Insurance Plays Lead Role in Movies

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 last year’s movies, Fireman’s Fund Insurance Co. called “The Girl with the Dragon Tattoo” the riskiest. The movie was filmed in Sweden, Switzerland and the United Kingdom, and posed challenging risks, including the set, transportation of film equipment and costumes, and the potential for illness in a foreign location.

“The Girl with the Dragon Tattoo” featured a 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.

The company reported 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 more risky and exotic products, the Lloyd’s marketplace can place coverage … for a price.

Coverages

Insuring a film — especially a big budget film — isn’t as easy as just applying general liability and property policies. To that end, there are a range of coverages for films productions.

“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.

So, cast coverage is crucial. It’s 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. This covers losses, damages and destruction to just about anything that would be “in front of the camera.”

For behind the camera, film productions also purchase miscellaneous equipment coverage to pay for losses on items such as cameras, sound equipment and lighting.

Most productions also purchase extra expense coverage to insure losses incurred by anything including sets, equipment and location. Third-party property damage coverage 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, as well. Faulty stock coverage can 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 a less obvious coverage available to film companies and video games.

Partnering with Fireman’s Fund, International Film Guarantors provides completion bonds for producers and financial backers looking for a guarantee that a production will be finished both on schedule and on budget.

Technology Risks

As technology has altered the way that films are made and distributed, it has opened up new risks for errors and omissions. For instance, Doug Turk, president of Aon/Albert G. Ruben, said “transmedia,” in which a variety of different media channels, music are tied into one project, create more exposure.

“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 explained.

He also pointed out that in today’s digital world, there are cyber liability concerns. 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. “[This]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.

“When you think of film intelligence today, when it’s in a digital format, it may be easier for people to misappropriate,” Turk 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. Policies need to recognize that, [and] 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.