In the past, sensational tragedies like kidnapping, stalking, and home invasions seemed to happen to someone else. Following the events of September 11 and some other recent high-profile abductions and shootings, not to mention one AMBER Alert after another, the reality is that our world, and our perception of the safety of our world, has changed. No one ever thinks “it could happen to me,” but it does.
The Justice Department estimates that in 2002 there were more than 1.3 million cases of forcible and unlawful entry of residences. That same year, there were 58,000 children who were victims of stranger and non-family abductions. In 1999 (the latest year for which there are statistics), nearly 50,000 cases of carjacking were reported in the United States. In 1998, an estimated one million women and 400,000 men were victimized by stalkers. Still think it can’t happen to you or your clients?
“One in 20 women can expect to be the target of a stalker at some point in their lives, and only half of all stalking victims report the problem to the police,” says Pat O’Connor, executive VP at City Securities Corp, an investment and insurance firm based in Indianapolis. According to a study conducted by a research firm called Corporate Risk International, women take 120 million business trips annually and account for 40% of all travelers, O’Connor notes. “Females traveling alone are more often targets for such crimes as pickpocketing, purse snatching, and assault,” he suggests. Due to such threats, security issues are the chief concern among female executives and travelers, particularly those traveling to a foreign country. “A wealthy individual in a high-profile position becomes a target for stalking” or other types of threats, O’Connor says. “Therefore, their wealth becomes a kind of liability.”
Stalking threats, carjacking, abduction, kidnap and ransom, workplace violence, extortion, and home invasion–and their financial consequences–are just a few of the issues your high-net-worth clients need to be aware of.
“You don’t hear about these things happening very often, but thinking about all of the financial confusion and criminal activity that exists, it is surprising that these kinds of issues aren’t more apparent,” adds O’Connor. “I am quite amazed that there hasn’t been more violence by people who have been defrauded and lost their entire savings from cases like Enron, Qualcomm, and so forth.”
High-net-worth clients have one thing on their minds: preservation of self and their assets. As investment advisors, it is your responsibility to educate your clients or refer them to someone who can explore the risk management options available to deal with these possibilities.
“You always want adequate excess liability coverage, so it is imperative that clients look at their risk management annually, or at least their property and casualty insurance, and all other ancillary coverage,” offers Ed Mooney, a senior VP and investment advisor with Bank of New York in New York. “It is obviously not a fun thing to discuss, but if your clients are in the press a lot, or their information is publicly available in business documents such as annual reports, then I think you have to look at the risk and the cost benefit of purchasing such insurance.”
So what is available? There are a few companies–like AIG and Chubb & Son–selling policies that pay victims of home invasions, stalking, carjackings, abductions, and kidnap and ransom.
“People are definitely more concerned about their personal safety,” says Peter Spicer, assistant VP for Chubb & Son and new product manager of Chubb Personal Insurance. In recognition of that concern, Chubb rolled out in 2001 a family protection insurance plan called Masterpiece. Now available in most states, this personal liability plan is added to an existing Chubb policy. “Having this product is a very personal decision,” he says. “It is peace-of-mind coverage. Should one of these things befall you or a loved one, you would know that extra measures were in place to at least remove some of the financial burden so you can focus on emotional health.”
The family protection plan is broken into four categories: abduction/kidnap and ransom, carjacking, stalking threat, and home invasion. The cost varies from state to state but ranges somewhere between $70 and $135 per year for the average policy, Spicer continues. “Chubb tends to offer products that have a broader appeal to the affluent,” he says. “But this was designed to be available to anyone who wants it, not necessarily the rich.”
Unlike kidnapping and ransom policies that companies purchase on behalf of their employees, the Chubb policies are personal kidnap and ransom policies that individuals can buy for themselves and their families.
Abduction, Kidnap, and Ransom
“Initially it is important to make a distinction between abduction, and kidnap and ransom,” Spicer explains. “You will hear those terms used interchangeably, but for insurance purposes, in a kidnapping there has to be a ransom demand to trigger coverage.” A kidnap ransom policy then reimburses the insured for ransom payments and other related expenses up to the applicable limits. “With an abduction policy, there does not have to be that mysterious phone call or that mysterious note demanding money or some other form of payment,” he continues. If a child disappears and cannot be readily located, that triggers abduction coverage.
In either case, the Family Protection product reimburses the insured for medical and psychiatric expenses, as well as travel, meals, lodging, and telephone expenses incurred while searching for the missing person. Additionally, the insured has up to $100,000 available to use toward a public relations analyst, a forensic specialist, or a security consultant. “So if your child is abducted and you want to hire a private security company to work with law enforcement to try to locate your child, we are going to reimburse those expenses up to $100,000,” Spicer says. The public relations analyst is included for two reasons, says Spicer: to get the word out that the child or other family member has been taken or is missing, and to give parents and family members an opportunity to deal with the emotional trauma without having to face the press. “It puts someone else out on the front lawn to answer questions,” Spicer says.
For the medical and psychiatric expense portion, the policy offers up to $50,000 for the victim on top of any other medical coverage that might exist. “Most people have access to some form of private medical or health care plan, and this money fills in the gaps,” says Spicer, noting it can cover any deductibles or copayments, or out-of-network medical expenses.
