Note: Your comments are welcome below, but please keep them to the insurance underwriting and coverage aspects of this issue, not the divisive emotional or political aspects of gun ownership. Comments that do not stick to the insurance issues will likely not be approved for publication.
In August, I blogged about “Lemonade’s Bizarre New Self-Service Approach.”
This “self-service” approach is pitched by Lemonade as a benefit to customers who can apparently delete coverage for spouses, mortgage companies and others unilaterally, something that could likely create serious problems for consumers who are not counseled on the possible repercussions of such actions. In other words, Lemonade is reducing their workload, increasing consumers’ risks of loss, and making their customers thank them for it.
Earlier this month, I posted on my LinkedIn Discussion page about “Lemonade’s ‘Zero Everything’ Policy.”
Again, Lemonade touts something that largely benefits…Lemonade. And they do it in a way that makes consumers think it’s good for them.
Just this week, I learned of yet another odd Lemonade decision about a new coverage stance on guns and gun owners. This is from their web site blog:
“Guns, And Why Lemonade Is Taking A Stand“
According to the blog post, Lemonade’s next policy form revision will include the following:
- We will exclude assault rifles altogether. We simply don’t understand why civilians need military-grade weapons, and we prefer not to insure them.
- We will add requirements that firearms be stored securely and used responsibly, upon penalty of voiding coverage. We believe guns should be treated mindfully and soberly, not as a plaything, a status symbol or an ideological prop. Reasonable people, we believe, can agree on that.
On the first point, they did not elaborate on how “assault rifle” will be defined, nor did they indicate whether the exclusion will be for loss of the rifle itself or, more likely, liability claims for BI to others. If the latter, this policy sounds like it punishes victims as much as gun owners.
Lemonade’s HO policies already exclude liability coverage for intentional losses like the recent Las Vegas shooting, so even if the perpetrator had an HO policy with them (or most other insurers), it wouldn’t cover victims’ claims. However, what about an accidental negligent shooting or BI that arises when someone takes a gun owned by someone else and the owner is sued? Most HO policies would respond to such claims. However, it doesn’t sound like Lemonade wants any part of that.
On the second point, they say that their revised policies will require that all firearms be stored “securely and used responsibly” or there is no coverage. How do you determine what “securely” and “responsibly” mean if these terms are the ones actually used in the revised policy language? And, again, if such an exclusion is invoked, who is the loser? It sounds like the victim(s) of such negligence now have no insurance proceeds to access.
So, who is potentially the primary beneficiary of these changes? Sounds like Lemonade is since they would not be paying claims to innocent victims of the negligence of their insureds. Insurance policies sometimes exclude BI or PD that arises from illegal activities, though most auto policies, for example, don’t exclude BI or PD that arises from driving under the influence. The reason is that one of the primary purposes of liability insurance, from a social aspect, is to benefit innocent victims of such careless actions.
However, what we could be seeing with this change from Lemonade is that their insurance products may base coverage on what THEY think is morally right or wrong. Their blog post says they are being upfront about what THEY think is “good” and not good, and that they’re not into “gun worship” or “vigilante” gun owners, and that they are doing their part to “solve gun violence.”
Sounds like what they’re doing is simply taking away a victim’s source of financial recovery for the negligence of Lemonade’s customers. Does that benefit society, or does it benefit Lemonade?
Bill Wilson
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Bill,
This is a great post!! I think Lemonade is a horrible idea and is going to blow up (no pun intended) in the consumers face. Most people today don’t understand their current insurance, and certainly don’t realize the exposure they are getting by being a client of Lemonade.
Also, I think this is nothing more than a political statement to try to generate mainstream exposure. That’s not a bad thing, but that’s all it is in my opinion.
Thank you for your insight into the insurance industry. As a relative young agent (less than 5 years) I love reading your posts.
Bill
When coverage is excluded for the gun owner and there is an unintended accident not covered, the plaintiff does not have the defendant’s insurance policy for payment of damages but only the assets of the defendant. That could be problematic. It seems to me that is also something that affects the public interest. So while Leomade is dressing up their actions in the cover of the public good, they are really just reducing their own pay outs, as you stated.
I can’t wait to see the actual policy form language that Lemonade uses to implement this “stand” they are taking. I don’t see how they are going to define “securely” and “responsibly” in any way that will not eventually result in messy litigation. I suspect that the real motivation for this coverage form change is to deter most gun owners from becoming Lemonade customers at all. Much like late night comedians seem content, if not happy, to write off part of their market with whom they have philosophical differences. I own a hunting rifle and shotgun, and a handgun for personal protection. All properly licensed and permitted and well within Lemonade’s maximum coverage limit of $2500. But I wouldn’t consider Lemonade’s product for a second given the vagueness of their stated conditions on coverage (i.e., “securely” and “responsibly”). And I suspect they are okay with that.
As they expand into other states, they may also run into problematic laws like this one in Georgia:
Excluding or denying coverage on basis of lawful firearms possession
No policy of insurance issued or delivered in this state covering any loss, damage, expense, or liability shall exclude or deny coverage because the insured, members of the insured’s family, or employees of the insured will keep or carry in a lawful manner firearms on the property or premises of the insured.
