The Office of General Counsel issued the following informal opinion on January 30, 2002, representing the position of the New York State Insurance Department.
Re: Kidnap and Ransom Insurance
1. Is kidnap and ransom insurance permissible in New York?
2. Are there any regulatory limits or legal constraints imposed on this type of coverage?
3. May a company that is not licensed in New York sell this type of insurance in New York?
4. Are there any special or compulsory clauses that must be included in this type of coverage?
5. Does New York have a specific regulation that applies to kidnap and ransom insurance?
1. The payment of a ransom comes within the definition of burglary and theft insurance. N.Y. Ins. Law § 1113(a)(7) (McKinney 2000 & Supp. 2001-2002).
2. Incidental or consequential non-health or non-life expenses, as well as reward coverage, may be included in the policy only where the policy provides ransom coverage. Certain health and life related coverages may be included as endorsements to the policy. N.Y. Ins. Law § 1113(a)(13) (McKinney 2000 & Supp. 2001-2002).
3. Kidnap and ransom insurance coverage may be written on an excess line basis in New York.
4. There are no special or compulsory clauses that must be included in this type of coverage.
5. New York does not have a specific regulation concerning kidnap and ransom insurance.
No specific facts were presented. The inquiry is general in nature.
Questions 1 & 2
Insurance for the payment of a ransom comes within the definition of burglary and theft insurance that is contained in N.Y. lns. Law § 1113(a)(7) (McKinney 2000 & Supp. 2001-2002). Specifically, subparagraph (A) provides for:
Insurance against loss of or damage to any property resulting from burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation or wrongful conversion, disposal or concealment by any person, or from any attempt thereof;
It is the Departments opinion that the extortion of the ransom can be seen as a theft, or even a robbery. Whether property is taken by stealth, by gunpoint or by extortion should not obscure the fact that property is taken and is therefore properly considered as burglary and theft insurance. Consequently, this coverage may be offered in New York by a property/casualty insurer.
The Department has also opined that incidental or consequential non-health or non-life expenses, such as reasonable costs for a professional negotiator, a professional security consultant and travel, meals and lodging incurred by the insured or a family member, are permitted because they are considered ancillary to the indemnification for the primary coverages under the policy. However, this is only permissible where the policy provides ransom coverage and where these ancillary coverages do not constitute a principal exposure under the policy. Similarly, coverage for a reward is also permissible and will be treated as incidental to the ransom coverage.
Certain health and life related coverages such as related medical, cosmetic, psychiatric and dental expenses incurred by the kidnapped person for a specified period of time, as well as funeral benefits, may be offered as endorsements to the policy, as "medical payment coverage", which is authorized by N.Y. Ins. Law § 1113(a)(13) (McKinney 2000 & Supp. 2001-2002).
Pursuant to N.Y. Ins. Law § 1101(b)(2) (McKinney 2000 & Supp. 2001), "an unauthorized or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile" may, in accordance with N.Y. Ins. Law § 2105 (McKinney 2000 & Supp. 2001), effect the insurance transaction by mail from outside New York. Thus, provided that the unlicensed company is licensed to transact the business of insurance in its domicile, and the sale is transacted by mail through an excess line broker, in accordance with N.Y. Ins. Law § 2105 (McKinney 2000 & Supp. 2001), the prohibition against doing an insurance business without a license contained in N.Y. Ins. Law § 1102(a) (McKinney 2000) would not be violated. Accordingly, provided that it is done in compliance with the applicable statutory requirements, kidnap and ransom insurance may be written on an excess line basis.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.