'Ham-handed': Supreme Court justices probe how New York discouraged insurers from working with NRA

WASHINGTON – A majority of the Supreme Court sounded ready Monday to stick with the current standard for how much government officials can say about businesses they regulate, but left uncertain how that would resolve a case involving the National Rifle Association.

The NRA contends New York regulators went too far in pressuring insurance companies and banks to stop doing business with the group because of its gun advocacy. Under Supreme Court precedent, government officials can use their bully pulpit to persuade people or groups to take action, but not coerce them.

But the New York Department of Financial Services insists the NRA and three insurance companies admitted to peddling unlawful policies. Criticism of the NRA by the department’s superintendent, Maria Vullo, and Gov. Andrew Cuomo coincided with the enforcement action rather than dictated it, according to government lawyers.

Justice Brett Kavanaugh said he was surprised to see the Justice Department’s solicitor general acknowledging that Vullo may have gone too far in a meeting urging Lloyd’s of London not to do business with the NRA.

“It's a bit jarring, I guess, for me that the solicitor general is on the other side from you in this case, given that the solicitor general represents the United States,” Kavanaugh said.

'Ham-handed': Alito questions how New York regulators dealt with the NRA

Neal Katyal, a lawyer representing the New York regulators, agreed that government officials can’t coerce action. But the former acting solicitor general argued if the high court allows lawsuits to challenge enforcement from organizations that have already admitted breaking the law, it will open the door to widespread lawsuits claiming retaliation from regulators.

“They were doing massively illegal things,” Katyal said of NRA and three insurance companies that marketed insurance policies through it.

Justice Samuel Alito grilled Ephraim McDowell, assistant to the solicitor general, in a sarcastic way whether the federal government was angling for ways to allow New York organizations to pressure organizes.

“They gilded the lily or whatever the phrase is. I mean, they were ham-handed about this. The people up in New York are rubes," Alito said to laughter. "They don’t really understand how to do this. If you do this in a more sophisticated manner, you can achieve what you want to achieve.”

Ephraim McDowell, assistant to the solicitor general, said the high court should consider all of Vullo's messaging, not just a letter sent to insurance companies and banks warning of "reputational risks" from doing business with the NRA may have gone too far. The letter urged businesses to review their relationship with the NRA and "take prompt actions to managing these risks."

Why did the NRA sue New York regulators?

The NRA dealt with insurance policies it was offering members. The NRA began marketing policies 2000 and in April 2017 created policies called “Carry Guard,” to cover expenses from using a legal firearm in self-defense. "Carry Guard" policies were administered by Lockton and underwritten by insurance companies Chubb and Lloyd’s of London.

But the Department of Financial Services began investigating in October 2017 and Chubb and Lockton suspended the Carry Guard program the next month.

By February 2018, in the aftermath of a horrific school shooting in Parkland, Florida, Vullo began meeting with insurance executives who did business with NRA. What was said is disputed, but Lloyd’s of London decided to stop underwriting firearm-related policies that month.

On April 19, 2018, Vullo sent “guidance letters” to New York banks and insurance companies “in the wake of several recent horrific shootings,” listing Columbine High School, Sandy Hook Elementary School and a Las Vegas music festival. Vullo said the “social backlash” against the NRA and other gun-rights groups “is demanding change now.”

“They are seeking to penalize the NRA because of its speech advocating for gun rights,” said David Cole, the national legal director of the American Civil Liberties Union Foundation who argued for the NRA.

How did New York regulators respond?

The Department of Financial Services determined the NRA’s insurance products were “unlawfully marketed” because the group lacked the necessary license. The department also bars insurance for intentional acts and criminal defense costs such as "Carry Guard," which critics nicknamed “murder insurance."

In May 2018, two of the insurance companies admitted to unlawfully providing insurance in New York and agreed to pay $7 million from Lockton and $1.3 million from Chubb. In December 2018, Lloyd’s acknowledged violating state law and agreed to pay a $5 million fine.

The NRA agreed to pay $2.5 million and to refrain from offering insurance in New York for five years.

“We think it was an exercise of legitimate law enforcement,” Katyal said.

NRA wants to challenge 'scarlet letter' of criticism from regulators

Justices asked Cole how the NRA would like to resolve the case. Cole said the existing test for how far regulators can go would be fine.

“That’s about all I need,” Kavanaugh said to laughter.

Justice Amy Coney Barrett also asked whether the case would break any new ground. Cole said it would not.

Justice Neil Gorsuch cited the 60-year-old precedent called Bantam Books as the benchmark for prohibiting government officials from coercing people to stifle their free speech.

“It seems like we're all in agreement that the law here is clearly established under Bantam Books and it's just a matter of application,” Gorsuch said. “Is that right?”

Cole argued that the high court could send the case back to lower courts so the NRA could challenge Vullo’s advocacy, remove her guidance letter citing the “reputational risk” of dealing with NRA that remains on the department’s web site and the legitimacy of canceling the insurance policies.

“The real damage in terms of putting the scarlet letter on the NRA comes from her public actions,” Cole said of Vullo. “I would urge you to address the whole picture here.”

The Justice Department weighed in on the case because prosecutors and regulators warned about the Supreme Court opening the floodgates to more lawsuits.

“What I’m worried about is your position ultimately reducing to any time a regulator enforces the law against an entity that does business with an advocacy organization, we have a First Amendment violation,” Justice Ketanji Brown Jackson told the NRA lawyer.

This article originally appeared on USA TODAY: Supreme Court considers curbing New York regulators dealing with NRA