Triggering Reputational Risks: How Product Liability Lawsuits Are Reshaping the Firearms Industry

The firearms manufacturing sector is no stranger to controversy, but recent legal developments are turning up the heat on companies like Sig Sauer. The reinstatement of the Slatowski v. Sig Sauer case—a product liability lawsuit involving an ICE officer injured by a holstered P320 pistol—has reignited debates about design flaws, legal liability, and the long-term viability of companies facing mounting litigation. For investors, this case is more than a legal drama; it's a warning shot about the reputational and financial risks that could derail even the most well-positioned players in the industry.

The Slatowski Case: A Litigation Powder Keg

The Slatowski case, which involves a $10 million damages claim for a 2020 training injury, has taken a pivotal turn. The Third Circuit Court of Appeals ruled that the trial judge had improperly excluded expert testimony on the P320's design, forcing the case back into the discovery phase. This decision underscores a critical shift: courts are increasingly allowing plaintiffs to argue that the absence of an external mechanical safety—a feature present in military versions of the P320—makes the gun inherently unsafe.

Sig Sauer's legal team has pushed back, emphasizing the P320's internal safety mechanisms and blaming the incident on user error or incompatible holsters. But the company's arguments have struggled to gain traction in court. Two high-profile verdicts in 2022 and 2023—$11 million to a U.S. Army veteran and $2.35 million to another plaintiff—suggest a pattern. These rulings, combined with the Slatowski case, could force Sig Sauer to redesign its flagship product or face a deluge of settlements.

Insurance Costs: A Hidden Bullet

Product liability lawsuits are not just a legal headache—they're an insurance nightmare. The firearms industry's insurance premiums have surged as insurers grapple with the rising frequency and severity of claims. For every dollar saved on manufacturing, companies like Sig Sauer now face multipliers in legal defense costs. The reinstatement of the Slatowski case alone could add millions to Sig Sauer's already ballooning legal tab.

The broader industry is feeling the squeeze. A 2024 report revealed that general liability premiums for firearms manufacturers increased by 4-5% in 2024, with companies having poor loss histories seeing double-digit hikes. Product liability claims, in particular, are a ticking time bomb. If a customer is injured by a defective firearm, the resulting lawsuit could easily exceed policy limits, leaving companies to cover costs out of pocket.

Legislative Loopholes and Legal Immunity

In a desperate bid to shield itself, Sig Sauer lobbied for New Hampshire's 2024 law granting legal immunity to gun manufacturers for claims involving the absence of optional safety features. While this law could blunt future lawsuits, it's a double-edged sword. The legislation doesn't apply to ongoing cases like Slatowski, and its constitutionality is being challenged in court. If struck down, Sig Sauer's legal exposure could spiral further.

This legislative maneuvering highlights a larger industry trend: companies are increasingly relying on political clout to offset legal risks. But as states like California and New York continue to pass stricter liability laws, the patchwork of state regulations creates uncertainty for investors. The Slatowski case could set a precedent that limits the effectiveness of such immunity laws, forcing manufacturers to rethink their strategies.

Investor Confidence: A Fractured Market

The firearms sector's investor confidence is under siege. While the military market (e.g., 6.8mm ammunition modernization) is booming, the civilian market has seen a 0.6% revenue decline in 2025. Tariffs on brass and steel have added to the pain, squeezing profit margins. Meanwhile, the rise of “public nuisance” lawsuits—targeting manufacturers for enabling gun violence—has further eroded trust.

Take Remington, for example. The company's $73 million settlement in the Sandy Hook case (2022) wasn't just a financial hit; it was a reputational black eye. Investors are now scrutinizing companies' compliance with the Protection of Lawful Commerce in Arms Act (PLCAA), which offers some legal protection but isn't foolproof.

The Bottom Line: How to Navigate the Firestorm

For investors, the key takeaway is clear: legal and reputational risks in the firearms sector are no longer abstract. Here's how to position your portfolio:

1. Avoid Underprepared Players: Companies with weak legal defenses or a history of compliance violations (e.g., those with poor ATF inspection records) are ticking time bombs.
2. Prioritize Risk Management: Look for firms investing in robust insurance coverage, including umbrella policies, and proactive compliance programs.
3. Watch for Red Flags: The Slatowski case and similar lawsuits could trigger a wave of redesigns or recalls. Monitor litigation updates and regulatory shifts.
4. Diversify Exposure: While the military market is resilient, overreliance on civilian sales is risky. Favor companies with diversified revenue streams.

The firearms sector is at a crossroads. For every dollar spent on bullets and brass, companies now spend more on lawyers and lobbyists. The Slatowski case is a canary in the coal mine—its outcome will shape not just Sig Sauer's future, but the entire industry's ability to balance profitability with public safety. Investors who ignore these risks will find themselves caught in a crossfire of lawsuits, soaring insurance costs, and eroding trust. The time to act is now.