INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Ghost products, ghost insurance
Everything is bigger in the Lone Star State … even litigation! A Texas company, Primary Arms, LLC (Primary), found itself in a large, complex predicament. Primary is a seller and distributor of firearms and parts. It was insured under general liability policies issued by two carriers, Granite State Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pennsylvania (From herein to be referred to as Gran/Union). The policies provided coverage against accidental harm.
In 2022, the cities of Buffalo and Rochester, New York, both sued Primary, among other firearms retailers. In these underlying lawsuits, the cities alleged that Primary’s marketing and sales in their areas led to economic damages due to increased gun violence. The underlying lawsuits sought recovery of law enforcement and community service expenses created by the increased flow of firearms.
Upon receiving notice of the underlying lawsuits, Primary requested Granite State to defend against them and, if necessary, pay any resulting settlements. While the request was just made to Granite State, it was Gran/Union (both insurers) that sent denials of Primary’s claim. Then the insurers sought a declaratory judgment that there was no obligation under their policies to either indemnify or defend Primary. Primary then filed a summary judgment in support of their request. After a court found in favor of Gran/Union, Primary appealed.
Once in the hands of the higher court, the focus was on the insurers’ argument. Gran/Union held the position that the underlying lawsuits did not claim that Primary was responsible for accidental harm. Rather, the cities argued that economic damages took place because Primary emphasized marketing and selling firearm parts and kits.
They specifically alleged that Primary went to great effort to cater to clientele that wished to avoid securing firearms capable of being traced. Finished guns require permanent stampings of serial numbers. However, unfinished guns have no such requirement. Therefore, simple acts of leaving a couple of holes undrilled meant that nearly complete guns could be sold without serial numbers. Therefore, both their marketing and their products were geared towards clientele seeking firearms who normally would be barred from securing finished (serialized) firearms.
Primary’s marketing and sales efforts were intended to gain financially from a niche market. Thus, as alleged in the underlying lawsuits, Primary created a surge in untraceable firearms (also known as “ghost guns”) that are favored by persons having criminal intent and increasing the number of incidents of domestic violence, murders and suicides. The court agreed with an extension of the allegations that increased harm was foreseeable from Primary’s marketing, sales and shipping activity.
The higher court did consider several of Primary’s counter-arguments. Specifically, Primary argued that 1) their actions constituted negligence, 2) were deserving of being reviewed as a products-completed operations case, and 3) their conduct involved product liability. Finally, Primary argued that the lower court treated their conduct as legal theories rather than factual allegations and only the latter are properly subject to judicial review.
Regardless, the higher court found Primary’s arguments unpersuasive, determining instead that Primary’s conduct constituted deliberate actions with foreseeable consequences. The result was the district court affirming the lower court decision in favor of Gran/Union. Primary’s actions were deemed intentional and the policies were not obligated to defend or indemnify.
Granite State Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA. v. Primary Arms, LLC—U.S. District Court for the Southern District of New York—No. 24-2748-cv—December 10, 2025.
