CR 00 40-Kidnap/Ransom And Extortion Coverage Form And CR 00 41-Kidnap/Ransom and Extortion Policy

CR 00 40–KIDNAP/RANSOM AND EXTORTION COVERAGE FORM AND
CR 00 41–KIDNAP/RANSOM AND EXTORTION POLICY

(July 2019)

 

Menu (click here to expand or to collapse)

INTRODUCTION

There are two different ways to write kidnap, ransom, and extortion coverage. One is through a separate policy or coverage form. The other is by attaching an endorsement to the Insurance Services Office (ISO) Commercial or Government Crime Coverage Forms or Policies. This analysis reviews only CR 00 40–Kidnap/Ransom and Extortion Coverage Form.

Related Article: CR 04 03–Extortion–Commercial Entities and CR 04 04–Extortion–Government Entities

Because they have similar formats, this analysis refers back to CR 00 21–Commercial Crime Coverage Form (Loss Sustained Form) as an aid to understanding.

Related Article: ISO Commercial Crime Coverage Forms and Policies Analysis

ELIGIBILITY

Any commercial entity is eligible for this coverage. Most state and local governmental units and entities are also eligible. Financial institutions are not eligible.

POLICY MAKEUP

The Kidnap/Ransom and Extortion Policy consists of two basic parts:

A policy containing the Kidnap/Ransom and Extortion Coverage Form must include the following four basic forms:

Related Article: IL 00 17–Common Policy Conditions Analysis

CR DS 06–KIDNAP/RANSOM AND EXTORTION COVERAGE PART DECLARATIONS

Note: The DS 07–Kidnap/Ransom and Extortion Policy Declarations is a combination of the DS 06 below and the DS 00–Common Declarations.

The declarations consist of four different insuring agreements and conditions that apply to only Kidnap/Ransom and Extortion Coverage.

Insuring Agreements, Limits of Insurance, and Deductibles

This section has spaces to enter the limits of insurance per occurrence and the deductible amounts per occurrence for the following insuring agreements:

1. Kidnap/Ransom and Extortion–Direct Loss

2. Kidnap/Ransom and Extortion–Expenses Incurred

3. Detention or Hijack

4. In-transit Delivery of Property

There are also spaces to enter Insuring Agreements endorsed to the policy.

Entering “Not Covered” next to any insuring agreement deletes that insuring agreement and any reference to it in the coverage form.

Excluded Persons or Classes of Persons

This section has spaces to enter the names of persons or classes of persons excluded from coverage.

Name and Address of Security Firm

The full name and address of the security firm to be used to negotiate with kidnappers and attempt to gain the release of any insured kidnapped party is listed in this section.

Endorsements Forming Part of this Coverage When Issued

Endorsements issued at inception are listed in this section.

Cancellation of Prior Insurance by Us

This section has space to list prior policy numbers for coverage that are automatically cancelled when this coverage takes effect.

Countersignature of Authorized Representative

This section has spaces to enter the countersigning authorized representative’s signature and date countersigned.

CR 00 40–KIDNAP/RANSOM AND EXTORTION COVERAGE FORM ANALYSIS

This analysis is of the 08 13 edition of this coverage form. Changes from the 08 07 edition are in bold print. This analysis does not address editorial or format changes that do not affect coverage.

The coverage provided by CR 00 41–Kidnap/Ransom and Extortion Policy is identical to that provided by CR 00 40. The only difference between the two is that the CR 00 41 incorporates the conditions contained in the IL 00 17–Common Policy Condition while CR 00 40 does not so that the IL 00 17 must be attached to complete the policy.

A. INSURING AGREEMENTS

There are four insuring agreements. Coverage applies to only insuring agreements that have a limit of insurance on the declarations. The coverage provided is for any loss sustained plus expenses, as this coverage form defines, due to an occurrence. The occurrence must take place or be taking place during the policy period and be reported to the insurance company either during the policy or the extended reporting period.

