Financial Institution Kidnap/Ransom and Extortion Policy
ISO Form FI 00 30 09 12
September 22, 2014
Summary: In response to industry feedback that indicated an interest in ISO supporting the entire fidelity line of business, ISO developed a Financial Institutions Program as a new line of business in 2005. This form has been revised in 2012. This article provides an overview of form FI 00 30 09 12 the form provides direct loss coverage for property surrendered as ransom or extortion payments, expenses incurred in handling kidnap/extortion situations, expenses in detention/hijack situations and loss of property from a messenger in transit to make such payments. The policy is subject to certain exclusions and conditions which are discussed. Definitions of terms specific to this type of coverage are also analyzed. The 2012 form has some new language and clarifications.
Topics covered:
Introduction
Insuring Agreement 1—Kidnap/Ransom and Extortion—Direct Loss
Insuring Agreement 2—Kidnap/Ransom and Extortion— Expenses Incurred
Insuring Agreement 3—Detention or Hijack
Insuring Agreement 4—In-Transit Delivery of Property
Limits of Insurance and Deductible
Exclusions
Conditions
Definitions
Introduction
This policy contains four insuring agreements, and coverage is provided under these agreements when a limit of insurance is listed in the Declarations. The loss must arise from an occurrence and take place during the policy period. The loss must be reported during the policy period or during the extended reporting period. The extended reporting period is an extended period of time beyond the expiration of the policy during which an insured may report a loss that occurred during the policy period. The terms in quotation marks are defined terms and, as such, are discussed subsequently in this article. See Definitions.
This is claims-made policy form; losses that occurred during the policy period must be reported during the policy period or the extended reporting period in order for coverage to be provided. Any losses occurring outside of the policy period will not be covered.
Insuring Agreement 1- Kidnap/Ransom and Extortion-Direct Loss
1. Kidnap/Ransom And Extortion – Direct Loss
a.We will pay for loss of “property” surrendered as a ransom payment resulting directly from the “kidnap” or alleged “kidnap” of an “insured person”
b.We will pay for loss of “property” surrendered as an extortion payment resulting directly from an extortion threat communicated to you:
(1) To do bodily harm to an “insured person”
(2) To do damage to “premises” or “property”,
(3) To introduce a denial of service attack into your “computer system”;
(4) To introduce a virus or other malicious instruction into your “computer system” which is designed to damage, destroy or corrupt “electronic data” or “computer programs” stored within your “computer system”; or
(5) To disseminate, divulge or utilize:
(a)Your proprietary information including formulas, patents, data, processes or other confidential information unique to your business, provided you make a constant and conscious effort not to disclose the existence of such information to any third party; or
(b) Weaknesses in the source code within your “computer system”.
(6)To inflict “ransomware” on your “computer system”.
Analysis
Insuring Agreement 1 provides coverage for the direct loss of property either surrendered by the named insured as a ransom for an insured person who was kidnapped or surrendered as an extortion payment. Coverage is specified for property surrendered as an extortion payment because of the following threats:
·To physically harm an insured;
·To damage property or premises;
·To damage or corrupt computer systems;
·To release or use proprietary information.
Property as used in this policy is defined as money or monetary instruments. Therefore, this agreement provides coverage for the actual dollar amount the insured had to surrender in order to guarantee the safety of an insured person or property. For example, if a director is kidnapped and held for ransom for the sum of $500,000.00, and the limit in the declarations reflects such coverage, the policy will cover that amount.
Kidnap is the abduction by force or otherwise of an insured person for the purpose of demanding ransom or other consideration for their release. Examples of kidnapping are the holding of an insured until certain political prisoners are released, and the holding of an insured until $500,000 is paid.
The definition of insured person includes not only directors, trustees, employees, and managers of an insured, but also relatives, guests, or residents of the household of the insured person, and messengers. For example if the children of an insured's employee are kidnapped, the ransom for them would also be covered by this policy.
Computer systems are covered against extortion threats to contaminate the systems with viruses, content designed to damage or corrupt the insured's data or programs, and from weaknesses in the source code being divulged to others. The 2012 form also provides coverage the infliction of “ransomware” on the insured's “computer system”. Viruses exist that will lock a computer system until an amount is paid to the kidnapper, who then unlocks the system on receipt of his demands.
Threatened damage to property or premises, such as a threat to blow up a building, is also covered.
The threat to divulge proprietary information, patents or other information confidential to the insured's business is covered as long as the insured has made efforts to not disclose that information to third parties.
Insuring Agreement 2-Kidnap/Ransom and Extortion – Expenses Incurred
2. Kidnap/Ransom And Extortion – Expenses Incurred
We will pay for “expenses” incurred by you resulting directly from a “kidnap”, alleged “kidnap” or extortion threat covered under Insuring Agreement 1.
