1. Forms
2. CR
3. CR-04-03

What the form is

The CR 04 03 Extortion – Commercial Entities endorsement is an addition to the Insurance Services Office (ISO) Commercial Crime Coverage Forms and Policies. Its primary function is to add an insuring agreement that covers the loss of "money," "securities," or "other property" surrendered by the insured commercial entity as a result of an extortion threat. These threats typically involve (1) threats of bodily harm against the named insured's employees, directors, trustees, partners, members, managers, proprietors, or their relatives who are captured or allegedly captured, or (2) threats to damage the insured's premises or property located on the premises. It's important to note that this endorsement is not standalone coverage and is more restricted than comprehensive Kidnap/Ransom and Extortion policies; for instance, it generally covers only the value of the items surrendered and not other extortion-related expenses. The 2022 version of this endorsement specifically removed coverage for extortion threats that are generally considered cyber threats, as these are more appropriately covered under a Cyber policy.

Classes of business it applies to

This endorsement is designed for commercial entities of various types and sizes. It is particularly relevant for businesses that perceive a risk of extortion due to the nature of their operations, their public profile, the locations where they operate, or the wealth of their key personnel. Examples include:

• Businesses with executives or employees who travel frequently to high-risk areas.
• Companies that handle large amounts of cash or valuable securities.
• Organizations that might be targeted due to their brand recognition or perceived wealth.
• Businesses concerned about threats to their physical property or premises.

Special considerations

• Scope of Coverage: The endorsement typically only covers the actual loss of money, securities, or other property surrendered. Expenses incurred in dealing with an extortion demand (e.g., negotiation costs, legal fees, travel expenses) are generally not covered by this specific endorsement.
• Cyber Extortion Exclusion: As of the 06 22 edition, extortion threats that are primarily cyber-related (e.g., ransomware demands to decrypt data) are generally excluded, emphasizing the need for separate cyber insurance coverage.
• Threat Communication: Coverage usually applies only to threats communicated to the named insured during the policy period.
• Territory: The coverage may be subject to territorial limitations, often stipulating that the threatened person(s) or premises must be within the United States, its territories, Puerto Rico, Canada, or other specifically scheduled countries.
• Valuation: The endorsement may amend the valuation basis for surrendered property. For example, securities might be valued at their market value at the time they are surrendered, rather than at the time they were stolen.

Key information for agents and underwriters

• Optional Coverage: This is an optional endorsement that modifies a base Commercial Crime policy; it's not automatically included.
• Risk Assessment: Underwriters should carefully assess the specific extortion risks faced by the applicant, considering their industry, location, employee travel, public profile, and existing security measures.
• Distinction from K&R: Agents should clearly explain to clients the difference between this endorsement and broader Kidnap/Ransom (K&R) and Extortion policies, particularly regarding the coverage of related expenses and the narrower scope of covered extortion events.
• Cyber Exposure: Given the exclusion of many cyber extortion events, agents and underwriters must ensure that clients with significant cyber risks are appropriately advised to seek dedicated Cyber Liability insurance.
• Policy Coordination: Ensure that the limits and deductibles for this endorsement are clearly stated and align with the insured's overall risk management strategy.
• Eligibility: The CR 04 03 is specifically for commercial entities and should be attached to a Commercial Crime Coverage Form or Policy, not a Government Crime form (CR 04 04 is used for governmental entities).