Litigation Highlight: Federal Judge Grants Motion to Dismiss Claims Challenging San Jose Gun Insurance and Fee Requirements
In August 2022, shortly after Bruen was decided, Judge Beth Labson Freeman of the Northern District of California denied a motion for a preliminary injunction of a San Jose ordinance that requires gun owners to maintain firearm liability insurance and pay an annual gun harm reduction fee. Jake covered that decision here, including how the court determined that historical surety laws were sufficiently analogous to the city’s insurance requirement at the preliminary injunction stage. The court concluded back in August that:
Both regulations share similar, albeit not identical, deterrent purposes: surety laws were “intended merely for prevention” of future harm, while the Insurance Requirement is intended to “reduce the number of gun incidents by encouraging safer behavior.” Both schemes also achieve their purposes through similar means, namely the threat of financial consequences (either through a peace bond or higher premiums) for individuals deemed to be high-risk (either by a judge or an underwriter).
At the preliminary injunction stage, the judge denied the requested injunction as to San Jose’s insurance requirement on the merits, held that challenges to the fee requirement were not yet ripe because the city had not determined the amount of the fee, and rejected other state-law challenges to the ordinance. In a subsequent ruling in September 2022, Judge Freeman granted a motion to dismiss the Second Amendment challenge with leave to re-plead.
On July 13, after the plaintiffs filed an amended complaint, Judge Freeman issued a decision granting the city’s motion to dismiss. As to the insurance requirement, the judge noted that she initially determined the relevant conduct for purposes of the Second Amendment challenge was “owning or possessing a firearm without firearm liability insurance.” At the preliminary injunction stage, Judge Freeman found this to be a course of conduct implicating the Second Amendment and requiring a historical-tradition analysis because, “[t]o the extent Bruen accounts for the degree to which Plaintiffs’ Second Amendment rights have been burdened, that analysis would occur under the ‘historical tradition’ prong of the Bruen framework.” However, in her July 13 decision, the judge revised this framing of the relevant conduct. Because the ordinance “does not condition ownership on complying with the Insurance Requirement, as non-compliance with the Ordinance can only result in an administrative citation or fine [and] the City has no authority to seize a person’s gun under the Ordinance’s impoundment provision,” the judge found that mere ownership or possession of a gun—plaintiffs’ preferred framing—was not restricted by the ordinance. Judge Freeman reframed the conduct alleged in the amended complaint as “choosing to keep and bear arms at home without the burden of insuring liability for firearm-related accidents.” Ultimately, Judge Freeman held that this conduct was not covered by the Second Amendment. In other words, the judge appeared largely convinced by the city’s argument that “[h]olding insurance for an activity is not the same as participating in that activity.”
However, Judge Freeman proceeded to address consistency with historical tradition at step two of Bruen “for the sake of completeness.” The judge noted that “[t]he history of reallocating costs of firearm-related accidents—from which the Insurance Requirement descends—can be traced back to the early American practice of imposing strict liability for such accidents.” Judge Freeman found that the premium calculation inherent in an insurance system means that “the actual amount of the burden involves a risk evaluation tailored to the individual and analogous to ‘reasonable cause’ determinations under surety statutes.” The opinion also compares the insurance requirement to other requirements imposed by some shall-issue permitting laws—such as mandatory fees for fingerprinting, background checks, or training. Finding that “[t]he City has demonstrated that the Insurance Requirement is consistent with the Nation’s historical traditions,” Judge Freeman granted the motion to dismiss the Second Amendment challenge to the insurance requirement (and did so without leave to amend, as the plaintiffs had already amended their complaint).
Turning next to the fee provision, which requires that all gunowners pay an annual gun harm reduction fee to a selected non-profit, the judge found the challenge to be ripe. San Jose set the fee at $25 annually and, in the judge’s view, “[t]he fact that the fee amount is subject to change does not affect ripeness.” Judge Freeman observed that:
The Supreme Court in Bruen expressly contemplated regulations that may permissibly include fee payments, so long as the fees were not so “exorbitant [so as to] deny ordinary citizens their right to public carry.”
Noting that other shall-issue states impose fees higher than $25 for various licensing-related requirements and that the San Jose ordinance contains a hardship waiver, the judge found the provision in accord with the post-Bruen Second Amendment framework and again granted the motion to dismiss without leave to amend.
Judge Freeman also evaluated the city’s motion to dismiss plaintiffs’ claim that the fee requirement violates the First Amendment by requiring “San Jose gun owners to associate with or support [a] private group and to fund their message.” Judge Freeman held that, as the beneficiary organization of the harm reduction fee payments has not yet been identified, “the Court cannot determine if the Fee would fund any expressive activities and thereby [the claim] remains unfit for judicial determination.” The judge granted the motion to dismiss as to this claim with leave to amend, and also dismissed various other claims for declaratory relief, violation of the state constitution, and violation of California-specific taxation requirements.
I’ll focus primarily here on Judge Freeman’s dismissal of the Second Amendment challenge to San Jose’s gun liability insurance mandate. There is scholarly debate about the extent to which a firearm insurance mandate would actually produce the kind of individualized risk assessment that occurred under historical surety laws. For example, Adam Shniderman argues that gun insurance requirements are unlikely to actually resemble surety statutes in this regard because insurers will not inquire ex ante about gun ownership or risky gun behaviors and lack the means and incentive to uncover such information on their own. Therefore, Shniderman believes that “[p]remiums [will not be] risk-adjusted” and “[t]he threat of increased premiums or cancellation of coverage is unlikely to help ensure safe and lawful firearm use.” Stephen Gilles and Nelson Lund, whose scholarship is quoted in the motion to dismiss decision in the San Jose case, instead envision that “[c]ompetitive pressures would lead insurance carriers to keep the premiums for low-risk gun owners low, while charging higher premiums to those who are more likely to cause injuries to other people.” It’s possible, I think, that such an individualized system pricing in gunowner-specific risk could develop over time, but it’s not clear that this will take shape quite as quickly as Judge Freeman’s order suggests.
Judge Freeman also relies on a comparison to other shall-issue licensing requirements—including mandates to be fingerprinted, undergo background checks, obtain safety training, and so on—to uphold the insurance provision. Another comparison often made in this context is to automobile insurance. All states require drivers to have either proof of car insurance or the ability to pay for any damages caused in an accident. It’s also relatively well known that car insurance companies offer a variety of discounts to insureds, including for accident avoidance over a prolonged period of time, driving fewer miles per month, completing a defensive driving course, and so on. One way to conceptualize a firearms liability insurance program that is tailored to individual risk from the outset is that insurers might offer premium discounts based on completed safety training, proof of safe storage, etc. Because these discounts would adjust premiums without requiring insurance companies to prospectively identify risky gun owners, and because it would be in the insurance company’s interest to verify compliance, such a system might indeed approach Gilles and Lund’s vision of a properly-functioning gun insurance system. However, serious questions remain about how such a system would be implemented—including whether homeowners’ or renters’ insurance policies would even cover firearms-related liability and to what extent, whether a market for standalone gun liability insurance exists, and “[t]he conventional wisdom  that liability insurance does not cover intentional torts.”