Analysis
This insuring agreement pays for expenses incurred from a kidnap or extortion threat, not the actual ransom or extortion payment itself. For example the costs involved in hiring a messenger to deliver the ransom/extortion payment, expenses incurred in obtaining the necessary ransom funds, or expenses involved in the safe return of the kidnapped person.
Insuring Agreement 3-Detention or Hijack
3. Detention Or Hijack
We will pay for “expenses” incurred by you resulting directly from the “detention” or “hijack” of an “insured person”.
Analysis
This agreement covers expenses incurred related to the detention or hijack of an insured person. Detention is the holding under duress of an insured person by anyone acting with the approval of a government or insurgent party for any reason other than kidnap. Hijack is the holding of an insured under duress while traveling in a vehicle, aircraft, or watercraft for reasons other than kidnap. Therefore, the insured person is not held for ransom; she has been taken for purposes other than simply collecting funds from the insured. It could be to redirect the vehicle to a different location than where it was originally headed, or it could be to prevent an insured's scientist from leaving the country to complete research on a controversial drug.
Insuring Agreement 4 In-Transit Delivery of Property
4. In-Transit Delivery Of Property
We will pay for loss of “property” while in the care and custody of a “messenger” resulting directly from theft, disappearance, confiscation or destruction thereof, while being delivered to persons demanding the payment of such “property” arising out of a “kidnap”, alleged “kidnap” or extortion threat covered under Insuring Agreement 1.
Analysis
When a ransom or extortion payment as defined in Insuring Agreement 1 is to be paid by messenger, this insuring agreement provides coverage for certain losses to that payment while in transit. While the messenger has custody of the payment and is on his or her way to the delivery point, loss to the payment by theft, disappearance, confiscation, or destruction is covered.
Limit of Insurance and Deductible
B. Limit Of Insurance
The most we will pay for loss or “expenses” in any one “occurrence” is the applicable Limit of Insurance shown in the Declarations.
However, the fees and costs of the Security Firm shown in the Declarations are payable by us in addition to the Limit of Insurance applicable to Insuring Agreements 2. and 3.
C. Deductible
We will not pay for loss resulting directly from an “occurrence” unless the amount of loss exceeds the applicable Deductible Amount shown in the Declarations. We will then pay the amount of loss in excess of the Deductible Amount, up to the Limit of Insurance.
The Deductible Amount does not apply to any “expenses” paid under Insuring Agreements 2. and 3.
Analysis
These sections identify how the company will pay the limits of insurance and what is affected by the deductible. The limits of insurance as shown in the Declarations are the maximum amount that will be paid for any one occurrence. Any fees and costs from the Security Firm shown in the Declarations and relating to Insuring Agreements 2 and 3 and expenses incurred relative to kidnap/ransom/extortion or detention or hijack, are paid in addition to the limit of insurance.
Losses are not paid until the loss amount exceeds the deductible amount, with one exception. The deductible does not apply to the expenses under Insuring Agreements 2 and 3, which provide for expenses incurred relative to kidnap/ransom/extortion or detention or hijack.
D. Exclusions
1.This policy does not cover:
a. Loss or “expenses” resulting from any dishonest, fraudulent or criminal act committed by:
(1)You; or
(2)Any “insured person”.
b. Loss or “expenses” resulting from the surrender of “property”:
(1)Inside the “premises” unless first brought inside the “premises” after receipt of the ransom or extortion demand for the purpose of paying such demand; or
(2)Outside the “premises” as a result of a threat to do bodily harm to a person in possession of such “property” other than a “messenger”.
2.Insuring Agreement 3. does not cover:
a. “Expenses” resulting from an “insured person” taking part in any political activity or the operations of any security or military force.
b. “Expenses” resulting from the failure of you or an “insured person” to properly procure or maintain required travel documents including passports, visas, permits and other similar documentation.
c. “Expenses” resulting from “detention” due to any actual or alleged violation of the laws of a foreign country by you or an “insured person”, unless the “detention” results from allegations that are deliberately false, fraudulent or malicious and made solely to achieve political, propaganda and/or coercive effect upon or at the expense of you or an “insured person”.
Analysis
Dishonest, fraudulent or criminal acts committed by a named insured or any insured that result in loss or expenses are not covered by this policy. Expenses includes fees for security firms, negotiators, travel, salary of the kidnapped person, medical and psychiatric care of the returned abductee, and reward money.
When property is surrendered inside the premises, loss or expenses incurred as a result of that surrender are not covered except for situations in which the property is first brought into the premises after a ransom or extortion demand has been received. However, if a ransom note has been received and the security firm is bringing property into the premises to pay the ransom, then the expense of the security firm would be paid. The intent is to pay for expenses related only to kidnap/ransom/extortion, not normal costs of doing business.
Also excluded is the loss or expense resulting from the surrender of property outside the premises by someone other than a messenger who is threatened with bodily harm. The intent of the policy is to provide coverage for the ransom money while in transit as long as it is in the custody of a messenger and not a regular employee. A messenger is someone designated by the first named insured to have custody of the property outside the premises.