1. Kidnap/Ransom and Extortion–Direct Loss (08 13 changes)

This insuring agreement covers the following two types of loss of property:

a. If a ransom is paid as a direct result of kidnap or alleged kidnap of an insured person, coverage applies for the money, monetary instruments, securities, services, or other tangible property used to pay the ransom.

b. If an extortion threat is communicated to the named insured, coverage applies for the money, monetary instruments, securities, services or other tangible property used to respond to the extortion threat. The communication must threaten to take one of the following or similar actions:

Confidential information is protected only if the named insured makes regular efforts to not disclose to any third party that such information exists.

 

Example: Baxter and his family have produced world famous pickles for more than 30 years and the recipe is a secret. Baxter receives a note that states that the pickle recipe will be posted on the Internet unless he delivers $100,000 in negotiable securities to a secure location. The demand note includes a copy of the recipe. Coverage applies because the information is proprietary.

 

2. Kidnap/Ransom and Extortion–Expenses Incurred

This insuring agreement covers the named insured’s expenses that result directly from an alleged or actual kidnap or extortion threat that the Kidnap/Ransom and Extortion–Direct Loss insuring agreement covers.

 

Example: Baxter decides he must protect the secret pickle recipe and hires a private investigator to deliver the demanded securities. The expense of the private investigator is covered.

3. Detention or Hijack

This insuring agreement covers the named insured’s expenses that result directly from an insured person being detained or hijacked.

 

Example: Phillip is driving a rental car and is parked outside a New Orleans bank when a robbery occurs. The gunman jumps into Phillip’s car and forces him to drive away. The incident ends three days later with the gunman dead, the car destroyed, and Phillip in the hospital. Subject to the limit of insurance, this coverage form pays for the rental car expenses, Phillip's hospitalization, his counseling costs, lost salary, and miscellaneous expenses paid to assist his family.

4. In-transit Delivery of Property

This insuring agreement covers loss of the named insured’s property that is in a messenger’s care and custody and is being delivered in response to a kidnapping or extortion covered under the Kidnap/Ransom and Extortion–Direct Loss insuring agreement.  The loss must involve theft, disappearance, confiscation, or destruction of the property while it is being delivered to comply with a kidnap/ransom request.

Note: The messenger can be any person the named insured designates to take the property from its premises. The messenger is not required to be an insured person. The property can be in the form of money, monetary instruments, securities, services, or other tangible property.

 

Example: Baxter hires a private investigator to deliver the securities to the extortionist who threatened to publicize the family’s secret pickle recipe. As the delivery takes place, the police move in and apprehend the perpetrator. During the scuffle, the briefcase flies open and the wind blows the contents away. The securities are covered up to the limit of insurance.

B. LIMIT OF INSURANCE

Fees and costs for the security firm on the declarations are payable in addition to the limit of insurance for the Kidnap/Ransom and Extortion–Expenses Incurred and the Detention or Hijack insuring agreements. If a security firm is employed in advance and is named on the declarations, this means its fees and services are covered outside the limits stated in the policy. However, the expenses are part of the limits of insurance if a security firm is employed at the time the incident occurs and is not listed on the declarations.

 

Example: The limits of insurance are $500,000 for Insuring Agreement 1., $10,000 for Insuring Agreement 2., $10,000 for Insuring Agreement 3., and $50,000 for Insuring Agreement 4. A kidnapping occurs, ABC becomes involved, and it incurs $50,000 in expenses. The $50,000 in expenses is covered in full because ABC is listed, even though the limit of insurance for Insuring Agreement is only $10,000.

C. DEDUCTIBLE

The insurance company does not pay for a loss that results directly from an occurrence unless the amount of loss is more than the deductible amount on the declarations. It then pays the amount of loss that exceeds the deductible amount up to the limit of insurance for the coverage or insuring agreement that applies.

Insuring Agreement 2. and Insuring Agreement 3. are not subject to a deductible.

D. EXCLUSIONS

1. Exclusions that apply to all Insuring Agreements

a. Acts Committed By You or Any Insured Person

There is no coverage if the kidnap/ransom or extortion threat results from a dishonest, fraudulent, or criminal act that the named insured or any insured person commits.

b. Surrender of Property

Coverage does not apply to loss or expenses that result from surrendering property under either of the following circumstances:

·         Inside the premises, unless the property was brought to the premises to respond to the ransom or extortion demand

Note: This distinguishes this coverage from standard robbery coverage.

