the scene of a disagreement, to go get their firearms, and then come back to escalate that disagreement where NO, without the shoot first law they previously did not do so.

      And if you add in that they now don't even have to be concerned about the legal expense of doing so, it does create a moral hazard where in a situation that is 'iffy', where they could decide not to escalate, they have fewer incentives to de-escalate rather than shoot.

      YES, you get it.

      That the NRA appears to be giving their stamp of approval to insurance which is more likely to be a rip off than the protection people will reasonably expect from it simply makes that even worse.

      I'm betting the insurance company and the NRA are finding ways to profit from this, at the expense of their members, and that the NRA is using this as a marketing tool to make their NRA legislation look 'safer' for the shooters.

      More than that, I have serious questions about the ethics and business practices of the risk insurer in writing and marketing this insurance. Without having investigate, my suspicion is they are in one of the notoriously bad / lax regulation states that does not protect insurance consumers.