Lockton Cos. L.L.C. agreed Wednesday to pay $7 million to New York regulators to settle charges that the brokerage’s National Rifle Association-branded insurance program violated state law and breached excess and surplus lines placement rules.

The New York State Department of Financial Services said the “Carry Guard” insurance program, which was administered by the brokerage’s Lockton Affinity L.L.C. unit, unlawfully provided liability insurance to gun owners.

The program, which provides gun owner-liability coverage to NRA members, covers acts of intentional wrongdoing and improperly provided coverage for criminal defense for any act of self-defense covered under the policy for gun owners and their resident family members who may be charged with a crime involving a firearm, Financial Services Superintendent Maria T. Vullo said in a statement.

The NRA, which does not have a license to conduct insurance business in New York, actively marketed the program through a website, email, and direct mail, among other channels, the statement said.

In a statement, Lockton said “we believe this settlement is the best way to resolve these issues.”

“When we learned of New York regulatory issues in our Affinity business in the course of an investigation by the New York DFS,” the statement said, “we immediately went to work to begin resolving them. As part of our settlement, we will continue to cooperate with the New York regulators to remediate any issues or concerns.”

“The NRA acted appropriately at all times,” William A. Brewer III, partner at Dallas-based Brewer, Attorneys & Counselors and counsel for the NRA, said in a statement. “The NRA relied upon Lockton and its assurances that the program complied with all applicable state regulations. Lockton, as the subject matter expert, was obligated to oversee the administration, marketing and promotion of this insurance program.”

Mr. Brewer also said, “we will continue to work cooperatively with the DFS in connection with its inquiry and to promote the interests of NRA members and law-abiding gun owners who participated in this program.”

The DFS took an aggressive stand against the NRA and insurance companies in an April 19 memo where Ms. Vulo said the department “encourages its insurers to continue evaluating and managing their risks, including reputational risks, that may arise from their dealings with the NRA or similar gun promotion organizations, if any, as well as continued assessment of compliance with their own codes of social responsibility.”

In February, Lockton said it would no longer sell NRA-endorsed products, joining other insurance financial industry companies ending deals with the NRA.

DFS’s investigation found that Lockton issued 680 Carry Guard insurance policies to New York residents between April and November 2017, the statement said.

Lockton carried out such functions as marketing the insurance, binding the insurance, collecting and distributing premiums and delivering policies to insureds. 

From roughly January 2000 through March 2018, Lockton and the NRA offered at least 11 additional insurance programs to new and existing NRA members in New York and elsewhere. During that time, Lockton collected about $12 million in premiums and $785,460 in administrative fees from policyholders, under the Carry Guard Program and other NRA programs.

DFS’s investigation found that Lockton made inaccurate representations in connection with affidavits of compliance with New York Insurance law related to excess and surplus lines insurance, which requires brokers to first approach three separate authorized insurers to see if any of them will write the coverage for the risk.

In placing the Carry Guard Program and other NRA program insurance policies Lockton only obtained declinations from three authorized insurers once annually for a single policy for each of the insurance programs, and then relied upon the single annual declination with respect to all other insureds who received policies under the programs.

Among other stipulations of the settlement, Lockton also agreed to refrain from participating in the Carry Guard insurance program, or any similar program in New York and from providing Carry Guard or similar insurance policies for or to New York residents regardless of where they are written.