Question

The actual "loss" that is covered by the "Extortion - Commercial or Government Entities" endorsement to a Crime policy includes all of the following, EXCEPT:

a.The loss of the named insured's reputation when he doesn't pay the extortionists' demands for cash and the extortionist reveals the insured's extramarital affair on social media.
b.This coverage addresses situations where an individual is unlawfully detained, kidnapped, or held for ransom.
c.This aspect of the endorsement covers threats to damage or destroy the insured’s property.
d.If an extortionist threatens to disclose confidential or sensitive information (such as trade secrets, customer data, or proprietary technology), this coverage responds.

Answer 1

The "Extortion - Commercial or Government Entities" endorsement in a Crime policy does not cover the loss of reputation due to non-payment of extortion money; coverage includes tangible losses like ransom or threats to property, but not reputational damage.

Step-by-step explanation:

The question pertains to what is not covered under the "Extortion - Commercial or Government Entities" endorsement in a Crime insurance policy. Of the scenarios provided, the one that is not covered by this type of endorsement is option a: the loss of the named insured's reputation when he doesn't pay the extortionists' demands for cash and the extortionist reveals the insured's extramarital affair on social media.

Coverage typically extends to tangible losses such as ransom for unlawful detention or kidnapping (option b), threats to property (option c), and revealing confidential information (option d), but not to intangible losses like reputation damage.

Insurance policies are created to mitigate financial risk and provide compensation for specific types of losses. In the context of crime policies, the insurance company aims to protect against financial damage from criminal acts against the insured, such as extortion. Yet, moral hazard can arise when parties behave recklessly because they are insured, and collateral may be required in some insurance agreements where creditworthiness is in question.