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Kidnap And Ransom Insurance

Kidnap and Ransom Insurance

Definition

Specialty crime coverage that insures against loss by the surrender of property as a result of a threat of harm to the named insured, an employee, or a relative or guest of the insured or the insured's employees. Available under an Insurance Services Office, Inc. (ISO), crime coverage form G, extortion (CR 00 08).
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Related Terms

Extortion Coverage Form G

An Insurance Services Office, Inc. (ISO), form (CR 00 08) that insures against loss of money, securities, and other property surrendered away from the premises as a result of a threat to do bodily harm to the insured, an employee, a relative, or invitee who is or allegedly is being held captive. Broader coverage, often at a reduced premium, can often be obtained by purchasing a separate kidnap and ransom policy from an insurer specializing in this field.

Special Crime Insurance

A type of insurance that covers losses arising from the kidnap and holding for ransom of a corporate employee or from the threat to do harm to a person or to certain property if a ransom is not paid. Accordingly, special crime policies are also termed "kidnap, ransom, and extortion" insurance. The policies generally cover some or all of the following perils: (1) kidnapping an insured person; (2) bodily injury (BI) extortion (a threat to kidnap, injure, or kill an insured person); (3) property damage (PD) extortion (a threat to damage or pollute property, tamper with the insured's product, or reveal a trade secret or other proprietary information of the insured); (4) wrongful detention (involuntary confinement of an insured person); or (5) hijacking. The categories of loss covered by the policies include ransom money payments; wrongful detention costs (costs of attempting to locate and secure the release of the victim); in transit/delivery expenses (for confiscation, disappearance, or destruction of ransom money during delivery); other expenses (reward payments to informants, interest on loans of ransom money, fees for security consultants); judgments, settlements, and defense costs (for lawsuits by a victim or victim's family alleging negligence on the part of the employer); and death or dismemberment payments (for a victim or insured person involved in handling the incident). Most policies impose separate limits for each of these categories of loss, as well as an annual aggregate limit. Special crime insurance can be included in a commercial crime policy, written on a stand-alone basis, or may be available as part of a management liability "package" policy.

Management Liability Insurance

Insurance that covers exposures faced by directors, officers, managers, and business entities that arise from governance, finance, benefits, and management activities (also called "executive liability insurance"). This includes (1) directors and officers (D&O) liability insurance, (2) employment practices liability (EPL) insurance, (3) fiduciary liability insurance, and (4) "special crime" insurance (covering kidnap, ransom, and extortion exposures). These coverages may be written as stand-alone insurance policies or combined into a single, "package" policy. Management liability policy "package" policies usually contain a set of common conditions applying to all of the coverage lines purchased. In most cases, an insured must select a minimum of two types of coverage to be eligible to purchase a management liability "package" policy. This arrangement offers meaningful premium discounts because much of the same data is needed to underwrite employment practices, D&O, fiduciary, and special crime coverages. Management liability "package" policies are usually available only to privately held firms, not-for-profit organizations, and small publicly traded companies (i.e., those with annual sales of under $25 million). Large publicly traded firms generally purchase stand-alone policies.

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