 

Example: A man enters a jewelry store and demands that the clerk give him all the jewelry in the store or he will detonate the bomb attached to his waist. This is considered a robbery because jewelry is on the premises. This coverage form does not insure this situation. Coverage may be available under a Jewelers Block Coverage Form or Policy.

                       

·         Outside the premises when the surrender occurs because there is a threat to physically injure a person who is not a messenger but who is in control of such property

2. Exclusions that apply to Insuring Agreement 3. Detention or Hijack

a. Political or Military Activity

There is no coverage for expenses that result from an insured person taking part in the operations of any security or military force or in any political activity.

b. Travel Documents

Coverage does not apply to expenses that result from an insured person not properly obtaining or maintaining necessary travel documents. Some examples of travel documents are passports, visas, permits, or similar documents.

c. Violation of Laws of Foreign Countries

There is no coverage if expenses result from an insured person being detained in a foreign country due to actual or alleged violation of that country’s laws. Coverage does apply if the detention results from deliberately false, fraudulent, or malicious allegations made solely to achieve political, propaganda, and/or coercive effect on the named insured or an insured person.

 

Example: Harry’s company is active in a South American country. It was very popular during the previous administration but the current administration considers it to be an enemy. Harry prepares to leave the country but airport security claims it found marijuana in his luggage and he is detained. Harry adamantly proclaims his innocence and states that there is no evidence that he was ever involved with any illicit drugs. Coverage applies for the expenses required to free Harry.

E. CONDITIONS

1. Confidentiality

The named insured and each insured person must make every reasonable effort to not divulge that this insurance exists.

Note: This coverage form probably includes this condition so that the named insured does not become a kidnap or extortion target.

2. Other Conditions

These conditions apply in addition to the Common Policy Conditions.

The word “loss” as used in any Condition also includes expenses.

a. Additional Premises or Employees (08 13 change)

When a named insured adds employees and/or premises during the policy term, coverage automatically applies without an additional premium charge during that policy term. The only exception is when the new premises or employees are the result of a consolidation, merger, or acquisition.

Note: Refer to the consolidation, merger, or acquisition condition below for information on the exception.

The named insured is not required (was “need not be given” in the 08 07 edition) to notify the insurance company and tell it about the additional premises and/or employees. The insurance company does not charge any additional premium for the rest of the policy period.

b. Concealment, Misrepresentation, or Fraud

Any fraudulent act the named insured commits voids coverage. Intentionally concealing or misrepresenting a material fact voids coverage but only if that fact concerns any of the following five areas as they relate to the insurance this coverage form provides:

·         The insurance itself

·         Insured persons

·         Covered property

·         The named insured’s interest in the covered property

·         A claim brought under this insurance

c. Consolidation–Merger or Acquisition

Coverage applies for 90 days for newly acquired entities, premises, assets, or liabilities of another entity and its employees. The coverage is automatic but the insurance company must receive written notice of the acquisition. There is no coverage after 90 days unless the insurance company adds it to the policy. Additional premium may be required. The only losses covered are those that occur AFTER the date of the consolidation, merger, or acquisition.

d. Cooperation

The named insured must cooperate and work with the insurance company according to this policy’s terms and conditions.

Related Court Case: Breached Policy Provisions Justify Denial of Coverage

e. Due Diligence

The named insured and each insured person is required to exercise due diligence by acting reasonably to avoid or reduce any covered loss.

f. Duties in the Event of an Occurrence (08 13 change)

The named insured must do certain things if there is an occurrence that may result in a loss that this insurance covers. It must do the following:

·         Determine that there was an actual occurrence that involved kidnapping, detention, hijack, or an extortion threat.

·         Notify all of the following if there is a kidnapping or extortion threat:

o    The security firm listed on the declarations immediately

o    An associate

o    Local law enforcement authorities

o    The Federal Bureau of Investigation (FBI)

·         Approve payments for extortion threats or ransom demands.

·         Notify the insurance company as soon as possible.

·         Give the insurance company a detailed, sworn proof of loss within 120 days.

