Does Your Production insurance policy cover You in this Brave New digital age? some producers and insurance brokers say, "not by a long shot."
At first glance, entertainment insurance seems pretty straightforward. A production company is hired to shoot a commercial or feature film. The company has an insurance broker write a premium based on an estimate of costs for the production. A certificate, or policy, is issued and the production company pays a percentage of the overall premium, which covers everything from cameras to costumes to lighting equipment.
The type of insurance policy used by film and TV producers has been standard for decades. And back in the days of celluloid, it more or less ensured that producers would have adequate protection in the event of unforeseen damage to equipment or stock.
With the emergence of tapeless image capture and online asset management, however, many production houses are not getting what they require from their policies. Some claim that today’s insurance is dated and does not reflect the needs of production in an ever-growing digital environment. In fact, it seems that producers are either not covered entirely, or they’re paying big bucks for coverage that doesn’t apply to them.
"We just weren’t on the same page at all," says producer Debra Bassett, referring to her conversation with an insurance broker. Bassett was looking to secure insurance for a production. But, as she says, "I took one look at the insurance certificate and told him there was a big problem."
Bassett has been involved in commercial production for more than 30 years. Her San Francisco-based Bassett Productions has worked with everyone from LucasFilm to small production companies. This past spring, Bassett was set to produce a five-day shoot for New York-based stock footage house Ribbit Films, which specializes in HD greenscreen footage. Before she could move forward with the production, however, she needed to clear up some serious insurance-related obstacles.
Jerome Guerard, of Stow, MA-based Getchall Companies, acted as Ribbit’s broker for the shoot. And like Bassett, he realized right away that there might be a problem with her policy. "I received a call for a certificate of insurance. [Debra] mentioned there was a clause that included rental items, such as sets, lighting, wardrobe and props," says Guerard. A standard insurance policy groups such items together under the title Property of Others. Bassett, however, wanted them itemized on the policy. So what did this mean from Guerard’s perspective? "She was being too specific," he says.
The central issue for the production became the insurance certificate, or more specifically, how it was worded. Bassett wanted her client to be fully covered, so she questioned every line item on the certificate. Guerard replied that all items were covered but weren’t listed in a way that Bassett was accustomed to. The issue caused so much confusion that Bassett recruited longtime Bay Area entertainment insurance broker Larry Walsh, president of Hammond, Martin, Walsh and Smith, to review the certificate. Walsh knew the entertainment industry enough to understand what Bassett was looking for. Still, it wasn’t easy to work out a policy.
What Bassett was looking for, Guerard says now, is what’s known as the "producers package." But Getchall Companies, which had no prior experience with the entertainment industry, was not familiar with this type of policy at the time. "The only people who are calling it a producers package are insurance wholesalers," says Guerard. He adds that wholesalers are also the ones who make the big money. They can charge high premiums because they’re taking a standard product, renaming it and charging more for it. Producers end up paying based on an estimate of how much a production will cost, which may or may not be accurate. By calling it a "producers package," wholesalers can, in a sense, justify why they’re charging more by making it sound like it’s the only thing around.
Actuaries and underwriters come up with the formulas used to create insurance premiums for the wholesalers. Guerard says they often use old information, and they don’t include the fact that new media is less susceptible to destruction than film.
What It Really Costs You
The most expensive coverage in the "producers package" is what’s known as "faulty and negative." This covers a producer if film stock turns out to be defective. This, of course, was relevant to most productions a decade ago or more. And it was essential coverage, as no one knew if a reel was corrupted until the time it was processed. With today’s direct-to-disk capture, however, a producer can tell right away if something is wrong. Still, many production companies working solely in the digital realm are paying for faulty and negative coverage, even though it doesn’t reflect their production or distribution methods. And a small company with a limited budget will pay the same as giants, such as Sony and Paramount. "They’re paying the same amount per one thousand dollars, either of sales or of payroll," says Guerard.
The cost for production insurance can be staggering. Let’s say a production company does a shoot and the estimate for coverage- including rentals on equipment- is one million dollars. The company will pay around five percent of the total premium, or $50,000. Then several months later the same company estimates another shoot, again at one million dollars. Production insurance is charged on a per production basis, not annually, so the company will shell out $100,000 to cover its shoots. And if certain coverage bundled in the producers package isn’t required, then this formula is not only costly, it’s also a big waste. Unfortunately, most production companies don’t realize this until it’s too late. "They’re not necessarily covered on certain line items, mostly because the language on policies does not reflect the changes in production from year to year," says Guerard. The larger problem, however, is how insurance wholesalers are packaging and selling policies in the first place. The bottom line is that many production houses are getting a bad deal- and they’re overpaying for it.
Bassett and Guerard eventually came to an agreement, the production went on, and their initial misunderstanding turned out to be a revelation for both of them. Bassett had a better idea of the coverage that an insurance policy should, and should not, include, and how that coverage should be presented. Guerard saw an opportunity to make entertainment insurance more applicable, and affordable, for those buying a policy.
Getchall Companies is now recruiting other insurance companies to help tailor a policy to suit producers’ needs, and it’s offered on an annual- not per job- basis, like the producers package. Guerard has also collected insurance requirements that are relevant to digital and Web-based production and has combined them into one package, which is offered by National Entertainment Insurance, a subsidiary of Getchall Companies.
"What we’re offering now will cover a whole new generation of producers specializing in digital media," he says. The policy includes an IT expansion to address piracy and other issues that occur with e-commerce. Though Guerard admits this package isn’t a cure-all, Bassett is grateful it addresses important issues that few other insurance companies have yet to recognize. With advances in production happening all the time, there’s no doubt that entertainment insurance needs to keep pace. "Walter Murch is now editing with four G5s on Final Cut Pro," she says. "Everything is changing quickly."