A federal appeals court recently ruled in favor of two major insurers, deciding they don’t have to defend or pay claims for a firearms retailer facing lawsuits over the sale of unfinished gun kits. The case focused on Primary Arms, a Texas-based business accused of selling firearm parts designed to bypass federal regulations.
The decision came down on December 10 from the Second Circuit. At the heart of the case was whether the insurer’s policies covered incidents caused by accidents or intentional actions. Primary Arms held liability insurance that covered damages only when caused by an "occurrence," which the policy described as an accident or unexpected event.
The legal trouble for Primary Arms began in 2022 when New York State and the cities of Buffalo and Rochester filed lawsuits. They claimed Primary Arms deliberately marketed and sold unfinished gun frames and receivers without serial numbers or background checks, allowing buyers to convert them into untraceable firearms. The suits said the retailer shipped over 25,000 packages containing these parts into New York over six years and provided the tools and instructions to complete the conversion. They argued this strategy attracted people barred from owning firearms and contributed to a rise in gun violence, pushing cities to spend more on law enforcement and public health services.
When Primary Arms asked its insurers to defend them and cover any damages, both companies refused. The insurers then sued, asking the court to clarify that their policies did not apply to this situation. The case was decided under Texas law, which applies a strict rule looking only at the complaint and policy wording, not outside facts.
The court used a two-part test to assess the claim: Did Primary Arms act intentionally? And did those actions lead to injuries that were expected or could reasonably happen? The court said yes to both. It found Primary Arms intentionally targeted customers who were likely banned from owning guns or posed public safety risks. Because the damage was foreseeable, the court ruled this was not an accident and therefore not covered by the policies.
Primary Arms argued the lawsuits included claims of negligence, which could imply accidental harm, but the court wasn’t convinced. It said the facts showed deliberate decisions made to profit from questionable business practices. The retailer also wanted a special rule for product liability cases that would focus only on whether harm was intended, but the court rejected that, sticking with the established test.
While normally indemnification decisions wait until the original case concludes, Primary Arms and the insurers agreed the defense ruling would settle both defense and indemnity questions. Primary Arms chose not to challenge this on appeal.
This ruling sends a clear message to insurance companies. When policyholders face claims over intentional actions, especially in product sales, coverage isn’t guaranteed. If a complaint shows that a business knowingly aimed products at prohibited buyers or set up its operations to dodge regulations—resulting in foreseeable harm—that activity doesn’t count as an accident under Texas law.
For insurers, this case is a reminder that the terms "occurrence" and "accident" still have real meaning. Intentional acts that predictably cause harm don’t fall under standard liability policies, even if the insured didn’t mean to hurt any specific individual. The court also reinforced the importance of sticking to complaint allegations and policy language when deciding coverage, without digging into facts outside the case or waiting for its outcome.