Note: This time period is longer than in most policies. This is because it can take an extraordinarily long time to work through a kidnap/ransom or extortion demand.

·         Cooperate with the insurance company as it investigates and/or settles claims.

·         Give the insurance company any pertinent records that relate to the claim for it to examine.

·         Agree to be examined under oath when the insurance company requests it and give the insurance company a signed statement of the answers given.

·         When organizations or persons responsible for the loss are identified, the named insured must obtain all rights of recovery against them. It must not do anything to hinder the insurance company’s ability to exercise those rights. (08 13 addition)

Note: The 08 13 edition also changed the order of some of the items above compared to the order in the 08 07 edition.

g. Extended Reporting Period

Losses must be sustained before the policy expiration date. The named insured must report them to the insurance company or the scheduled security firm during the policy period or within 30 days after the policy is cancelled.

Note: There is no additional extended loss discovery period.

 

Example: Jessica, an employee of South American Arts, Inc. is traveling in Columbia to search out new artisans. She is often out of communication for a number of days while she searches in remote villages. Her boss becomes concerned when he hasn’t heard from her for over 30 days. He contacts individuals he knows in the area. After 45 days with no contact, he calls in Security Firm for fear that a kidnapping may have occurred. The Firm springs into action and locates her. She has been kidnapped but quarreling within the ranks over her value had prevented a ransom demand. The Firm is able to resolve the situation and return Jessica safety to South American Arts.

Thanks to the efforts of the Security Firm Jessica was save without paying any ransom. However, the cost for their services was $150,000. Unfortunately for South American Arts, Inc. the insurance had expired the day after Jessica was kidnapped and the kidnapping was not reported within the 30 days reporting period. 

h. Joint Insured

·         The first named insured acts for all other insureds, unless the first named insured is excluded, deleted, or not covered in some way. In such cases, the next named insured listed becomes the first named insured. The first named insured is responsible for premium payments and receives all notices the insurance company issues, such as cancellation notices.

·         Any insured or its partner, member, official, or officer may know about or have information that is relevant to the coverage that this insurance provides. In such cases, every insured is considered to know about or have that information. This is an important point because the first named insured may not wholly own every insured on the policy. They may be partnerships or corporations that involve significant outside ownership.

·         When the insurance is canceled for one of the joint  insureds, coverage under this insurance for that joint insured is extended for a 30-day discovery period following the date of cancellation.

Note: This time period matches the extended reporting period for the coverage part.

           

Example: Celebrity Ink, Popular Celebrities and My Favorite Celebrity are joint insureds. Celebrity Ink’s reporters became very adventurous in performing their assignments. The insurance company determines that the risk is too big for the premium tells the joint insureds that they will cancel the entire policy or only Celebrity Ink and the other two agree that Celebrity Ink should be cancelled. However, nobody knew that one of Celebrity Ink’s reporters had been kidnapped and was being held in anticipation of a ransom demand. Coverage applied because the ransom demand was received only 15 days after the date of cancellation.

 

·         The limit of insurance is the most the insurance company pays whether one insured sustained the loss or multiple insureds sustained the loss. This means that a separate limit does not apply to each insured.

 

Example: Polly Kravens of Popular Celebrities and James Levin of My Favorite Celebrity are kidnapped while traveling on business. The maximum loss payment for this kidnapping is the limit of insurance on the declarations.

 

·         The insurance company pays the first named insured for loss that any insured sustains. This payment releases the insurance company on account of such losses.

 

Example: The insurance company pays Popular Celebrities for the expenses incurred to free both Polly and James. Popular Celebrities does not tell My Favorite Celebrity. If My Favorite Celebrity wants to be compensated for their expenses they must negotiate with Popular Celebrities and not their insurance company because of this condition.

i. Legal Action Against Us

The named insured may not bring any legal action against the insurance company with respect to a specific loss until all of the following conditions are met:

·         The named insured complied with all of this insurance’s terms

·         At least 90 days have passed since a proof of loss was filed with the insurance company

·         The action is brought not more than two years after the date the named insured discovered the loss

Laws may prohibit any or all of the above to apply. In that case, the specific condition is amended to comply with the minimum period of limitation such law provides.

j. Liberalization

The insurance company may adopt a revision that broadens the coverage this insurance provides without charging an additional premium. If it does so 45 days prior to or during the policy period, the broadened coverage applies to the coverage this insurance provides.

k. Other Insurance

(1) Primary Insurance

(a) Other insurance may be written based on the same terms and conditions as this insurance. In that case, this insurance pays its share of the covered loss in the proportion that its limit bears to the total limit(s) of all such insurance that covers the loss.

