CR 04 03-Extortion-Commercial Entities And CR 04 04-Extortion-Government Entities

CR 04 03–EXTORTION–COMMERCIAL ENTITIES AND CR 04 04–EXTORTION–GOVERNMENT ENTITIES

(July 2019)

INTRODUCTION

These endorsements cover extortion payments made because of threats of bodily harm directed against the named insured's employees, officials, and relatives who are captured or allegedly captured. They also cover threatened damage to the insured's premises or property on the premises.

ELIGIBILITY

CR 04 03–Extortion–Commercial Entities can be included as an additional insuring agreement on the following:

  • Commercial Crime Coverage Form
  • Commercial Crime Policy

Note: CR 04 03 is not used with the Government Crime Coverage Form or the Government Crime Policy.

CR 04 04–Extortion–Government Entities can be included as an additional insuring agreement on the following:

  • Government Crime Coverage Form
  • Government Crime Policy

Note: CR 04 04 is not used with the Commercial Crime Coverage Form or the Commercial Crime Policy.

CR 04 03–EXTORTION–COMMERCIAL ENTITIES ANALYSIS

This is an endorsement to the Insurance Services office (ISO) Commercial Crime Coverage Forms and Policies and is subject to their conditions, definitions, and exclusions. The only changes are those within the endorsement.

This is not standalone coverage. It is more restricted than the coverage that the Kidnap/Ransom and Extortion Coverage Form or Policy provides. Extortion is the only coverage provided and it is similar to Insuring Agreement 1.b. (1) and (2) in the Kidnap/Ransom and Extortion Coverage Form or Policy. However, it is not identical. One major difference is that these endorsements cover only the value of the items surrendered in the extortion situation. There is no coverage for any extortion-related expenses.

Related Article: CR 00 40–Kidnap/Ransom and Extortion Coverage Form and CR 00 41–Kidnap/Ransom and Extortion Policy

A. Insuring Agreement

When an extortion threat is communicated to the named insured, coverage applies for the money, securities, and any other tangible property used to pay the extortion demand. The communication must threaten to take one or more of the following actions:

1. Cause bodily harm to the named insured (as an entity or as an individual), its directors, trustees, partners, members, managers, or employees. The threat may also be directed against a relative or an invitee of any of these individuals. Coverage applies only if the threat follows the capture of any of the persons described above. The capture can be actual or alleged but must have taken place within the covered territories.  The territories are defined later in this endorsement.

2. Damage the named insured’s premises or the property inside the premises. This coverage applies only to property that is located within the covered territories.

 

Example: Mindy receives a call. The caller threatens to destroy her building unless she places $10,000 in a briefcase and leaves it on a park bench within the next hour. These endorsements cover the money and the briefcase. Mindy is concerned about her safety, calls a private detective, and pays him to deliver the briefcase. There is no coverage for the expense of the private detective.

 

3. To place a denial of service attack within the named insured’s computer system

4. To place a malicious instruction or virus into a computer system. The instruction or virus must be designed to destroy, damage, or corrupt the stored computer programs or electronic data in the named insured’s computer system.

5. To damage the named insured’s services or products by contaminating or polluting them or in some other way to cause them to become less than acceptable.

6. To utilize, divulge, or disseminate any of the following:

  • Confidential or proprietary information that belongs to the named insured
  • Confidential or personal information that belongs to a person or organization that is not the named insured
  • Weaknesses that are part of the source code that is part of the named insured’s computer system

7. To place software on the named insured’s computer system that would permit an extortionist to compromise the named insured’s data and make it inaccessible until a ransom is paid

B. Exclusions

The following exclusion is added

Coverage does not apply to property surrendered in response to an extortion threat unless a reasonable attempt was first made to notify an associate, a local law enforcement agency, AND the Federal Bureau of Investigation of the extortion demand.

There is no explanation as to who are" local law enforcement authorities," so it could mean either the authorities where the person is taken captive or authorities where the notification or demand is received. The Kidnap/Ransom and Extortion Coverage Form and Policy have similar requirements.

C. Conditions

One condition is added, one is replaced and one condition is amended.

Added Condition

This Insuring Agreement applies to only threats communicated to the named insured during the policy period.

Replaced Condition

The territory condition in the coverage form or policy is altered so that that the person(s) or premises threatened must be in the United States, its territories and possessions, Puerto Rico, Canada, or in a country listed on the endorsement schedule.

 

Example: George represents his company on a sponsored cruise. The company receives a message that George has been kidnapped in Jamaica and will be released only if $100,000 is delivered to a messenger. The company has CR 04 03 but Jamaica is not listed on the endorsement schedule. As a result, there is no coverage.

 

The named insured should consider listing locations by country name when it uses these endorsements. Every country where employees, directors, officers, and other covered persons might travel to or pass through on the way to other countries should be listed. The named insured should consider both the final destination and every possible country that such persons may travel through to reach the final destination.

 

Example: Director A is taken captive in New York and her spouse is taken captive in Paris at the same time. Paris is not listed as a covered location on the endorsement schedule. As a result, only the demands that involve Director A are covered.

 

Amended Condition

The Valuation–Settlement Condition is changed as follows:

The value of securities surrendered in an extortion demand is based on their value on the day they are surrendered, not the day the demand is received.

Property other than money and securities is valued at its replacement cost or the limit of insurance, whichever is less.

Note: Extortion demands are usually extremely high, at times millions of dollars. Because of this, high limits of insurance are recommended.

E. Definitions

A new definition is added:

Ransomware is a type of software. Its purpose must be to encrypt electronic date within a computer system so that it becomes inaccessible at the will of the parties that own the ransomware. That owner can then demand a ransom payment to decrypt the electronic data so that it once again is useable.

CR 04 04–Extortion–Government Entities

There are two differences between CR 04 03–Extortion–Commercial Entities and CR 04 04–Extortion–Government Entities:

  • The definition of who is covered is changed. Employees, directors, trustees, partners, members, managers, and proprietors are insured persons under the CR 04 03. Officials, employees, or invitees are insured persons under the CR 04 04.
  • The threat to damage the named insured’s services or products by contaminating or polluting them or in some other way to cause them to become less than acceptable is not covered.