Insuring Agreement 3, Detention or Hijack, does not provide coverage if an insured participates in political activity or military force operations, if an insured does not have appropriate travel papers, or if an insured is detained due to violation of local laws. The policy is intended to cover unlawful detention of an insured and not legitimate detention as a result of the insured's failure to obey local ordinances and requirements.
The Conditions section enumerates rights and duties of the insured and rights of the insurer.
E. Conditions
Wherever used in the Conditions, the word loss shall also be deemed to mean “expenses”.
1. Confidentiality
You and every “insured person” must make every reasonable effort not to divulge the existence of this policy.
2. Cooperation
You must cooperate with us in all matters pertaining to this policy as stated in its terms and conditions.
3. Representations
a. You represent that all information and statements contained in the application for this policy are true, accurate and complete. All such information and statements are the basis for our issuing this policy and shall be considered as incorporated into and constitute a part of this policy.
b. Any intentional:
(1)Misrepresentation;
(2)Omission;
(3)Concealment; or
(4)Misstatement of a material fact;
in the application or otherwise, shall be grounds for the rescission of this policy.
4. Ownership
The “property” covered under this policy is limited to “property”:
a. That you own or lease;
b. That is held by you in any capacity; or
c. For which you are legally liable, provided you were liable for the “property” prior to the time that the covered loss was sustained.
However this policy is for your benefit only. It provides no rights or benefits to any other person or organization. Any claim for loss covered under this policy must be presented by you.
5.Territory
This policy covers “occurrences” taking place anywhere in the world, unless modified in the Declarations.
Analysis
The first five conditions deal with basic duties of the named insured and general information. Due to the nature of the exposure being insured, any insured is required to keep the existence of the policy confidential. The knowledge that a kidnap policy exists on someone and that the ransom would be paid could easily become motive for someone to kidnap an insured.
The named insured is required to cooperate with the company in all matters and must represent that all information in the application is true and correct. Intentional misrepresentation, concealment, omission, or misstatement of a material fact is grounds for rescission of the policy.
When a policy is rescinded due to intentional misrepresentation, the coverage is void ab initio, which is from the beginning as if coverage never existed. The reasoning behind this is if the insurer had known the truth from the beginning, it would not have agreed to provide coverage. Statutes concerning rescission of policies vary from state to state.
The property covered under this policy must be owned or leased by the named insured, held by the named insured, or for which the named insured is liable. Property again is defined as money, monetary instruments, securities, or tangible property.
6.Additional Premises Or Employees
If, while this policy is in force, you establish any additional “premises” or hire additional “employees”, other than by consolidation or merger with, or purchase or acquisition of assets or liabilities of, another institution, such “premises” or “employees” shall automatically be covered under this policy. Notice to us of an increase in the number of “premises” or the number of “employees” need not be given and no additional premium need be paid for the remainder of the Policy Period.
7.Consolidation – Merger Or Acquisition
a. Except as provided in Paragraph 7.b., if you consolidate or merge with, or purchase or acquire the assets or liabilities of, another institution:
(1)You shall notify us in writing as soon as practicable and obtain our written consent to extend the coverage provided by this policy to such consolidated or merged institution or such purchased or acquired assets or liabilities. We may condition our consent by requiring payment of an additional premium; but
(2)For the first 90 days after the effective date of such consolidation, merger or purchase or acquisition of assets or liabilities, the coverage provided by this policy shall apply to such consolidated or merged institution or such purchased or acquired assets or liabilities, provided that all “occurrences” causing or contributing to a loss involving such consolidation, merger or purchase or acquisition of assets or liabilities, must take place after the effective date of such consolidation, merger or purchase or acquisition of assets or liabilities.
b. For institutions you acquire, in which you own greater than 50% of the voting stock or voting rights, coverage under this policy shall automatically become effective on the date of such acquisition with no additional premium required, provided:
(1)All “occurrences” causing or contributing to a loss involving the acquired institution must take place after the effective date of such acquisition; and
(2)The assets of the acquired institution do not exceed 10% of your total assets as reflected in your most recent calendar quarter consolidated financial statements immediately preceding the effective date of the policy.
8.Joint Insured
a. If more than one Insured is named in the Declarations, the first Named Insured will act for itself and for every other Insured for all purposes of this policy.
b. If any Insured has knowledge of any information relevant to this policy, that knowledge is considered knowledge of every Insured.
c. We will not pay more for loss or losses sustained by more than one Insured than the amount we would pay if all such loss or losses had been sustained by one Insured.
d. Payment by us to the first Named Insured for loss sustained by any Insured shall fully release us on account of such loss.
9.Change Of Control – Notice To Us
a. When you learn of a change in control, you shall notify us in writing as soon as practicable, but not to exceed 60 days from the date of such change of control.
b. As used in this Condition, control means the power to determine the management or policy of the Insured or of a controlling holding company by virtue of voting stock ownership. A change in ownership of voting stock which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 10% of such stock shall be presumed to result in a change of control for the purpose of the required notice.
c. A change in ownership which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 50% of the voting stock of the first Named Insured shall cause this policy to be terminated as set forth in Condition 23.b.(1)(b).