(b) Other insurance may be written that is not based on the same terms and conditions. In that case, this insurance is excess. It pays only after the loss exceeds the other limit(s) of insurance (whether or not it/they can be collected) or this insurance’s deductible, whichever is higher.

(2) Excess Insurance

(a) This insurance may be excess over other insurance. In that case, it pays only the amount of loss that exceeds the other insurance’s limit(s) (whether or not it/they can be collected) and that other insurance’s deductible. Any loss this insurance pays is subject to the terms and conditions of this insurance not the other insurance.

(b) This insurance may be subject to a deductible. In that case, this insurance reduces its deductible amount by the total of all other such insurance in addition to any deductible amount that applies to that insurance and then pays in excess of that.

l. Ownership of Property; Interests Covered (08 13 changes)

This insurance covers only the following types of property:

·         Property the named insured owns or leases

·         Property the named insured holds, regardless of the capacity under which it holds it. (08 13 addition).

Note: The 08 13 edition deletes the words “whether or not you are legally liable for the loss of such property” and adds it in the next item.

·         Property the named insured is legally liable for but only if that liability was in place before the loss occurred (08 13 change).

m. Recoveries

Recoveries may be made by the insured or by the insurance company and the recovering party must notify the other one. The recovering party is paid its expenses out of the recovered amount and then the remainder is returned as follows:

·         First, the named insured receives the amount of loss that exceeded the amount the insurance company paid.

·         Next, the insurance company receives the amount of loss it paid.

·         Next, the named insured receives the amount of deductible that was its responsibility.

·         Last, the named insured then receives any remaining amount to cover expenses that this insurance did not cover.

Recoveries do not include reinsurance the insurance company recovered or the recovery of original securities if duplicates had already been issued.

n. Surrender of Personal Assets

When payment or expenses are made on behalf of an insured person who is not the named insured, those payments or expenses are considered property and expenses of the named insured. This statement applies only if the reason for the demand was because of the relationship that insured person has to the named insured.

 

Example: Penelope is kidnapped while in Mexico. Her family is notified and they immediately pay the ransom. Penelope was in Mexico on business for her employer, World Tours, Inc. The ransom that Penelope’s family paid is considered a ransom that World Tours, Inc. paid. As a result, it is compensable by World Tour’s Kidnap/Ransom and Extortion coverage.

 

o. Territory

The occurrence can take place anywhere in the world unless the territory is modified by entries on the declarations.

Note: The CR DS 06–Kidnap/Ransom and Extortion Policy Coverage Part Declarations does not include a section to modify the territory and there is no endorsement available to do so. 

p. Transfer of Your Rights of Recovery Against Others to Us

The named insured must transfer all its rights to the insurance company against any organization or person for any loss it sustained and that the insurance company paid. It must also do everything required to secure those rights and not do anything after the loss to impair them.

Note: The named insured can waive rights of subrogation in writing before the loss in most property coverage forms and policies. This coverage form does not include that option.

q. Valuation–Settlement (08 13 changes)

The following determines valuation of losses based on the coverage that this insurance provides.

(1) Money

Money is valued at its face value. Money that is foreign currency can be replaced for the face value of that country’s currency or the equivalent in U.S. dollars. The equivalent value is based on the exchange rate or value published in The Wall Street Journal on the day it was surrendered.

(2) Securities

Securities are valued at their price at the close of business on the day they were surrendered. The insurance company has two options. It can replace securities in kind or with cash. If replaced, the named insured must sign over to the insurance company all rights to the lost securities. The second option is for the insurance company to pay for the cost of a lost securities bond in order to issue duplicates of the securities. The cost cannot exceed the market value of the securities as of the close of the business day in which the named insured first became aware of the loss or the limit of insurance, whichever is less.