The child abduction rider provides up to $25,000 for rest and recuperation coverage for the victim and the victim’s family. “If the doctors involved in the victim’s recovery recommend the family take a break,” notes Spicer, “then we will reimburse them to do so.” The policy also provides lost-wage coverage up to $15,000 per person and $30,000 per occurrence in an abduction. Chubb also posts a $50,000 reward for information leading to the arrest and conviction of the perpetrator. “In most states we have a $250,000 accidental death and dismemberment coverage,” Spicer says, “that responds to certain catastrophic injury or death resulting from a covered child abduction, carjacking, or home invasion occurrence.”
Carjacking and Stalking
Carjacking covers the insured in a motorized land vehicle, whether it is the insured’s own car, a rental car, or on a city bus. There are territorial limitations, however, coinciding with the U.S. State Department’s travel warnings list (you can view the list at www.chubb.com/personal). These limitations apply to the whole policy, including home invasion and child abduction coverage. “If the insured is carjacked in a country that appears on the State Department’s list of unsafe territories to travel to,” notes Spicer, “the loss would not be covered.”
Stalking threat coverage is triggered by an incident of harassment or threat brought to the insured by someone already named in a restraining order. It provides three expense reimbursements: up to $15,000 for a professional security consultant or guard services; up to $3,000 for residential security expenses, for hardware such as new sensors or a security system; and third, “if the threat is of such a nature that you feel you should not be at your home and you need to stay somewhere else for a while,” says Spicer, “we will reimburse up to $5,000 for temporary relocation expenses.”
The home invasion policy is similar to stalking threat coverage, Spicer explains. The trigger here is that the insured must be present when the incident occurs. “Home invasion means an unlawful act of violence or threat of violence to you, a family member, or your guest, by a person who unlawfully enters your residence while you are present,” he says. This coverage is designed to respond only when the insured is home. It is important to make the distinction that if the insured comes home to find that someone has burglarized their home, then that incident would not be covered. But if the insured comes home and interrupts someone while they are in the process of burglarizing the home, that would be considered. “At that point it would be very easy for us to believe that you would be violated, threatened, and traumatized by running into an intruder,” he says. The policy will also pick up coverage for temporary residences, such as a hotel room for yourself or for a dependent child who may reside at a college or other school away from home.
So, should you recommend such policies to your clients? Advisor Mooney says his role would be to bring up the coverage and discuss it with his clients to decide if such specialized coverage would be appropriate. Mooney suggests addressing the issue with clients who have $5 million to $10 million in assets. He’d also recommend it for many clients with expensive homes and clients who are on not-for-profit or public-company boards of directors. “It has to be looked at in the context of what potential liabilities exist, and given the current environment, there is a lot more concern,” says Mooney. The ultra-wealthy have a larger exposure to crime and more concern about crime because of their higher profiles, adds Spicer. “These clients have reached a point in their lives where they can afford rather large homes in more affluent neighborhoods, nice jewelry, and nicer vehicles. That visible wealth makes them targets.”
Watch Out for the Help
In addition to personal liability coverage, high-net-worth individuals who employ domestic staff such as housekeepers, nannies, gardeners, or chauffeurs should also consider some kind of workplace liability and workplace violence protection coverage, says City Securities’ O’Connor. “Does every employer or company need workplace violence coverage?” he asks. “Doesn’t everybody have that exposure?” O’Connor points out that the leading perpetrator of workplace violence is either a disgruntled or fired employee, or a stalking spouse. Many people also become unintended victims of workplace violence, he argues.
Chubb has a rider to cover employment practices liability (EPL) designed for those with five or fewer domestic employees. This policy is for employees residing in or outside your home and is not limited to people doing work in the home. Employees such as personal assistants would be included as well, explains Spicer.
The rider helps protect the insured from employment acts such as discrimination, sexual harassment, and wrongful termination. It pays any judgment up to the limit of coverage chosen. The insured is responsible for a $10,000 deductible. Beyond the deductible, there are two settlement options: the first covers up to $250,000 per occurrence and $500,000 annual aggregate; and the second is $500,000 per occurrence and $500,000 annual aggregate. Since it is added to a personal or excess liability contract with Chubb, it will also cover attorney costs, which are not limited until the EPL coverage occurrence limit is exhausted by a paid claim. Therefore, all legal fees are paid in full until a settlement is awarded.
There is also “reputational” coverage that provides payments of from $25,000 to $50,000. “Reputational injury responds to an allegation, or discovery, of a wrongful employment act against a residential staff that is reasonably likely to result in a civil action against you or a family member, or a threat by any staff to disclose publicly that you or any family member committed or allegedly committed a wrongful employment act,” Spicer says. “We view this as somewhat preemptive damage control coverage if there is concern that a disgruntled employee or one that has been harassed is going to go public.” Once that employment practices crisis occurs, the insured has up to $25,000 to employ a reputation management firm, such as a public relations firm or a media management firm, to convey their side of the story to the public, he says.
Whether or not your client decides to purchase any of these more esoteric insurance policies, they will thank you for bringing these issues to their attention. All the policies are oriented toward asset protection, says Spicer: “It’s about protecting yourself.”
Freelance writer Megan L. Fowler can be reached at firstname.lastname@example.org.