CR 04 03–EXTORTION–COMMERCIAL ENTITIES AND CR 04 04–EXTORTION–GOVERNMENT ENTITIES

(February 2026)

INTRODUCTION

These endorsements cover extortion payments made due to threats of physical harm to any specific individuals who are captured or believed to be captured. They also provide coverage for threats of damage to the insured's premises or property situated on the premises.

This analysis is of the 06 22 edition. Changes are highlighted in bold. It does not cover format changes that do not affect coverage.

ELIGIBILITY

CR 04 03–Extortion–Commercial Entities

This endorsement may be added as an additional insuring agreement to the following:

NOTE: CR 04 03 is not used with the Government Crime Coverage Form or the Government Crime Policy.

CR 04 04–Extortion–Government Entities

This endorsement can be added as an additional insuring agreement on the following:

NOTE: CR 04 04 is not used with the Commercial Crime Coverage Form or the Commercial Crime Policy.

CR 04 03–EXTORTION–COMMERCIAL ENTITIES ANALYSIS

This is an endorsement to the Insurance Services office (ISO) Commercial Crime Coverage Forms and Policies and is subject to their conditions, definitions, and exclusions. The only changes are those within the endorsement.

This coverage is not standalone and is more limited compared to the Kidnap/Ransom and Extortion Coverage Form or Policy. It offers only extortion coverage, similar to Insuring Agreement 1.b. (1) and (2) in the Kidnap/Ransom & Extortion Coverage Form, but with some differences. Specifically, these endorsements cover only the value of surrendered items during extortion incidents and do not provide coverage for extortion-related expenses.

Related Article: CR 00 40–Kidnap/Ransom and Extortion Coverage Form and CR 00 41–Kidnap/Ransom and Extortion Policy

INSURING AGREEMENT

The following is added to section A. Insuring Agreements:

Extortion – Commercial Entities

The insurance company will cover a loss if the named insured faces a threat of extortion, and the demand is paid with money, securities, or other tangible property. The payment must be surrendered to a natural person or entity, outside the insured premises, and must occur within the policy period specified on the Declarations. However, losses occurring in any Territory listed on the endorsement schedule are not covered.

The communication must threaten to take one or more of the following actions:

  1. Cause bodily harm to the named insured (as an entity or as an individual), its directors, trustees, partners, members, managers, ERISA plan officials, or employees. The threat may also be directed against a relative or an invitee of any of these individuals. Coverage applies only if the threat follows the capture of any of the persons described above. The capture can be actual or alleged. Robbery is excluded from coverage.
  2. Damage the named insured’s premises or other property inside the insured premises.   
  3. Damage the services or products of the named insured by contaminating, polluting, or otherwise impairing them to make them less acceptable.

NOTE: In the 06 22 edition, cyber threat coverage has been eliminated from the insuring agreement. This includes disseminating, divulging, or using proprietary or confidential information. Now, a separate Cyber policy is necessary to obtain coverage, as costs associated with investigation and remediation are covered under that policy.

LIMIT OF INSURANCE

The maximum amount payable for all losses from an occurrence is the Limit of Insurance specified on the Declarations.

DEDUCTIBLE

The insurance company will only cover losses that exceed the deductible specified on the declarations. After the deductible is met, they will pay up to the Limit of Insurance stated on the declarations.

EXCLUSIONS

Applicable to All Insuring Agreements:

h. Kidnap, Ransom, Extortion And Other Unlawful Demands Exclusion is replaced by the following:

Surrendering ransom in response to an unlawful demand, which may include, but is not limited to, demands resulting from:

·         Alleged or actual kidnapping or threats of physical harm to any covered person, excluding robbery.

·         Threatening to damage any property.

·         Denial of service attack threat to any computer system.

·         Threatening to introduce malicious instructions or viruses into a computer system. Such malware must be intended to destroy, damage, or corrupt the stored computer programs or electronic data within any computer system.

·         Threatening to access, download, use, disclose, or distribute any of the following:

o   Information belonging to the insured.

o   Information belonging to a natural person.

o   Information belonging to an entity that is not the insured.

o   Vulnerabilities present in the source code of any computer system.

NOTE: This exclusion does not apply if any of the above is covered under Insuring Agreement A.1.a or A.1.b. or this insuring agreement.  

·         Except as covered under Insuring Agreement A.1.a or A.1.b, losses caused by payments made due to a denial of service attack, ransomware, viruses, or other malicious instructions introduced into any computer system—especially when such actions deny or restrict access, encrypt data, or damage, download, or corrupt any computer system, electronic data, or computer—are not covered.

·         No coverage is provided when an act or event listed above incurs fees, costs, or expenses.

CONDITIONS

Applicable to All Insuring Agreements:

The following is added to Conditions:

·         Duties in the Event of Loss Condition

When the insured first learns of facts that would lead a reasonable person to believe an extortion threat covered by this endorsement has already happened or is about to happen, they must take all reasonable steps to report the extortion demand to local law enforcement. If applicable, this should include notifying the FBI or the corresponding foreign authorities before surrendering any property for the ransom.

The following is replaced in Conditions:

·         Territory

Losses occurring anywhere in the world are covered. However, losses occurring in the territories listed on the schedule are excluded. 

Example: George is representing his company on a sponsored cruise when the company receives a message that he has been kidnapped in Jamaica. The kidnappers demand $100,000 for his release, payable to a messenger. Since Jamaica isn't listed on the endorsement schedule, coverage applies. 

The following is changed in Conditions:

·         Valuation – Settlement

o   Securities

The value of securities surrendered in an extortion demand is determined by their worth on the surrender date, not when the demand is received.

o   Property Other Than Money and Securities

Property other than money and securities is valued at either their replacement cost or the insurance limit, whichever is less.

NOTE: Extortion demands are usually extremely high, sometimes reaching millions of dollars. Because of this, high insurance limits are recommended.

NOTE: The definition of ransomware has been removed in the 06 22 edition, since it is in connection with cybercrime.

CR 04 04—EXTORTION—GOVERNMENT ENTITIES

The CR 04 03 – Extortion – Commercial Entities and CR 04 04 – Extortion – Government Entities are very similar, differing in only two respects:  

Under A. Insuring Agreements, the scope of coverage has been revised as follows:  

  1. Under CR 04 04 – Government Entities, officials, employees, or representatives, relatives, and invitees are insured persons.
  1. Under CR 04 03 – Commercial Entities, coverage includes threats to harm the insured’s services or products through contamination, pollution, or other means that make them unacceptable. However, under CR 04 04 – Government Entities, this coverage does not apply.