Gun Makers May Be Bulletproof.

Recent decisions in New York and Louisiana indicate that the gun manufacturing industry may not be held liable for criminal acts committed with guns.

Two years ago, many thought that gun litigation would follow asbestos, pollution and tobacco as the next big issue in both tort liability and insurance coverage.

But gun manufacturers recently won two important appellate decisions. The highest courts in both New York and Louisiana found in April 2001 that gun manufacturers are not liable for criminal acts committed with guns. These decisions suggest that the gun industry may avoid the liability concerns that it had been facing.

In 1999, cities and private plaintiffs were suing gun manufacturers for criminal activity committed with guns. Plaintiffs were arguing that guns were unreasonably dangerous and gun-distribution methods were improper. Smith &Wesson entered into a major settlement on these issues.

These lawsuits had an immediate impact on the insurance industry Suits were filed over whether there was insurance coverage for gun litigation. Insurers changed their underwriting practices regarding the gun industry with some insurers dropping gun shops and other parts of this industry.

But then, New York and Louisiana courts ruled that gunmakers are not liable in these suits.

The New York decision, Hamilton vs. Beretta U.S.A., involved a suit by relatives of gunshot victims against handgun manufacturers. The New York court considered two liability theories that plaintiffs throughout the country have used in suits.

In the first theory plaintiffs argued that the gun industry was liable because its distribution methods were improper. The New York court approached this point as an issue of duty: Do gun manufacturers owe a legally recognized duty of care to gunshot victims? The court balanced the competing public-policy concerns. Ultimately, the court focused upon the relationship between gun manufacturers and perpetrators and concluded that it is appropriate to extend liability only if the defendant is in the best position to protect others against the risk of harm. This, of course, depends upon the relationship between manufacturers and shooters. The court concluded that the relationship between manufacturers and shooters is too distant to justify imposing liability on manufacturers.

While the first point resolved the issue, the New York court also considered market-share liability. This theory a departure from traditional tort principles, holds every manufacturer liable for every plaintiffs injury in proportion to each manufacturer's share of the market. The court said this theory was limited to circumstances involving both products that are fungible and injuries that cannot be tied to any one manufacturer's product. The court held that neither factor applied to guns. Guns are not fungible, and gun injuries often can be tied to a specific gun.

In Louisiana, the state Supreme Court considered a suit brought by the City of New Orleans, Morial vs. Smith & Wesson Corp. This suit involved special circumstances that may be peculiar to Louisiana. The state had passed a statute precluding government suits against gun manufacturers. New Orleans argued that applying the statute to bar suit was unconstitutional, because the statute was passed after suit was filed. The Louisiana Supreme Court, however, upheld the statute and dismissed the suit against Smith & Wesson.

With the high court opinions in Hamilton and the City of New Orleans, along with gun industry victories in some of the lower court decisions, the trend seems to be favoring gun manufacturers. But these decisions are probably not enough for plaintiffs to abandon their fight. After all, tobacco plaintiffs persevered through many defeats. Plaintiffs are likely to regroup and focus on a state that is perceived to be both friendly to plaintiffs and unfriendly to guns.

Even if manufacturers continue to win in court, at least two insurance issues will remain. First, gun makers may continue to seek coverage for the costs of defending against these suits. That is, even if manufacturers avoid any liability, they will incur defense costs. Some manufacturers may seek to recover these defense costs from their liability insurers.

The other issue, of course, is underwriting. When the suits began against the gun industry many insurers decided to stop writing insurance coverage for the various parts of this industry. With the recent legal victories by defendant gun manufacturers, some insurers may start rethinking that underwriting position.

Alan S. Rutkin, a Best's Review columnist, is a partner in Rivkin, Radler LLP, Uniondale, NY