The insurance requirements in the film, TV and theatre business are as unique as the stories told in every production
“Normally this would have been a case of abandonment,” says Guylaine Dechaine, vice-president of BFL Canada’s film and entertainment division, and the film’s broker. “But there is no production company out there, no insurance company out there that wants abandonment; everybody wants to find a solution.”
Ed Gathercole, BFL’s executive vice-president of film and entertainment, and the most senior member of the team, was immediately dispatched to Los Angeles. He spent the next several months in daily meetings with producers, insurers, adjusters, lawyers and others, in the attempt to navigate the successful completion of the film. In Canada, his colleagues, including Dechaine, were patched in to the daily meetings via conference call.
“This is where the expertise of the broker comes in,” says Dechaine. “As the broker, we become the middle man. There are a lot of parties around the table. Our job is to navigate the potential claims and bring assistance to all these experts and come up with creative solutions to make sure the movie can be completed.”
In the end, the film wrapped within six months, using three different actors to replace Ledger in the lead role. It went on to gross over $61 million in worldwide box office sales.
“It was still one of the largest claims that I have encountered in my 26 years in the business,” says Dechaine. “You don’t encounter many of those in your life. I had one and that was enough, and I wouldn’t wish it on anyone.”
Claims like the ones involving Ledger are rare. Cast insurance, unique to the industry, is more often applied to cover illness and accidents for irreplaceable cast and crew. But brokers work closely with their producer clients to try and mitigate risk. As with life insurance applications, for example, each crew and cast member is required to undergo a full medical examination.
“The size of the claim is directly linked to the size of the budget,” says Darlene Milley, vice-president at Aon Ruben-Winkler Entertainment Insurance Brokers. “If you have the death of an artist before the end of the principal photography period, (shooting term), and you cannot salvage the film as a result, this would cover most of the costs incurred to that point. There is the potential for large losses, but abandonment is highly unusual.”
That’s because, says Milley, risk management is a big part of the broker’s role. From the outset, brokers go through scripts line by line to give them an idea of the context of the film, (or theatre production), the potential risks involved – if there are any stunts or elaborate sets, for example – and primarily to ensure the production respects copyright laws.
“Producers’ errors and omissions liability coverage is one of the most important and it’s our starting point,” says Milley. “That’s what’s going to protect our clients – the producers — from infringement of copyright, unauthorized use of titles, formats and ideas, and characters, including any libel or slander suits that could arise.”
While a framework of standard policies and programs for film, television and theatre production exists, unique to this market is the need to provide highly customized coverage.
“The packages we have may not automatically cover everything that’s in the script,” explains Milley. “It’s our job to understand the details of the production from the outset, and follow it through day by day. It’s a lot easier if it’s just talking heads, all dialogue, if no one’s blowing up buildings.”
Producers have been known to “throw surprises in at the last minute,” however, the reason brokers have to be hands-on with their clients. Conducting site visits and always monitoring the daily call sheets, which show who’s going to be on the production site and where the site is on any given day, are all standard practice.
“Between the pre-production time, when we bind the insurance coverage, and when they actually start working, there are often modifications,” says Nellie Lindner, vice-president of sports, film and entertainment at BFL Canada. “Maybe they’ve started scouting locations and have changed the location of a particular scene, or they have to create an elaborate prop for a science fiction movie. The daily call sheets are like our Bible. We make a habit of looking at them every single day.”
Brokers also keep their eyes on production budgets, which sometimes reflect exposures not otherwise evident.
“If you see in the budget that they’ve hired an elephant trainer and you don’t remember that from the script, it’s going to raise red flags,” says Lindner.
Stories of Loss
Cast coverage, E&O, general liability and third-party liability programs all have to be specifically crafted to meet the needs of the producers and their individual productions. Although premiums vary widely, they often represent 1% of the total production budget.
By far the most frequent claims, however, involve property, which tends to be a more generic coverage, non-specific to the particular production. In the world of theatre, this includes props, sets and wardrobe. In film, television and web media, property policies encompass all those things, but also account for mechanical and technical equipment failures, including what’s called “negative and faulty processing.”
“If there’s damage to the production media – film or HD camera, for example – there may be a need to reshoot or fix it in post-production,” explains Milley. “Much of that isn’t unique to an individual production.”
In fact, with the rapid changes in production media technology, insurers have become increasingly broad in their coverage. While the policies around production media are pretty standard, the amount of coverage for equipment and other property varies – as do the premiums, deductibles and claims – depending on the value of the production, the value of the equipment, and the number of prior claims.
“Ninety per cent of claims in this industry are equipment damage claims,” explains Bruce Douglas, vice-president at CG&B Group, and head of Unionville, the firm’s entertainment subsidiary. “Someone drops a camera, someone drops a lens. We’re always telling our clients to be very careful who they’re allowing to use the equipment because if they have a lot of claims, their deductibles will go up. If they have too many, they may have trouble getting insurance.”