10.Due Diligence
You and every “insured person” must exercise due diligence in doing all things reasonably practicable to avoid or diminish any loss covered under this policy.
Analysis
The policy provides automatic coverage, without additional premium, for the addition of premises or employees during the policy period as long as the addition is not the result of a merger, consolidation or acquisition of another institution's assets or liabilities. When the additional premises or staff is the result of a consolidation, or merger, the insurer must be notified in writing as soon as possible, and an additional premium may be charged. Coverage for the newly acquired assets or liabilities is provided during the first ninety days only if the date of loss is after the date of the merger.
When an acquisition results in the insured owning greater than fifty percent of the voting stock or rights of the acquired organization, coverage is automatically provided without additional premium as long as: occurrences are after the effective date of the acquisition; and the assets acquired do not exceed ten percent of the insured's total assets as shown in the most recent calendar quarter financial statements immediately preceding the date of the policy.
For example, International Imports purchases Tropical Skydiving Adventures, as part of the purchase; International acquires sixty percent of the voting stock of Tropical. International is a much larger institution than Tropical, so while International controls the voting stock and voting rights, the assets of Tropical, when added to International's original assets, is less than ten percent of International's total assets as reflected on the most recent quarterly financial statements. In order for any loss to be covered, it must occur during the policy period. If Tropical had sustained a loss prior to the effective date of the acquisition by International, there would be no coverage.
If there is more than one insured named in the Declarations, any action by the first named insured shall be applicable to every other insured. The first named insured can make coverage changes to the policy that affects all other insureds. Likewise knowledge relevant to the policy that one insured knows is considered to be known by all insureds.
If more than one insured sustains a loss, no more will be paid out than if all such losses had been sustained by one insured. Payment to the first named insured for loss sustained by any insured releases the insurer on account of such loss.
A change in control is defined as a change in ownership of voting stock and voting rights that result in any given stockholder having possession of more than ten percent of such stock or rights. The insured is required to notify the carrier immediately of such a change and must do so within sixty days after the effective date of the change. Any change in ownership which results in more than fifty percent of the voting stock and rights being held by one stockholder or organization will cause this policy to be cancelled. Under condition 23.b. (1) (b), Policy Termination, the policy is cancelled immediately upon the effective date that the first named insured is acquired by another company.
Any insured on the policy is required to try to do everything reasonably practicable in order to avoid or mitigate any losses under this policy.
11.Notice To Us – Proof – Legal Proceedings Against Us
a.In the event of an “occurrence” which may result in a loss covered under this policy, you shall:
(1) Determine that the “kidnap”, extortion threat, “detention” or “hijack” has actually occurred.
(2) In regard to a “kidnap” or extortion threat, make every reasonable effort to:
(a)Immediately notify the Security Firm shown in the Declarations;
(b)Notify an associate;
(c)Notify the local law enforcement authorities; and
(d)Notify the local Federal Bureau of Investigation or foreign equivalent;
before surrendering any “property” in payment of a ransom demand or extortion threat.
(3) Approve any payment involving a ransom demand or extortion threat.
(4) Notify us as soon as practicable.
(5) Submit to examination under oath at our request and give us a signed statement of your answers.
(6) Produce for our examination all pertinent records.
(7) Give us a detailed, sworn proof of loss within 6 months from the date of the “occurrence”.
(8) Cooperate with us in the investigation and settlement of any claim.
b.Legal proceedings for the recovery of any loss under this policy shall not be brought after the expiration of 24 months from the date of the “occurrence”.
c.If any limitation embodied in this Condition is prohibited by any law controlling the construction hereof, such limitation shall be deemed to be amended so as to equal the minimum period of limitation provided by such law.
d.This policy affords coverage only in your favor. No suit, action or legal proceeding shall be brought under this policy by anyone other than you.
12. Surrender Of Personal Assets
In the event of a ransom or extortion demand directed against any “insured person” other than the Named Insured shown in the Declarations, any “property” surrendered or to be surrendered by or on behalf of the “insured person” and additional “expenses” of the “insured person” shall be considered “property” or “expenses” of the Named Insured, provided the ransom or extortion demand occurred directly as the result of the “insured person's” association with the Named Insured and not as the result of such person's association or position with any other entity.
Analysis
The notice of loss condition is fairly standard; the named insured is required to verify that the kidnap/detention/hijack has really occurred, and the named insured is then required to notify the security firm, associate, local law enforcement, and the FBI or its foreign equivalent before any property is surrendered. The company must be notified as soon as possible, ransom payment must be approved, a proof of loss must be provided within six months, and the named insured must cooperate with the insurer in the investigation of the claim.
