The coverage is found on CR 00 40 08 13 and CR 00 41 08 13. CR 00 40 is for use with the commercial package policy, and CR 00 41 is a stand alone form written outside the commercial package program. This article is based on CR 00 41.

Topics covered: Insuring Agreements Deductible Exclusions Conditions Definitions

Insuring Agreements

A.Insuring Agreements

Coverage is provided under the following Insuring Agreements for which a Limit Of Insurance is shown in the Declarations and applies to loss that you sustain and "expenses" that you incur resulting directly from an "occurrence" taking place during the Policy Period shown in the Declarations and reported to us during the policy period or during the period of time provided in the Extended Reporting Period Condition E.2.j.:

1. Kidnap/Ransom And Extortion – Direct Loss

a. Loss of "property" surrendered as a ransom payment resulting directly from the "kidnap" or alleged "kidnap" of an "insured person".

b. 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";

     (5) To contaminate, pollute or render sub-standard your products or goods; 

     (6) To disseminate, divulge or utilize:

          (a) Your proprietary or confidential information, including formulas, patents, data, processes or other confidential information unique to your business, or the confidential or personal information of another person or organization, 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"; or

     (7) To inflict "ransomware" on your "computer system".

Analysis:

Coverage is now provided for the infliction of "ransomware" on the computer system of an insured. This is a type of virus that deprives the owner of access to its computers until a ransom is paid. Once a ransom is paid to the hacker, the data is again made available to the insured. Retrieving the data from back-ups and recovering that data not backed up can be exceedingly expensive and time consuming. This is new to the 2013 form.

Coverage must apply to a loss and expenses that result from an occurrence that takes place during the policy period and is reported during the policy period or extended policy period. Only losses that are covered under the policy, or occur during the period, and qualify as an occurrence are covered.

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 part of the insuring agreement applies to the expenses that the insured incurs in its handling of the direct loss payments discussed in the first insuring agreement. "Expenses" is a defined term that will be treated later in this article, but it includes such items as fees and costs for negotiators, travel costs, hospitalization and medical service costs, reward money, and any other reasonable expenses incurred by the named insured with the consent of the insurer. For example, if the insured's company representative in the Middle East is kidnapped and held for ransom, and the company hires a negotiator who acts as the go-between in the deal, CR 00 41 will pay the negotiator's expenses and fees. And, after the representative is released, CR 00 41 will pay for his medical costs (including psychiatric care).

The maximum amount that the insurer will pay for these expenses is listed on the declarations (CR DS 07). There is no deductible applicable to this coverage, and the payment is on a per occurrence basis. The statement that fees and expenses incurred are in addition to the limit of insurance was removed. Coverage has not changed however, since this language now appears under section B. limit of insurance.