Film exposures:

August 21, 2006

Creating a Hollywood movie is not always as glamorous as it sounds. The average cost for a Hollywood movie is tallied at $60 million, and the payoff is not realized until viewers show up to view the final product on the big screen. Add to that risks such as terrorism, cast injuries and equipment malfunctions that can damage or slow film production, and moviemaking seems more like a wild, and sometimes unwise, adventure. Fortunately, the insurance industry is working behind the scenes.

Understanding the risks

The potential for catastrophe for filmmakers is great, said Brian Kingman, senior vice president of Aon/Albert G. Ruben, which provides coverage for the entertainment industry. “If an actor is incapacitated because of sickness, injury or death and cannot complete his or her role, the movie is in extreme jeopardy,” he provided as an example.

Safety of crews and equipment is also a concern, said Chris Palmer, director of risk control for Aon/Albert G. Ruben and author of the company’s “Risks in Global Filmmaking Map.” [See “Filming abroad a risky business”] Especially in foreign countries, equipment could be confiscated by the host government. The host government might withdraw its welcome to filmmakers for political reasons. Or filmmakers may run into extortion and threats by criminals, he said. Actors and crews may get sick from diseases such as malaria or just routine illnesses.

Additionally, like many businesses, filmmakers must consider the threat of terrorism, which like a disease outbreak could require evacuation and halt production.

Then, there are the risks inherent with shooting a film on a set with many people. There could be a “fender bender” on the set, said Denise Dimin, claims supervisor for the entertainment division of Fireman’s Fund. There also could be accidents with cameras.

“Sometimes I don’t think they ever make a movie where that doesn’t happen,” she said. “When you’re dealing with an entourage of hundreds of people who are dealing with other people’s property, they aren’t as careful with rented cars as they are with their own. With rented equipment, the likelihood of there being some sort of claim is good.”

Of course, the film itself needs to be insured. “You can shoot an entire day and lose hundreds and thousands if the film stock is bad. Or you can have problems with the camera that it exposes the film incorrectly,” said Christie Mattull, senior vice president with DeWitt Stern of California. The company underwrites theatrical, film, television and music risks.

Most claims involve the crew, according to Mattull. If actors get sick or injured, the production can be shut down yet workers must still be paid. Even if production is halted, there are invoices — rentals on equipment and the site — that still need to be paid.

“Whatever film is shot on a particular actor is not protected until the actual movie is completed, cut and replicated,” Kingman said.

The right coverage

How do insurers cover a film’s potential risks?

First, insurers read the script and peruse the movie’s budget. “As a matter of course, I read the script twice to read the story and then go through the second time to focus on what exposures might exist,” Mattull said. “The screenplay could say ‘establishing aerial view’ or say ‘aircraft involved,’ and that’s not standard. If the script mentions animals or trains, or what appears to be a stunt, we go through and make notations on that.”

Following that, Mattull meets with the client to discuss the potential exposures and explain what products could protect them.

Among the typical coverages are cast insurance for the actors; coverage for the film itself; workers’ compensation; property coverage for props, sets, wardrobe and third-party property damage; errors and omissions liability coverage, general liability, auto liability; employee coverage and business interruption; miscellaneous coverage for equipment behind the camera like sound; and other coverage for adverse weather and terrorism-related events.

Limits depend on the picture. “You can have $200 million or $3 million depending on the picture,” according to Suzy Wozniak, senior product manager for new business for Fireman’s Fund. Likewise, deductibles reflect the title. A smaller shoot would be in the $25,000 range; a larger shoot could be up to $1 million. “Each line has a deductible reflecting what kind of exposure the client is facing,” she said.

Depending on their risk tolerances, clients may opt for some coverages and ignore others. “Some companies feel more comfortable knowing they have insurance for anything that could go wrong on the production,” Mattull said. “Others, for budgetary reasons or the exposure is not as great, may choose to forego coverage. We feel it’s our job to enlighten the client on potential risks and then it’s their decision on how they address them.”

One coverage clients are choosing more frequently is coverage for data. “With computer-generated graphics and animation, there are different kinds of exposures that you wouldn’t have with normal film,” Mattull said. “We’re definitely seeing more animation in more things where the movie took the live process of film of the actors and overlaid animation over that. With computers, you can lose data and things can go wrong that weren’t previously contemplated under standard types of entertainment insurance.” For example, the recently release Lady in the Water by M. Night Shyamalan used animation with film, she said.

In addition, clients are giving more consideration to weather-related exposures, Mattull said. “After Hurricane Katrina, Florida has been trying to get people to go and film there,” she said. “A lot of clients are looking to shoot where hurricanes could be an issue, and this year is predicted to be as bad if not worse than last year.”

Despite the many exposures the film industry attracts, the business earns its stars. “Large claims are generally infrequent,” Mattull said. “It’s rare to see a production with multiple big claims,” she said. “People dent a car here and there, and a camera gets damaged. Overall, of the volume of films made in Hollywood and the amount of production that goes into it, claims are not really frequent.”

The bonus, Mattull said, is that the entertainment industry is a creative business. “A very interesting part of entertainment insurance is we have to create products all the time for our clients. Film production people want to do crazy things all the time and have fantastic visions of how they want their movie to be,” she said. “My mind always has to be working alternatives or new ways of doing things, addressing my clients’ needs for whatever their creative people come up with … As brokers, we get to create something for that film.”

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