A federal judge has ruled gun seller Red Dot Arms can’t compel its insurance company to cover its legal defense against accusations of illegally transferring a gun allegedly connected to the 2022 Highland Park Independence Day parade shooting spree.
U.S. District Judge Robert Gettleman issued an opinion last month, ruling in favor of Acceptance Indemnity Insurance Co., which sought a declaration it doesn’t need to defend or indemnify Red Dot in 12 lawsuits from 28 shooting victims, all named as defendants in Acceptance’s filing.
The lawsuits all assert Red Dot broke federal and local laws in the way it transferred a Smith & Wesson M&P (Military & Police) semiautomatic rifle to the accused shooter, Robert Crimo III, after taking possession of the weapon from another gun seller, identified as Bud’s Gun Shop.
The lawsuits allege that the gun meets the legal definition of an assault rifle under Highland Park and Highwood ordinances banning such weapons. The suits say Red Dot should not have allowed Crimo III to take possession of the rifle while knowing he lived in a municipality prohibiting possession, so the gun shop should be held partially liable for Crimo III's alleged actions.
The complaints also accuse Red Dot of violating “the national Firearms Act by transferring and selling the firearm without filling out the proper transfer forms, getting approval of the ATF, paying transfer taxes or registering the firearm.”
Red Dot sought coverage under its commercial policy with Acceptance, effective from Oct. 3, 2021, to Oct. 3, 2022, of $1 million for each occurrence with a $2 million liability limit for general and products completed operations. After Acceptance turned to the court for a declaration of no duty to indemnify, Red Dot filed a counterclaim seeking a declaration asserting the validity of its coverage. The parties each moved for summary judgment.
“Under Illinois law, which the parties agree applies to this dispute, the duty to defend is much broader than the duty to indemnify,” Gettleman wrote.
Acceptance pointed to policy exclusion for claims related to “ ‘bodily injury’ or ‘property damage’ arising out of any acts committed with a ‘firearm’ or ammunition that is sold, distributed or transferred by any insured where such sale, distribution or transfer is in violation of ATF, federal, state or local laws or regulations for the lawful transfer of a ‘firearm’ or ammunition.”
Gettleman agreed “the exclusion is clear and unambiguous,” noting the underlying complaints allege Red Dot, which conducted a background check in the summer of 2020, should’ve known Crimo III couldn’t buy or possess the rifle in question through his identification or completed federal weapon transaction form.
Red Dot argued the insurance policies should apply because the complaints also alleged intentional and negligent infliction of emotional distress, apart from the allegations of violating laws. It suggested the possibility it could still face those claims even after proving it completed proper paperwork and complying with all ordinances, Gettleman explained.
“However, there are no factual allegations of any wrongdoing or negligence by Red Dot except for violating the ordinances, and it is the factual allegations, not the legal label that is important,” Gettleman wrote. “Absent such allegations, there is no conduct alleged in the underlying complaints that would arguably be covered by the policy.”
While Gettleman agreed with Red Dot it is improper for him to consider the merits of the complaints at the root of the indemnity dispute, he said he reached his decision based on the nature of the underlying factual allegations, not whether those allegations are true. And even if the exclusion would somehow not apply, the policy has a second exclusion providing “insurance does not apply to any ‘bodily injury’ or ‘property damage’ arising out of any actual or alleged ‘assault and battery.’ ”
Gettleman rejected Red Dot’s argument that exclusion couldn’t apply because the underlying plaintiffs alleged the gun sale was a proximate cause of their injuries in addition to Crimo’s alleged conduct, calling that position an unwelcome intermingling of the principles of contract law and tort principles.
Michael Cleary Bruck, of Spellmire Bruck, of Chicago, represented Red Dot. He did not respond to a request for comment.