As long as any insured is kidnapped due to his affiliation with the named insured, property surrendered or expenses on behalf of this insured are considered to be property or expenses of the named insured. For example, an employee of International Imports is kidnapped; International Imports has a kidnap/ransom policy in force. As the employee is affiliated with International Imports, that employee would be covered under their kidnap/ransom policy.
13.Assignment – Subrogation – Recovery
a.In the event of payment under this policy, you shall deliver, if so requested by us, an assignment of your rights, title and interest and causes of action as you have against any person or entity to the extent of the loss payment.
b.In the event of payment under this policy, we shall be subrogated to all of your rights of recovery against any person or entity to the extent of such payment.
c.Recoveries, whether effected before or after any payment under this policy, whether made by us or by you, shall be applied net of the expense of such recovery:
(1) First, to you in satisfaction of your covered loss in excess of the amount paid under this policy;
(2) Second, to us in satisfaction of amounts paid in settlement of your claim;
(3) Third, to you in satisfaction of any Deductible Amount; and
(4)Fourth, to you in satisfaction of any loss not covered under this policy.
Recovery on account of loss of securities as set forth in Condition 21.b. or recovery from reinsurance and/or indemnity by us shall not be deemed a recovery as used herein.
14. Transfer Of Your Rights And Duties Under This Policy
Your rights and duties under this policy may not be transferred without our written consent.
15. Changes
This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy.
16. Examination Of Your Books And Records
We may examine and audit your books and records as they relate to this policy at any time during the Policy Period and up to 3 years afterward.
17. Inspections And Surveys
a.We have the right to:
(1) Make inspections and surveys at any time;
(2) Give you reports on the conditions we find; and
(3) Recommend changes.
b.We are not obligated to make any inspections, surveys, reports or recommendations and any such actions we do undertake relate only to insurability and the premiums to be charged. We do not make safety inspections. We do not undertake to perform the duty of any person or organization to provide for the health or safety of workers or the public. And we do not warrant that conditions:
(1) Are safe or healthful; or
(2) Comply with laws, regulations, codes or standards.
c.Paragraphs 17.a. and 17.b. apply not only to us, but also to any rating, advisory, rate service or similar organization which makes insurance inspections, surveys, reports or recommendations.
Analysis
Upon payment under this policy, the insured is required to assign any rights, title, interest or causes of action against the other party to the insurer at its request. This allows the insurer to proceed against the other party to recover what it has paid out. Recoveries shall be applied as follows: first to the insured for any loss in excess of what the policy paid out; next to the insurer for payments made under the policy; then to the insured for any deductible, and lastly to the insured for any damages not covered under this policy.
The named insured may not transfer rights or duties under this policy without written consent from the carrier. The named insured is authorized to make changes to the policy with the consent of the insurer. Policy terms can only be amended by endorsement.
The insurer has the right to examine and audit books and records up to three years after the policy period. The company may also make inspections, or surveys, and give the first named insured reports and recommend changes. The company is not obligated to make surveys and does so only to review insurability. No warranties are made that conditions are safe or comply with laws, regulations, or codes.
18.Liberalization
If we adopt any revision that would broaden the coverage under this policy without additional premium within 45 days prior to or during the Policy Period, the broadened coverage will immediately apply to this policy.
19. Premiums
The first Named Insured shown in the Declarations:
a. Is responsible for the payment of all premiums; and
b. Will be the payee for any return premiums we pay.
20. Other Insurance Or Indemnity
Coverage afforded under this policy shall apply only as excess over any valid and collectible insurance or indemnity obtained by you.
Analysis
When the insurer makes revisions to a policy 45 days prior to or during the policy period that broaden coverage, and there is no additional premium, the policy will automatically expand to contain this coverage.
The first named insured is held responsible for any payments due and is the payee for any return premiums.
If the first named insured has another policy that would apply, the insurance under this policy is considered excess.
21.Valuation – Settlement
The value of any loss for purposes of coverage under this policy shall be the net loss to you after crediting any receipts, payments or recoveries, however denominated, received by you in connection with the transaction giving rise to the loss.
a.Money
Any loss of money, or loss payable in money, will be paid, at your option:
(1) In the money of the country in which the loss was sustained; or
(2) In the United States of America dollar equivalent determined by the rate of exchange published in The Wall Street Journal on the day the money was surrendered.
b.Securities
(1) We will settle in kind our liability under this policy on account of loss of any securities or, at your option, will pay you the cost of replacing such securities, determined by the market value of such securities at the close of business on the day such securities were surrendered.
In case of a loss of subscription, conversion or redemption privileges through the misplacement or loss of securities, the amount of such loss will be the value of such privileges immediately preceding their expiration.