3) Property Other than Money and Securities

Loss of property other than money and securities is valued at replacement cost without a deduction for depreciation. The insurance company does not pay more than the least of the following:

·         The limit of insurance on the declarations

·         The cost to replace such property with similar property used for the same purpose

·         The amount the named insured spent to repair or replace such property

The insurance company does not pay any loss or damage on a replacement cost basis until such property is actually repaired and replaced. The repair or replacement must be completed as soon as reasonably possible. At the named insured’s option, the insurance company pays for loss or damage to such property in the money of the country where the loss or damage was sustained (was “occurred” in the 08 07 edition) or the equivalent in U S. dollars. The equivalent value is based on the exchange rate or value published in The Wall Street Journal on the day on which the property was surrendered.

Any property the insurance company pays for or replaces becomes its property.

F. DEFINITIONS

1. Computer program

A set of related electronic instructions that direct the function and operation of computers or the devices attached to the computer. A computer program enables computers or the devices attached to them to receive, process, store, or send electronic data.

2. Computer system

Any of the following if they collect, transmit, process, store, or retrieve electronic data:

3. Detention

This is holding an insured person under duress. The holding must be done by one who has actual or implied approval of a governmental entity or government. It may also be committed by one who has actual or implied approval of an insurgent group, party, or organization.

Note: Detention does not include kidnapping.

4. Electronic Data

Facts and other information that meet all of the following criteria:

o    Floppy disks

o    Tapes

o    Divers

o    Data processing devices

o    Media.

·         Used with electronically controlled equipment such as a computer.

·         Stored on, created on, transmitted to or from, or used with computer software. This includes software used with computer peripherals

5. Employee

Employees ARE natural persons:

(1) Who meet all of the following criteria:

·         Are in the named insured’s service. This applies for up to 30 days after such a person is terminated unless the termination is due to theft or any dishonest act the employee committed

·         The named insured compensates directly by wages, commissions, or salary

·         The named insured has the right to control or direct while he or she performs services for the named insured

Note: The difference between employees and independent contractors can be vague and is somewhat fluid. Recent employment cases have examined long-term independent contracts to determine if individuals are truly independent or are de facto employees. Each situation is different and requires expert legal advice to determine if these persons should be considered employees or not.

(2) Furnished to the named insured to temporarily substitute for a permanent employee. This applies only if that replaced permanent employee is on leave. Such employees may also be furnished to meet short-term workload demands. They must be subject to the named insured’s control or direction while they perform services for the named insured to be considered employees.

Coverage for these employees is enhanced in the 08 13 edition because they remain employees even when they take property off premises. This was not the case in the 08 07 edition.

(3) Leased to the named insured under a written agreement with a leasing firm. They must perform duties that relate to conduct of the named insured’s business. This does not include temporary employees.

(4) Who are former employees, directors, partners, members, managers, representatives or trustees the named insured uses as consultants.

(5) An intern or guest student pursuing studies or duties.

Coverage for these employees is enhanced in the 08 13 edition because they remain employees even when they take property off premises. This was not the case in the 08 07 edition.

(6) Who are employees of merged or consolidated entities provided the merger or consolidation occurred before the effective date of the current policy.

Employee ARE NOT brokers, agents, commission merchants, factors, consignees, independent contractors, or similar parties and any others not specifically described above as employees.

6. Expenses

a. All of the following are considered expenses:

·         Costs and fees of the security firm listed on the declarations hired to negotiate or secure release of an insured person. This also includes the expenses to determine the validity and severity of a threat.

·         Costs and fees of independent negotiators

·         Costs and fees of interpreters and/or independent public relations consultants

·         Costs to hire security guards to protect insured property or an insured person. However, this is only when the security firm on the declarations recommends hiring them.