O.C.G.A.§ 33-24-30.1
It is difficult to keep just to the insurance aspect of this when it is obviously a political decision. “…Lemonade was founded to make insurance into a social good.” Even the vaguery of the language used such as the ambiguous “assault weapons” which has never been adequately defined even under laws designed to ban them. Since they then referenced military-grade weapons one is left with the idea that those are the weapons they will not cover. However the cost and steps needed (Including an FBI background check) to legally possess* a military-grade weapon severely limit the number of people who actually possess them. If they only intend to exclude those then their coverage limit would do so automatically since they are usually over $10,000.
Unfortunately their liability language is even more vague. “Used responsibly” is open to interpretation since even defensive-use is severely curtailed in some states requiring one to withdraw multiple times before using a weapon. Failing to fulfill such requirements, no matter how fearful for one’s life you may be, can bring criminal penalties and thus the “illegal use” exclusion to coverage.
* https://www.quora.com/Is-it-legal-for-a-normal-citizen-to-buy-a-military-grade-fully-automatic-assault-rifle-in-the-US
You bring up an interesting point that I believe is often overlooked. In this case, who are the ultimate benefactors of policies that include this coverage? It’s the victims of gun violence who will receive the benefit. This is the inherently human and decent side of our business and it may enhance public understanding of what it is we try to do. Insurance companies not only try to solve problems for their customers, but there are some inherently moral social goods that our product and industry addresses as well.
I agree with your argument that Lemonade choosing not to pay for these claims isn’t really solving for the public good. What it is really doing is allowing them to capture attention off of a national tragedy and score points socially in a deceptive manner. I’m glad someone has called them out, It’s one thing to take a stand, however, if your stance is going to negatively impact the exact people you say you are trying to help, that’s not an entirely honest or responsible position. What’s more, I find it in poor taste to use this unfortunate headline as a marketing piece.
While there are some great aspects of innovation that Lemonade is deploying which I think will move our industry forward, there are some other elements to their business plan and tactics that are inherently intellectually dishonest. Thank you for shining the spotlight on this issue.
This should be good news for the rest of the insurance industry. There are an estimated 100,000,000 gun owners in the USA so it looks like they are excluding a third of the population as potential customers. The term “assault rifle” is a made up term to make guns sound scary to the ignorant public. (ignorant in the true meaning, not a derogatory comment) If a rifle is used for defensive purposes is it still an assault rifle? Wouldn’t it be a defensive rifle in that case? So if used in a defensive situation is it covered by the policy or not? If they keep adding these coverage restrictions, it will be that much easier to sell against them. Hope they keep it up!
One thing you have to admire about Lemonade. They can spin a yarn. Their writers are particularly talented.
Taking a standard homeowners limitation to which nearly all policies subscribe, and using it to make a poignant marketing/political statement is heady stuff. But the WAY they contort their stance and compare that to the rest of the industry can only be compared to genius:
“But while we respect gun ownership, we’re not into gun worship” “This is why our policies limit the amount we will pay out for the damage or theft of firearms to an entirely adequate $2,500. If you own more than $2,500-worth of firearms, we recommend trying one of our competitors. They seem to all offer additional coverage. We don’t.”
As the readers of Mr. Wilson’s excellent work know, EVERY standard ISO homeowner’s policy limits theft of guns. It’s what they claim as unique – and – what they don’t proclaim that makes this campaign distorted.
Lemonade then ups the ante:
“In our next version, we plan to add more protections around firearms”.
Catch that? “More protections”. Wow.
The writing continues, inferring that the rest of the industry is irresponsible. As in supportive of vigilantes.
Does anyone doubt that Lemonade knew in advance:
1. That the press would eagerly carry the water for their announcement on this controversial topic?
2. The issue would resonate with a particular demographic?
3. That the public would be justifiably ignorant of the standard coverage provided by the majority of insurance policies?
4. That those of us in this honorable industry would respond and continue to promote their spin by rallying against it? (Shame on me)
The writing is evil genius. The gun allegory plays on illiteracy rather than seeking to educate and inform. At best, the effort is non-constructive. At worst, it is a less than subtle effort of manipulation. Machiavellian rather than straightforward.
What does it say about a company that will take such pains to use a tragedy for this purpose? Are they genuinely interested in helping those they serve? Who are they really? Lemonade or Lemontwist?
Great insight Bill. So with the social good concept what is next? Maybe certain books……….mixed breed dogs like Labsky lab and huskie (because of genetic engineering)…………muscle cars (they go fast and could hurt someone)………butter knives……….an axe (used to chop wood)…….fire losses caused by lite cigarettes………on and on
I think they already have a thing on dogs. Cigarettes are bad, so not covering fires caused by smoking would be good for society.
From Agency Nation:
https://www.agencynation.com/lemonades-quest-for-attention-gone-too-far/
facepalm
The true test will be the leagal challenges. Courts decide issues on many different grounds. If the argument is of the expectation of BI or PD to others. They “Lemonade “ could be in trouble. Especially, given that the language is so ambiguous.
This all sounds very subjective. That is not the anticipated and expected reach or scope when a consumer talked coverage.