(2) If the applicable coverage of this policy is subject to a Deductible Amount and/or is not sufficient in amount to indemnify you in full for the loss of securities for which claim is made under this policy, our liability under this policy is limited to the payment for, or the duplication of, so much of such securities as has a value equal to the limit of such applicable coverage.
c.Other Property Not Specified Above
(1) In case of loss of any “property” not specified in Paragraph 21.a. or 21.b., we will pay the replacement cost of such “property” without deduction for depreciation. However, we will not pay more than the least of the following:
(a)The Limit of Insurance applicable to the lost “property”;
(b)The cost to replace the lost “property” with “property” of comparable material and quality and used for the same purpose; or
(c)The amount you actually spend that is necessary to replace the lost “property”.
(2) We will not pay on a replacement cost basis for any loss of “property” covered in Paragraph 21.c.(1):
(a)Until the lost “property” is actually replaced; and
(b)Unless the replacement is made as soon as reasonably possible after the loss.
If the lost “property” is not replaced, we will pay on an actual cash value basis.
(3) We will, at your option, pay for loss of such “property”:
(a)In the money of the country in which the loss occurred; or
(b)In the United States of America dollar equivalent of the money of the country in which the loss was sustained determined by the rate of exchange published in The Wall Street Journal on the day the property was surrendered.
(4) Any “property” that we pay for or replace becomes our property.
22. Extended Reporting Period
We will pay for loss that you sustain prior to the effective date of termination or cancellation of this policy which is reported to us or the security firm shown in the Declarations within 30 days from the date of that termination or cancellation.
23. Policy Cancellation Or Termination
a. Policy Cancellation
(1) The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.
(2) We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:
(a)10 days before the effective date of cancellation if we cancel for nonpayment of premium; or
(b)60 days before the effective date of cancellation if we cancel for any other reason, other than for policy termination as provided in Paragraph 23.b.
(3) We will mail or deliver our notice to the first Named Insured's last mailing address known to us.
(4) Notice of cancellation will state the effective date of cancellation. The Policy Period will end on that date.
(5) If this policy is cancelled, we will send the first Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.
(6) If notice is mailed, proof of mailing will be sufficient proof of notice.
b.Policy Termination
(1) This policy terminates immediately upon:
(a)The taking over of the Insured by a receiver or other liquidator or by state or federal officials;
(b)The effective date of the first Named Insured being acquired by another entity. As used in this condition, acquired means a change in control where the power to determine the management or policy of the first Named Insured has changed by virtue of a change of ownership which results in direct or indirect ownership by a stockholder or an affiliated group of stockholders of more than 50% of its voting stock or voting rights, regardless as to the changes to the core functions of the acquired institution; or
(c)The expiration of the Policy Period shown in the Declarations.
If this policy terminates for any reason specified in Paragraph 23.b.(1)(a) or 23.b.(1)(b), we will send the first Named Insured any premium refund due. The refund will be pro rata.
(2) This policy terminates as to any Insured, other than the first Named Insured, immediately upon its acquisition by another entity of more than 50% of its voting stock or voting rights or being taken over by a receiver or other liquidator or by state or federal officials.
(3) Termination of the policy as to any Insured terminates liability for any loss sustained by such Insured which is reported after the effective date of such termination.
Analysis
Any losses of money are payable, at the insured's request, either in the currency of the country in which the loss was sustained or in U.S. dollars. The dollar equivalent is based on the exchange rate published in the Wall Street Journal on the date the property was surrendered; this is a significant change from the earlier policy that based the amount on the date the claim was made or the loss was discovered. As significant amounts of time can transpire between the date of loss and the date of surrender, the exchange rate could be quite different. It makes more sense to use the exchange rate closest to when payment is actually made.
Loss of securities is settled in kind or, at the insured's option, the cost of replacing them will be paid. Their value is determined by the market value of the securities on the close of business on the day property was surrendered; again, this is a change from the earlier form. If subscription, conversion or redemption privileges are lost, the amount of settlement will be the value of such privileges immediately preceding their expiration. Once the policy limits have been reached, the insurer's obligation for payment is complete, even though the loss may be greater than the applicable limits of coverage.
Other property not specified as money or securities will be paid on a replacement cost basis without deductions for depreciation. Payment will not be more than the least of: Limit of applicable insurance, cost to replace lost property with like kind and quality, amount actually spent to replace the lost property.
While payment is on a replacement cost basis, payment will not be made until the lost property is replaced, and the property must be replaced as soon as possible. Payment again is offered in the currency of the country in which the loss occurred or in U.S. currency at the exchange rate on the day the loss was discovered.
This policy contains an extended reporting period; if the named insured sustains a loss before the cancellation date of the policy but reports it within thirty days after that date, coverage is available. For example, the policy's cancellation/termination date is June 30, 2006. A loss occurs June 28 but is not discovered until July 6th. The loss is reported to the insurer or security firm on July 7th. Since the seventh of July is within thirty days of the cancellation date of the policy, and the loss occurred before the cancellation date, coverage is available for the loss.
The policy may be cancelled at the request of the insured; the request must be in writing from the first named insured. The company may cancel the policy by delivering notice to the last known address of the first named insured. If the policy is to be cancelled due to nonpayment of premium, notice must be given ten days in advance of the effective date of the action. For cancellations for any other reason, notice must be given sixty days in advance. Any refunds will be sent to the first named insured. These cancellation and time requirements are subject to individual state regulations.
