Brazas Sporting Arms, Inc. was insured by a CGL policy from American Empire Surplus Lines Insurance Company for the period of 1992 through 1997. A dispute arose between the two parties due to lawsuits filed against the insured in 1995.
Brazas, a firearms distributor, was named as a defendant in two separate suits. In both instances, Brazas was one of various parties named and accused in making firearms available in an irresponsible manner. Specifically, Brazas, et. al., were accused of either making or distributing weaponry in numbers that ignored legitimate consumer need; in other words, creating an illegal market. The illegal firearms, in turn, were widely available to criminals for a multitude of acts that resulted in substantial bodily injury and property damage. While accused of contributing to this situation, none of the defendants, (including Brazas) was accused of making or selling any specific model or make of weapon, just producing and distributing firearms.
Brazas notified its insurer, American, of the suits, but the carrier denied any responsibility to either defend or cover the legal actions. Brazas asked a court to find that American was obligated to provide a defense against the suits and, should it be necessary, pay any related damages. Brazas appealed after the lower court ruled in favor of American, stated that it owed no obligation to defend or cover Brazas.
Both the lower and higher courts examined the policy language of the CGLs that covered Brazas. The policies were identical, modified by wording that excluded coverage for any BI or PD related to the Product and Completed Operations hazard.
The higher court reviewed all of Brazas’ arguments, specifically that American’s sale of a Comprehensive General Liability policy with the products/completed operations exclusion was misleading, that the policy provisions were in violation of state consumer protection law and that the carrier acted in poor faith by failing to give a detailed explanation of the grounds for denying coverage. The higher court disagreed with Brazas’ position. It found the policy wording to be clear, that the company actions did not violate state law and that the denial procedure was consistent with its interpretation of the modified CGL. The lower court’s granting of summary judgment in favor of American was affirmed.
Brazas Sporting Arms, Inc., Plaintiff, Appellant, v. American Empire Surplus Lines Insurance Company, Defendant, Appellee. No. 99-2055 United States Court of Appeals For the First Circuit, filed July 13, 2000 Firearms Litigation Clearinghouse.