Even with the best risk mitigation plan in place, however, brokers must be prepared to negotiate on behalf of clients when there’s a mishap, even one which should’ve been avoidable. For example, BFL Canada insists its clients, have 24-hour security for their equipment.
“We had a situation where there were three guys at the end of a 16-hour shoot,” recounts Dechaine. “They were tired. They loaded the equipment into the van, and drove off. There was a bump. They called and told me they had run over an $85,000-camera. When you get these phone calls, you think ‘this must be a prank,’ but this is the kind of stuff that happens and it was our job to make sure the claim went through.”
Productions have been known to run for months without making a single property claim. This is because the damages are often too small to justify the deductible. Aon offers policies without deductibles.
“Without the deductible, it gives the clients the option to submit smaller claims at their discretion,” says Milley. “Clients often use discretion when submitting claims, however, so as not to impact their loss history and the ability to insure future productions.”
Brokers working in entertainment insurance have to be prepared to offer clients creative solutions at any moment during the production period. Those in the business caution anyone outside of the market from attempting to ‘dabble’ in entertainment insurance.
“The key is to understand that this is specialty insurance,” says Mark Teitelbaum, president of Premiere Insurance Underwriting Services, a subsidiary of Everest Insurance Company of Canada. “This is not home, auto, or general commercial where you renew policies once a year and wave your hand. Entertainment insurance is a lot more sophisticated. If you don’t understand how the film-making process works, you’re not going to understand what the risks are, even the ones that aren’t initially obvious.”
DÃ©chaine at BFL recalls a client phoning her at 6:30am one Saturday to say he “had the police standing beside him.” He had been filming a car commercial on a road in rural Quebec; legitimate authorization to close the road for a plate-less car would have potentially taken months, risking the production’s deadline.
“After my heart started beating again, I told him to drive to the nearest town or village, go to the local car mechanic, and ‘rent’ a license plate from him,” says Dechaine. “It’s really like an emergency ward. There is always something we need to respond to. We might have three heart attacks in the same day or just a lot of band-aids to apply, but our people have to be alive and kicking and ready to respond to anything.”
Breaking Into The Business?
In the wake of the six-month filming of science fiction remake Total Recall, Toronto has been positively giddy, anticipating a record-breaking $1 billion in film production value for the city this year. With the film’s production and marketing costs estimated to reach $200 million, a recent Toronto Star headline said it all: “How Total Recall saved Toronto’s film industry.”
“It’s the largest film Toronto has ever had,” says Milley, at Aon Ruben-Winkler, which was the broker for Total Recall. “Losses on a film this large have the potential to be astronomical. But there are very few people in Canada that have the expertise to handle an account this size.
“Besides, this is a 24-7 job; we’re not keeping bank hours,” adds Milley with a laugh. “And we’re certainly not hanging around all day having cocktails with the stars.”
Others in the business say it’s unlikely the blockbuster – or others that follow — will have any noticeable impact on the highly competitive, niche entertainment insurance market in Canada. Annual GDP in 2010 for the entire arts, entertainment and recreation sector estimated at approximately $11.3 billion, according to Industry Canada.
“It’s a highly competitive market, but there’s a ceiling to this,” says Teitelbaum. “It’s a small pie, specialty in nature, and it’s not a huge market, especially not from a commission point of view.”
Currently, there are four main brokers in Ontario, and about six in Canada that specialize in this type of business, adds Douglas.
“There’s not a lot of business to go around,” says Douglas. “Rates are down; it’s a softer market, like all commercial business. I would doubt if anyone in the business is increasing volume. There’s really not a lot of room for newcomers.”
Statistical Indicators of Film and Television Production in Canada
Data from Profile 2010. All figures are in Canadian dollars. Figures cover the period from April 1, 2008 to March 31, 2010 and include both French and English-language productions.
Total volume of production in Canada (i.e. Canadian television, Canadian theatrical, Foreign Location & Service, and Broadcaster In-House combined)
- Increase by 1%, from $4.8B in 08/09 to $4.9B in 09/10
- 117,200 full-time jobs
Canadian television production
- Decreased 3.4% from $2B to $1.9B
- 47,300 full-time jobs
- Biggest of the 4 industry sectors at 40% of all activity
Canadian theatrical production
- Increased by 41.8%, from $217M to $308M
- 7,300 full-time jobs
Foreign location and service production
- Increased by 4%, from $1.4B to $1.5B
- 35,900 full-time jobs
Broadcaster in-house production
- Decreased by 5%, from $1.17B to $1.11B
- 26,600 full-time jobs
Copyright 2011 Rogers Publishing Ltd. This article first appeared in the October 2011 edition of Canadian Insurance Top Broker magazine.