Insurers Act to Limit Exposure
                   In Suits Filed Against Gun Makers

                   By DEBORAH LOHSE and VANESSA O'CONNELL
                   Staff Reporters of THE WALL STREET JOURNAL

                   As litigation mounts against gun makers and distributors, liability insurers
                   are taking steps to limit their exposure.

                   Several insurers have notified gun companies and industry trade groups
                   that they won't necessarily cover damages awarded in lawsuits, including
                   suits brought by municipalities seeking to recover public costs related to
                   gun violence.

                                        The insurers' stance creates a danger for
                                        smaller gun companies, which industry officials
                                        have said might be forced to seek
                                        bankruptcy-court protection if faced with
                                        sizable verdicts. Without insurance coverage,
                                        the firearms industry as a whole also could be
                                        forced to consider settling lawsuits rather than
                                        fighting them.

                                        The move to limit coverage comes as more
                                        cities are gearing up to sue and after a federal
                                        jury in Brooklyn, N.Y., this month found that
                   15 of 25 gun makers distributed weapons negligently. In the Brooklyn
                   case, brought by the families of seven shooting victims, the jury imposed
                   $520,000 in damages against three gun manufacturers: the Beretta U.S.A.
                   Corp. unit of Italy's Beretta SpA; American Arms Inc.; and the Taurus
                   Manufacturing International Inc. unit of Brazil's Forjas Taurus SA. Last
                   week, the judge presiding over the case ordered a fourth gun maker, S.W.
                   Daniel Inc., to pay $49,000 in damages.

                   Open Question

                   "It's an open question at this point as to whether insurers will have to cover
                   damages," said Daniel T. Hughes, a lawyer for American Arms, which was
                   ordered to pay $9,200 and has been told by Home Insurance Co. that it
                   won't necessarily cover any damage awards. Home is one of several
                   insurers of defendants in the Brooklyn case that sent their clients so-called
                   reservation of rights letters during the trial. A spokesman for Home, which
                   now handles claims under the supervision of the New Hampshire insurance
                   department, said he couldn't verify the information.

                   Some insurance brokers say their clients who are defendants in the city
                   cases also have gotten, or expect to receive, reservation-of-rights notices
                   from their insurers.

                   Insurance companies often try to avoid covering jury awards in cases that
                   aren't clearly covered by the language of their policies. In the gun cases,
                   which all make novel allegations, "all carriers will look for a way to
                   escape," predicts Jay Mayesh, a product-liability defense lawyer who isn't
                   involved in the litigation.

                   The insurers are scrutinizing the city suits to see whether such allegations as
                   "negligent marketing" of guns are covered by their product- or
                   general-liability policies. The theory that gun makers fail to take reasonable
                   care to keep their weapons out of criminal hands was the core of the
                   trailblazing Brooklyn case. Chicago and Bridgeport, Conn., make similar
                   allegations. New Orleans, Miami and Atlanta allege that gun makers were
                   negligent in failing to incorporate safety devices in their products.

                   Warning in Chicago Case

                   Indeed, Hi-Point Firearms, a Mansfield, Ohio gun maker with about $4
                   million in annual sales, was told by its product-liability insurer,
                   Bermuda-based Sporting Arms Insurance Ltd., that any damage awards in
                   Chicago's negligent-marketing suit wouldn't be covered by the policy,
                   according to Tom Deeb, president of Hi-Point. An executive at the
                   insurance company said it has sent out reservation-of-rights notices, but
                   couldn't be reached for comment about Hi-Point.

                   Lawyers say a product-liability insurer could also argue that the shootings
                   by criminals weren't caused by a misfire or malfunction of the gun, the
                   classic trigger for such policies to pay.

                   Grounds for denying a claim also might center on language in many
                   general-liability policies that excludes payments for "intentional acts," which
                   insurance companies may argue include flooding lax-regulation areas with
                   guns that fall into the hands of criminals. Timothy Bumann, an attorney for
                   Taurus, said plaintiffs could "prove themselves out of coverage" and have
                   to try to collect from gun makers.

                   Then again, gun companies could argue that insurers should pay unless
                   they can prove the gun companies intended to cause deaths, not just to
                   flood certain markets, said Robert L. Carter, a product-liability lawyer
                   whose firm has represented gun makers in the past.

                   Some insurers, meanwhile, are backing away from new gun business. New
                   York-based Gulf Insurance Group, part of Citigroup's Travelers Property
                   Casualty Corp., last week stopped writing policies for shooting ranges if
                   the ranges also sell guns, according to an agent. A Travelers spokesman
                   confirmed that Gulf Insurance no longer writes such policies.