No Coverage for Gun Store in Highland Park Shooting Case

The United States District Court for the Northern District of Illinois, in an opinion by Judge Gettleman applying Illinois law, granted an insurer’s motion for summary judgment, holding that Acceptance Indemnity Insurance Company (“Acceptance”) had no duty to defend or indemnify its insured, Red Dot Arms, Inc. (“Red Dot”), in twelve underlying lawsuits brought by victims of the mass shooting that occurred at a Fourth of July parade in Highland Park, Illinois.  

Red Dot is a retail gun store. Acceptance issued a commercial general liability policy to Red Dot for the relevant policy period. The underlying lawsuits all allege that Red Dot transferred the firearm used in the shooting to Robert Crimo III in violation of federal law and local ordinances, and that Crimo used the firearm to assault and batter the underlying plaintiffs.  

Acceptance argued that it had no duty to defend or indemnify Red Dot because coverage for the claims was precluded by the Operation of the Outdoor Commercial Definitions and Exclusions Amendment Endorsement B.8, which provided that the insurance “does not apply 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.” 

The District Court determined that the exclusion’s language was clear and unambiguous. Each underlying complaint alleged that in the summer of 2020, Red Dot transferred the rifle to Crimo, but should have known that Crimo could not legally buy or possess the rifle because his identification and completed federal transaction form would have shown that he resided in either Highwood or Highland Park, both of which prohibited him from acquiring or possessing the rifle. The District Court concluded that the underlying lawsuits alleged that the bodily injuries arose out of acts committed with a firearm sold or transferred by Red Dot in violation of federal and local law. The only factual allegations against Red Dot are that it transferred the firearm in violation of the ordinance and federal law. Thus, the underlying claims fell within the exclusion, and Acceptance had no duty to defend or indemnify Red Dot. 

Red Dot argued that the exclusion did not apply because the underlying complaints also alleged negligence. The District Court rejected this argument because, although the complaints alleged two counts of negligence, “there were no factual allegations of negligence by Red Dot except for violating the ordinances, and it is the factual allegations, not the legal label that is important.” Red Dot also argued that the court should not determine if the exclusion applied because “the question whether the firearm sale violated any law cannot be resolved in this declaratory suit when the question is one of the ultimate issues on which recovery is predicated in the underlying case.” The District Court also rejected this argument because it only needed to determine if Acceptance had a duty to defend by comparing the factual allegations of the underlying complaint to the policy, it did not determine whether Red Dot violated the ordinances. 

Despite Red Dot’s contentions to the contrary, the District Court also noted that even if the exclusion did not apply, the policy’s assault and battery exclusion, which provided that the “insurance does not apply to any ‘bodily injury’ or ‘property damage’ arising out of any actual or alleged ‘assault and battery,’” precluded coverage. The injuries alleged in the underlying complaints all arose from Crimo’s alleged assault and battery of the underlying plaintiff. Acceptance Indem. Ins. Co. v. Red Dot Arms, Inc., 2023 WL 7629820 (N.D. Ill. Nov. 14, 2023).