1. Forms
2. CR
3. CR-00-40

What the Form Is

The CR 00 40 Kidnap/Ransom and Extortion Coverage Form is an insurance contract developed by the Insurance Services Office, Inc. (ISO) designed to be included as part of a Commercial Package Policy. Its primary function is to protect businesses against financial losses arising from kidnap, ransom, or extortion events. The form typically includes four main insuring agreements: Kidnap/Ransom and Extortion – Direct Loss (covering the actual money, securities, or other property surrendered), Kidnap/Ransom and Extortion – Expenses Incurred (covering costs associated with a covered event, such as negotiator fees, travel, medical, and legal expenses), Detention or Hijack (covering losses if an insured person is detained or hijacked), and In-Transit Delivery of Property (covering the loss of ransom or extortion payments while being delivered by a messenger). For coverage to apply under any of these agreements, a limit of insurance must be specified for that agreement in the policy declarations.

Classes of Business It Applies To

This coverage is particularly relevant for a wide range of commercial entities whose employees, directors, officers, or their relatives could be targets for kidnap, ransom, or extortion demands. This includes, but is not limited to:

• Multinational corporations with employees traveling to or located in high-risk or politically unstable regions.
• Companies with high-profile executives or those dealing with sensitive information or valuable assets that might attract criminal attention.
• Financial institutions or businesses that handle large amounts of cash or securities.
• Organizations concerned about threats to damage their premises or property as a means of extortion.
• Any business, regardless of size, that wants to mitigate the potentially significant financial and emotional impact of such an event. For example, a domestic company whose executive is targeted during a routine business trip could face substantial losses.

Special Considerations

• Package Policy Form: CR 00 40 is designed for use within a package policy. For standalone kidnap and ransom coverage, the CR 00 41 Kidnap/Ransom and Extortion Policy form is used.
• Definitions are Key: The form contains specific definitions for terms like "kidnap" (typically involving involuntary abduction by force for the purpose of demanding a ransom) and "hijack" (holding a victim under duress while traveling, for reasons other than kidnap). Understanding these definitions is crucial for determining coverage.
• Reporting Requirements: Losses must generally be sustained and reported to the insurer during the policy period or any applicable extended reporting period.
• Common Exclusions: Policies often exclude losses arising from dishonest, criminal, or fraudulent acts committed by an insured person or the named insured. There may also be exclusions or limitations related to the surrender of property from within the insured's premises unless it was brought inside after a demand was received, or the surrender of property outside the premises due to a threat to harm a person in possession of the property who is not a designated "messenger".
• Covered Territories: The policy will specify the geographic territories where a loss must occur for coverage to apply.
• Security Firm: The declarations may list a specific security firm to be used for negotiating with kidnappers and attempting to secure the release of a kidnapped insured party.

Key Information for Agents and Underwriters

• Risk Assessment: Agents should thoroughly assess a client's exposure. This includes evaluating travel patterns of key personnel (especially to high-risk areas), the company's public profile, the nature of its operations, and existing security protocols.
• Underwriting Factors: Underwriters will consider the industry, geographic locations of operations, frequency and destination of international travel by executives, the company's crisis management plans, financial stability, and any prior loss history related to kidnap, ransom, or extortion.
• Tailoring Coverage: The four distinct insuring agreements allow agents and insureds to select and tailor coverage based on perceived risks and budget. Limits and deductibles are applied individually to each chosen insuring agreement.
• Client Education: It is vital for agents to educate clients on who qualifies as an "insured person" under the policy, the specific circumstances that trigger coverage under each insuring agreement, and all applicable conditions and exclusions.
• Scope of Financial Protection: Emphasize that the form can cover not only the direct ransom or extortion payment (money, securities, or other property) but also a range of associated expenses, which can be substantial.
• Understanding Insuring Agreements: Ensure clarity on the nuances of each insuring agreement. For example, the "In-Transit Delivery of Property" agreement specifically addresses the risk of losing the ransom payment during its conveyance, while the "Detention or Hijack" agreement provides a distinct layer of protection for insured persons during such events.