Insurance Plays Lead Role in Movies

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by Jonathan Schwarzberg

Americans love movies, and they showed it by purchasing 1.2 billion tickets worth about $10.2 billion at the box office last year.

That, of course, means big business for companies that are willing to insure the risks behind these productions.

Of the movies to hit the theaters last year, Fireman’s Fund has called “The Girl with the Dragon Tattoo” the riskiest of them all. The movie was filmed in international locations including Sweden, Switzerland and the United Kingdom and posed a variety of challenging risks, including the set, transportation of film equipment and costumes, and the potential for dealing with illness in a foreign location.

“‘The Girl with the Dragon Tattoo” featured a wide range of risky elements, including motorcycle, skateboarding, fight and torture scenes, and filming in foreign locations, which all contributed appreciably to its overall risk,” said Lauren Bailey, vice president of entertainment at Fireman’s Fund Insurance Co.

The company reports that some of the action scenes, such as a motorcycle sequence, actually had to be altered from the book because of the insurance concerns.

“Part of my role as a risk services consultant is to collaborate with movie studios to analyze action and stunt scenes, understand all of the safety measures in place, and ensure the safety of the cast and crew,” said Paul Holehouse, entertainment risk consultant at Fireman’s Fund.

Most of the standard coverages for films are available through the traditional insurance markets in the United States. For some of the more risky and exotic products, the Lloyd’s marketplace is always willing to place coverage…for a price.

The company will insure everything from independent films to major blockbusters.

Insuring a film – especially a big budget film – isn’t as easy as just applying general liability and property policies. To that end, Fireman’s Fund offers a wide range of coverages for films productions. The company routinely insures productions worldwide with production costs exceeding $200 million.

“Delays can cost a production millions of dollars if a cast member becomes injured and is unable to work, which can cost up to $250,000 a day for a big budget film,” said Wendy Diaz, entertainment underwriting director at Fireman’s Fund.

The Novato, Calif.-based carrier has been insuring films for almost 100 years now and works with everyone from producers to studios to musical artists. The company has a staff of entertainment specialists that includes underwriters, claim adjusters and safety experts. Many of these employees used to work at production companies.

Fireman’s Fund offers cast coverage, which is basically a form of business interruption coverage for the production company should an actor become unavailable due to specific perils. These generally include things like illness, injury or death as opposed to jail or rehab.

Coverage for props, sets and wardrobe is also important for film productions. This covers losses, damages and destruction to just about anything that would be “in front of the camera.”

On the other end of the camera, film productions also purchase miscellaneous equipment coverage. Where the props, sets and wardrobe coverage is for things in front of the camera, this coverage pays for losses for items “behind the camera.” These can include everything from cameras to sound equipment to lighting.

Most productions also purchase to extra expense coverage to insure losses incurred by anything from sets to equipment to location, according to the insurer. Third-party property damage coverage is another piece of the puzzle and pays for the legal liability for real property at various filming locations.

Insurance for film productions extends beyond what happens during filming to include the actual film and equipment. Faulty stock coverage can be purchased to provide protection against having to reshoot or correct unacceptable footage that happens due to the mistaken use of faulty raw stock or equipment, such as cameras and sound equipment. It also covers problems caused by bad processing at the lab and mistakes from an editor’s handling of the negatives. The insurer also provides an all-risk coverage for negatives that excludes the perils named in “faulty stock coverage.”

Completion bonds are one aspect of covering films that might not be obvious to some people. Fireman’s Fund has been making this coverage available to film companies and recently began offering it for video games, too.

The carrier has partnered with International Film Guarantors to provide completion bonds for producers and financial backers looking for a guarantee that a production will be finished both on schedule and on budget.

As technology has altered the way that films are made and distributed, it has opened up new levels of risks for errors and omissions. This is an area that Doug Turk, president of Aon/Albert G. Ruben, calls “transmedia.” He said this is especially noticeable as a variety of different media channels, music are being tied into one particular project, creating more exposure.

“I think you also have a really interesting move to kind of transmedia,” Turk said. “Think about some of the films that have come out, and how they cut across a whole bunch of different media sources. There could be a television element, there could be a video game element, there could be online webisodes.”

Turk also pointed out that in today’s digital world, there are cyber liability concerns for productions. If hackers get into a server in an editing house and pull down a movie like “Pirates of the Caribbean,” they could put it out on the Web, which poses a liability issue. In the “old days,” someone would have to physically steal the film can and have a movie projector.

Turk added, “It’s one of those where it creates a different type of profile of risk to both the production as well as the consumption.”

Film-related companies like IMDb have made film data their business. Having this information taken and used in an unlawful way could have an impact on the business. It could trigger the cyber liability policy, a business interruption policy or others.

“I think when you think of film intelligence today, when it’s in a digital format, it may be easier for people to misappropriate,” he said. “That’s something that, again, the policies cover and they anticipate but it’s, again, a change in the risk profile of how these things are produced and consumed which really the policies need to recognize that, the insurance needs to recognize that and support any potential losses that come from that.”

Insurance Journal West Editor Don Jergler contributed to this report.


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