The taking over of the named insured by a receiver, other liquidator, or by state or federal officials results in immediate termination of the policy. If the named insured is acquired by another entity, the effective date of that takeover is the termination date of the policy. This acquisition indicates a change in control by management or stockholders controlling more than 50 percent of the voting stock.
F. Definitions
1. “Computer program” means a set of related electronic instructions that direct the operations and function of a computer and computer devices connected to it and enable the computer or devices to receive, process, store or send “electronic data”.
2. “Computer system” means:
a. Computers , including Personal Digital Assistants (PDAs) and other transportable or handheld devices, electronic storage devices and related peripheral components;
b. Systems and applications software;
c. Terminal devices; and
d. Related communications networks;
by which “electronic data” is collected, transmitted, processed, stored and retrieved.
3.”Detention” means the holding under duress of an “insured person” by anyone:
a. Acting as an agent of or with the tacit approval of any government or government entity; or
b. Acting or purporting to act on behalf of any insurgent party, organization or group;
for any reason other than “kidnap”.
4.”Electronic data” means information or facts, images or sounds stored as or on, created or used on, or transmitted to or from computer software (including systems and applications software), on data storage devices, including hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
5.”Employee”:
a.”Employee” means:
(1)Any natural person:
(a) While in your service;
(b) Whom you compensate directly by salary, wages or commissions; and
(c) Whom you have the right to direct and control while performing services for you;
(2)Any guest student or intern pursuing studies or duties;
(3)Any attorney retained by you and any employee of such attorney while either is performing legal services for you;
(4)Any natural person who is furnished temporarily to you:
(a) To substitute for a permanent “employee” as defined in Paragraph 5.a.(1), who is on leave; or
(b) To meet seasonal or short-term work load conditions;
while that person is subject to your direction and control and performing services for you;
(5)Any natural person who is leased to you under a written agreement between you and a labor leasing firm, to perform duties related to the conduct of your business, but does not mean a temporary “employee” as defined in Paragraph (4); and
(6)Any natural person employed by an institution merged or consolidated with you prior to the effective date of this policy.
(7) Any of your directors or trustees while:
(a) Performing acts within the scope of the usual duties of an “employee” or
(b) Acting as a member of any committee duly elected or appointed by resolution of your board of directors or board of trustees to perform specific, as distinguished from general, directorial acts on your behalf; and
(8) Any natural person who is a director or trustee of yours while such director or trustee is engaged in handling “property” of any employee benefit plan, or any natural person who is a trustee, administrator, manager, officer or employee of any such employee benefit plan, except an administrator or manager who is an independent contractor.
b.Does not mean:
(1) Any agent, broker or other representative of the same general character not specified in Paragraph 5.a.; or
(2) Any independent contractor, except a contractor specified in Paragraph 5.a.(3).
Analysis
Computer program and computer system are self-explanatory, although the definition of computer system has been expanded to include PDAs and other transportable or handheld devices. Detention is the holding of an insured by anyone acting as an agent for any government or governmental entity or insurgent group for any reason other than kidnap. The insured is held under duress, and is not held for a genuine violation of local laws or lack of proper travel documentation. For example, a journalist may be detained by rebel forces for reporting negatively about such rebels. A ransom is not demanded and the insured is not detained for violation of laws; the insured is detained because of ideological differences. Such a situation would qualify as a detention.
Electronic data is the actual data stored within a computer system or on disks, CDs, or other media and includes images or sounds, and not just data.
The policy provides a lengthy definition of employee. Included as an employee are students or interns, attorneys retained by the office, and a person provided on a temporary basis from an agency to substitute for a prolonged absence or to meet short-term increases in volume of workload. The language has been changed and the clauses “under this policy” and “in any of said premises” have been removed from various sections; this broadens coverage to employees who may not be actively on the insured premises but are conducting work remotely, or allows coverage for employees not normally covered by this policy. Employees leased to the named insured through a leasing firm are covered as are employees of an institution that was merged with the named insured.
Newly added to the definition are directors or trustees while performing acts within the scope of usual duties of an employee; while acting as a member of a committee appointed by the board of directors to conduct specific tasks; or any director or trustee handling property of an employee benefit plan or an administrator, manager, officer or employee of said plan handling plan property. With this change if a director for some reason is stepping into the duties of an employee, say a manager suddenly left or had a medical crisis, the director would be covered while handling those duties or handling property of an employee benefit plan.
Not considered employees are agents, brokers, commission merchants, cosignees, or independent contractors.
