(Article from Insurance Law Alert, January 2026)
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Holding
Insurance companies have no duty to defend or indemnify underlying lawsuits related to harms from the sales and marketing of “ghost gun” parts because the underlying lawsuits do not allege an “accident” and therefore no occurrence under Texas law, to trigger coverage. Granite State Ins. Co. v. Primary Arms, LLC, 161 F.4th 160 (2d Cir. 2025).
Background
Primary Arms is a manufacturer and retailer of gun part kits that can be used to assemble unregistered, untraceable guns known as “ghost guns.” Because Primary Arms sells firearm parts and not the fully assembled firearm, the buyer does not receive a background or firearm license check prior to the sale. The later-assembled firearm also does not have a serial number like a finished firearm would. The State of New York and the cities of Buffalo and Rochester filed lawsuits against Primary Arms seeking to recover economic losses stemming from the increase in gun violence and crime linked to the company’s products. The underlying lawsuits allege that Primary Arms marketed its products to consumers who otherwise would have been unable to legally obtain firearms, those wishing to skirt state-mandated background checks, and those wanting untraceable guns.
Primary Arms’ insurers filed a declaratory judgment action seeking a ruling they had no duty to defend or indemnify the underlying suits. The policies provide coverage when there is an “occurrence” defined as an “accident.” The district court ruled that the policies did not obligate the insurers to indemnify or defend Primary Arms because the underlying suits did not allege an “accident.” The Second Circuit affirmed.
Decision
The principal issue was whether the underlying suits allege harm caused by an “accident” as that term is used in the policies. The policy did not define the term “accident”, so the court looked to Texas law to find the term’s ordinary meaning. Under Texas law, an “accident” is defined as a “fortuitous, unexpected, and unintended event.” Conversely, an act is not an accident if it: (1) is “intentional”; and (2) “results in injuries that ordinarily follow from or could be reasonably anticipated from the intentional act.” The Second Circuit held that the underlying suits did not allege an “accident” because Primary Arms committed intentional acts (selling and marketing their products in New York to individuals who would otherwise be disqualified from purchasing finished firearms) that resulted in injuries that ordinarily follow from or could be reasonably anticipated from the intentional acts (i.e., increased gun-related incidents and ensuing financial burdens). Primary Arms argued that coverage should apply because the underlying complaints alleged theories of negligence; the Second Circuit rejected this argument, concluding that the negligence allegations were mere “conclusory legal labels” inconsistent with the “basic facts underlying the claims.”
Comments
Policyholders often argue that an event should be deemed accidental based on the absence of subjective intent to cause harm or an underlying allegation of negligence. This decision reinforces the principle that for insurance coverage purposes, the determination of whether an “accident” exists turns primarily on whether the initial acts were intentional and whether the resulting harm could be reasonably anticipated—not whether the policyholder intended the specific consequences. This principle is significant in coverage cases involving public nuisance claims arising out of the opioid epidemic, environmental damage, social media cases, and other firearms cases.