·         Costs for travel and accommodations the named insured or an insured person incurs

·         Salary, commissions, and other financial benefits the named insured pays to an insured person. The amount is limited to the level of pay in effect when the insured person was kidnapped, detained, or hijacked. This payment ends on the earliest of the following dates:

o    30 days after the insured person’s release, if he or she has not yet returned to work

o    Discovering that the insured person died

o    120 days after the last credible evidence that the insured person is still alive after an abduction

o    Five years after the insured person is abducted

·         Hospitalization and medical service costs and fees. This includes psychiatric care and cosmetic or plastic surgery. Only costs incurred within 24 months of an insured person’s release are covered.

·         Costs and fees of independent forensic analysts

·         Interest costs the named insured paid for loans it took out from a financial institution to pay an extortion threat or a ransom demand

·         An insured person’s personal financial losses because he or she could not attend to his or her personal financial matters due to kidnap, detention, or hijack

·         Reward money the named insured pays for information that leads to arresting and convicting parties responsible for losses incurred that this insurance covers

·         Court costs and attorney fees the named insured incurred to defend itself in a suit brought by the insured person’s spouse or beneficiary as a direct result of a kidnap, detention, or hijack

·          Any other reasonable expenses the named insured incurs with the insurance company’s written consent

b. The following are not considered expenses:

·         Costs the named insured incurs to recall or destroy any products or goods as a result of an extortion threat to contaminate or pollute any of those products or goods or to or render them substandard

·         Loss of earnings and all other costs the named insured incurs due to its business being interrupted

7. Guest

This is any person who visits the named insured’s premises or the residence of a director, trustee, partner, member, manager, or employee for business or social purposes. This includes when such persons visit the residence of a sole proprietor if the named insured is a sole proprietorship. A person is also considered a guest when he or she travels in a motor vehicle, aircraft, or watercraft with any insured person provided it is for business or social purposes.

8 Hijack

Holding an insured person under duress but it must occur while that insured person is traveling in a motor vehicle, aircraft, or watercraft. It does not include kidnap.

9. Informant

A person who provides information that cannot otherwise be obtained solely in return for a reward the named insured offers. An informant cannot be an insured person.

10. Insured person

Any of the following:

11. Kidnap

Abducting an insured person in order to demand money or other consideration in exchange for that person’s release. The abduction must be involuntarily.

12. Manager (08 13 change)

A natural (08 13 word added) person who is a director of a limited liability company.

Note: Manager is not the typical employee with supervisory responsibilities. That person is considered an employee.

13. Member (08 13 change)

An owner of a limited liability company represented by its ownership interest. A member may also serve as a manager if he or she is a natural person. (08 13 words added)

14. Messenger

A natural person the named insured designates to take care and custody of property outside the premises.

15. Occurrence

Either of the following:

There is a very important limitation to this definition. If a kidnap, extortion threat, detention, or hijack involve a series of acts and any of those acts start prior to the effective date of this policy, the insurance company for this policy period will not pay for that loss.  

Note: This is an unusual place to add this wording because it does not have any bearing on the definition of occurrence. This statement also does not define what type of act in the series must occur in a prior policy period in order to void coverage for this policy period. Would plotting and planning the event be such an act or do only physical actions count?

16. Premises

A building the named insured occupies and in which business is conducted. The residence of any insured person is also a premises.

17. Property

Money, monetary instruments and securities are property. Services and tangible property are also property. The word services is not defined so what services are could be very wide ranging.  

18. Ransomware (08 13 addition)

A type of software that encrypts electronic data that is within a computer system so that it becomes inaccessible to the system owner.  The owner of the system is required to pay a ransom to the ransomware owner in order for them to decrypt the electronic data so that becomes useable.

19. Relative

The definition of insured person says that a relative who lives in the same household as an insured is also an insured person. This definition explains who the policy considers to be an eligible relative. It is the immediate family - spouse, child, stepchild, legally adopted child and foster child. It then expands out to include the spouse of a married child and grandchild. Brother, sister, parent, adoptive parent, stepparent and grandparent are included. Even the in-laws are considered relatives so brother-in-law, sister-in-law, parent-in-law, and grandparent-in-law are all relatives and therefore qualify as insured’s persons.

Note: Relatives as described above are either biologically or legally related to the insured person. This means that a significant other would not qualify even though the co-habitation has been long term. Children of that significant other would also not qualify regardless of the emotional attachments or understandings