Domestic Exposures

Schinnerer’s Kidnap, Ransom & Extortion insurance program provides coverage that addresses domestic security exposures as well as foreign exposure.

When people consider kidnap, ransom and extortion insurance, often the first thing that comes to mind is a kidnap for ransom or other security issue in a foreign country. While this is an important aspect of the coverage, clients with no foreign operations or travel can also benefit from this coverage. Examples of domestic security exposures that a Schinnerer KR&E policy can provide response to include:

Hostage Crisis

Industries that may have particular interest: Entities that are open to the public such as retail organizations, hospitals, banks, and entertainment venues, as they have heightened exposure arising from the constant flow of people on their premises and the relative ease of entry for a perpetrator.

Claims scenario: Employees and customers are held hostage at First Savings bank branch for five hours before the police are able to apprehend the perpetrators. In the process of the hostage situation, insured persons were threatened, and received injuries. Coverage would be in place for expenses incurred as a result of the hostage crisis situation such as lawsuits against the bank by those who were held hostage, temporary security measures, counseling & medical expenses for the Insured Persons, and rest & rehabilitation of directly affected employees & customers.


Cyber-extortion

Companies can be vulnerable to cyber-extortion no matter where they are located, and whether the perpetrator is operating in the US or halfway across the world. 

Industries that may have particular interest: Clients who hold trade secrets or confidential information, or who are reliant on access to their computer systems to maintain operations.

Claims Scenario: Smith & Smith, LLP, is a mid-sized law firm which holds confidential information on many of their clients, as well as information on merger opportunities they are exploring. A hacker based in Russia gains access to their computer system and the confidential information on it. They send an email with a copy of the merger plan scenario and one of the firm’s client files attached to the law firm and threaten that unless they are wired $250,000 they will not only shut down the firm’s computer systems, they will also publish all of data they obtained from the system on the internet. Coverage would be provided for the expenses  incurred as a result of the incident, including advice and assistance of the crisis response firm, ransom payments made (if any), public relations advice and legal fees, salary of employees temporarily assigned to assist in negotiating on the event, loss of earnings due to interruption of the Insured’s business operations, and legal liability should shareholders sue the firm as a result of the incident.


Products Extortion and Associated Products Loss

The real or threatened contamination of an entity’s products  with associated ransom demand can force a massive recall, tremendous examination and destruction costs, and the need to replace affected products.

Industries that may have particular interest: This coverage is of importance for entities that produce or handle products that are vulnerable to contamination extortion threats, such as food/beverage producers, restaurants, pharmaceutical companies, toiletry companies, and grocery/convenience stores.  

Claims Scenario: Fresh & Hearty Soups receives a demand that unless the perpetrator is paid $100,000 they will produce publicity that they have put rat poison in the company’s corn chowder. Coverage would be in place for expenses the incurred as a result including legal advice and public relations fees;  recall, examination and destruction of the product; and replacement costs.


Extortion

A threat made against an Insured with an associated ransom demand, such as a bomb extortion, can occur anywhere.

Industries that may have particular interest: All industries

Claims Scenario: Fairview Arena, a multi-purpose entertainment venue, receives a letter noting than unless $1,500,000 is sent to the perpetrators, a bomb will be set off in the arena. Coverage would apply for crisis response assistance and advice, as well as expenses incurred as a result of the incident and loss of earnings due to business interruption while the arena is shut down as a result of the extortion.


Threat Response

A sublimit is available to respond to threats made that do not have associated ransom demand. This includes threats to harm or abduct insured persons, damage insured property or reveal confidential information. In addition to covering advice and temporary security measures in response to such threats, this allows an Insured to show that they took steps in response to such an incident beyond notifying the police, which helps prevent lawsuits and protect their reputation.

Industries that may have particular interest: All industries

Claims scenario: Kevin Flanders, the loan manager at Henderson’s Auto Dealership, receives a threatening phone call at midnight on a weekend. The caller says Kevin cheated him on a loan, and that he knows where Kevin lives and where his children go to school and that Kevin better not sleep at night because he’s going to “get him”. The sublimit will apply towards investigation and advice by the crisis response firm, as well as temporary security measures recommended by the crisis response firm. Examples of this include temporary security guards, the cost for Kevin and his family to spend a few nights in a hotel and rent a different car while the threat is being investigated.


Child Abduction

This coverage responds to abduction of a child from an insured’s premises, and an enhanced version provides coverage for legal liability, abduction by non-custodial parents, and abduction from events organized by the insured as well. 

Industries that may have particular interest: Clients that have children on premises, particularly if they at any point have care and custody of the child. Examples of  clients who may find this coverage of particular interest include schools, day cares, houses of worship, recreational organizations and clubs, hospitals, retail organizations, restaurants, etc.

Claims Scenario: Jessica, age nine, is taking swimming lessons at Park Ridge Recreational Center. Her non-custodial father takes her from the rec center and flees across the border with Jessica. The mother sues the recreational center for negligence, and the abduction is covered extensively by the local media, which results in a decrease in enrollment in the classes and daycare services offered by the center. The policy with enhanced child abduction would cover costs associated with this incident, including: the costs of a crisis response firm to attempt to locate Jessica; rewards for information on Jessica; legal liability coverage for the lawsuit brought against the Insured; the salary of Jessica’s mother while she takes time off work to look for Jessica; public relations advice for the insured; counseling costs; medical costs; travel costs; and loss of earnings as a result of the abduction.


Assault Expense

This coverage is available exclusively for academic institutions and houses of worship, and is designed to respond to an act of violence on premises resulting in death or serious injury and involving three or more individuals.

Industries that may have particular interest: Available only for academic institutions and houses of worship.

Claims Scenario: A student at Mainsville High School brings a gun to school and opens fire in a classroom injuring five and killing two. The policy would cover costs including: temporary security costs in the wake of incident; counseling for students/staff and families, costs of leasing access to facilities off-site if school facilities are off-limits; legal, communications and public relations advice for school; salaries for additional staff that may be needed as well as salaries of affected staff; medical costs; personal accident coverage for those disabled or killed; rest and rehabilitation for directly affected insured persons and families.


Any examples in this webpage are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. This material is not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. Copyright © 2011 Victor O. Schinnerer & Co. Inc. All rights reserved.

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