6.”Expenses”:
a.”Expenses” mean:
(1) Fees and costs of the security firm shown in the Declarations hired to negotiate or secure the release of an “insured person” or determine the validity and severity of an extortion threat;
(2) Fees and costs of independent negotiators;
(3) Fees and costs of independent public relations consultants and/or interpreters;
(4) The cost of hiring security guards to protect an “insured person” or “property” upon the recommendation of the security firm shown in the Declarations;
(5) Travel costs and accommodations incurred by you or an “insured person”;
(6) Salary, commissions and other financial benefits paid by you to an “insured person”. Such compensation applies at the level in effect on the date of the “kidnap”, “detention”, or “hijack” of the “insured person” and ends upon the earliest of:
(a)Up to 30 days after their release if the “insured person” has not yet returned to work;
(b)Discovery of their death;
(c)120 days after the last credible evidence following abduction that they are still alive; or
(d)60 months after their abduction;
(7) Hospitalization and medical service fees and costs, including psychiatric care and cosmetic or plastic surgery of an “insured person” within 24 months following their release;
(8) Fees and costs of independent forensic analysts;
(9) Interest costs paid by you for any loan from a financial institution taken by you to pay a ransom demand or extortion threat;
(10) Personal financial losses of an “insured person” as a result of their inability to attend to their own personal financial matters due to their “kidnap”, “detention” or “hijack”;
(11) Reward money paid by you to an “informant” which leads to the arrest and conviction of parties responsible for loss covered under this policy;
(12) Court costs and attorney fees you incur in defense of a suit brought by the surviving spouse or beneficiary of an “insured person” resulting directly from “kidnap”, “detention” or “hijack”; and
(13) Any other reasonable expenses incurred by you with our written consent.
b. “Expenses” do not include loss of earnings and any other costs incurred by you as a result of an interruption to your business.
7.”Guest” means any person:
a. Visiting your “premises” or the residence of an officer, director, trustee, member or manager (if a limited liability company), partner, “employee” or proprietor (if the Insured is a sole proprietorship); or
b. Traveling with an officer, director, trustee, member or manager ( if a limited liability company), partner, “employee” or proprietor (if the Insured is a sole proprietorship) in a motor vehicle, aircraft or watercraft;
for business or social purposes.
8.”Hijack” means the holding under duress of an “insured person” while traveling in a motor vehicle, aircraft or watercraft for any reason other than “kidnap”.
9.”Informant” means a person, other than an “insured person” providing information not otherwise obtainable, solely in return for a reward offered by you.
10.”Insured person” means:
a. Any director, trustee, “employee”, member or manager (if a limited liability company), partner, or proprietor (if the Insured is a sole proprietorship) of any Insured, unless excluded in the Declarations;
b. Any “relative”, “guest” or resident in the household of an “insured person” defined in Paragraph 10.a.; and
c. Any “messenger”.
Analysis
Expenses as defined in this policy relate to expenses of the security firm, negotiators, interpreters, and to travel expenses, reward funds, medical costs for the kidnapped or detained person upon recovery, and the salary of the kidnapped/detained person. Newly included in the 2012 form is the cost to determine whether or not the extortion is a valid threat and if so its severity. The expenses are specific to the handling of a kidnap or detainee situation; loss of earnings and business interruption costs are not covered.
Guest, hijack, and informant are self-explanatory.
Directors, trustees, employees, members or managers are considered insured persons unless excluded in the Declarations of the policy. Guests, relatives, messengers, and residents of the insured person's premises are also defined as insured persons.
11.”Kidnap” means the involuntary abduction by force or otherwise of an “insured person” for the purpose of demanding money or other consideration in exchange for their release.
12.”Messenger” means a natural person designated by you to have care and custody of “property” outside your “premises”, or other natural person acting in the same capacity during an emergency arising from the incapacity of the original messenger.
13.”Occurrence” means:
a.An act or series of related acts involving one or more “insured persons”; or
b.An act or event, or a series of related acts or events other than in Paragraph 13.a.
However, we will not pay for any loss resulting from “kidnap”, alleged “kidnap”, an extortion threat, “detention” or “hijack” which is part of a series of related acts that began prior to the effective date of this policy.
14. Premises” means any office or building you occupy in conducting your business and the residence of any “insured person”.
15.”Property” means money, monetary instruments, securities and items of tangible property.
16. “Ransomware” means any software that encrypts “electronic data” within a “computer system” and demands a ransom payment in order to decrypt and restore such “electronic data”.
17.”Relative” means a spouse, child, stepchild, legally adopted child, foster child, spouse of a married child, grandchild, brother, sister, parent, adoptive parent, stepparent, grandparent, brother-in-law, sister-in-law, parent-in-law and grandparent-in-law.
Analysis
Occurrence is defined as an act or event, or series of acts or events, which involves or does not involve one or more insured persons. An occurrence is a precipitating factor to a loss. The policy will not pay, however, if the kidnap, extortion, detention, or hijack is part of a series of actions that began before the effective date of the policy.
Ransomware is a new term due to the creation of computer viruses that actually hold data hostage; once the demands are met then the hacker will unlock the data, but until then the data is held hostage and is unusable by the insured.
The remaining terms are self-explanatory.