Editors’ Note: Deadline’s latest series, Reopening Hollywood, focuses on the incredibly complicated effort to get the industry back on its feet while ensuring the safety of everyone involved. Our goal is to examine numerous sides of the business and provide a forum for leaders in Hollywood to discuss pressing issues around restarting production in the era of coronavirus.
As film and TV producers optimistically plot to resume shuttered projects and launch new ones, they are all stymied by a major blind spot. While those producers are immersed in bringing in medical staffs, temperature takers and sanitizers to keep casts and crews safe, a lack of clarity around insurance and completion bonds is hobbling plans to get the billion-dollar production industry off the ground.
Insurers already absorbing thousands of claims from film and TV productions that shut down abruptly in March (and across myriad other industries) aren’t even sure how deep their losses run. So they have hit pause on policies covering COVID-19. Studios can find ways around this, but even they are uncomfortable. Without the availability of proper insurance, many independents fear they cannot resume production because their bank financing is tied to insurance and completion bonds. If they’re forced to cover potential shutdowns themselves, the results could be catastrophic if, say, an actor gets sick an entire production shuts down 14 days or longer, with many department heads contracted to continue to be paid on a daily basis.
“We’ve been told that if we were being charged 1.5% or more of our budget for insurance, it’s going to double and they still won’t cover COVID-19,” said one exec who is engaged in daily conversations with insurers. “We all believe that the government is going to have to come in and backstop this, because there are millions of dollars at stake in production hubs all over the country in red and blue states that need the issue to be addressed before the business can come back to life.”
A bill currently being put together by the office of Rep. Carolyn Maloney (D-NY) is trying to address the problem through a government backstop for pandemic coverage. It would look much like TRIA, the Terrorism Risk Insurance Act, did in 2002 after the 9/11 terror attacks made shooting overseas seem more perilous. The legislation will be introduced next week. The bill’s backers hope it will be signed into law before year end.
Will President Trump help Hollywood? His Treasury Secretary Steven Mnuchin has a strong understanding of the issues since he left his perch as a Hollywood financier to join the administration, and millions in production spending in Republican stronghold cities will also be held at bay unless the issue is fixed.
“In this climate, anyone can get COVID,” even with extreme precautions on set like “isolation summer camp strategies where no one is allowed in or out. But all it takes is one person to sneak out and you have catastrophe on your hands,” said Vlad Wolynetz, head of television production at FilmRise and a former top production executive at AMC Network.
Jean Prewitt, CEO of the Independent Film & Television Alliance, is the point person for indie producers in Washington, D.C., where several bills are in the works. She said the one from Maloney — chairwoman of the House Oversight and Reform Committee and a senior member of the House Financial Service Committee and the Joint Economic Committee — appears to be the farthest ahead and may best serve the needs of producers.
The plan is to introduce it midweek next week. It would reinstate communicable disease coverage for the three core policies producers use: civil authority, imminent peril and cast insurance. It is voluntary, meaning insurers don’t have to offer it. But the idea is that the insurance companies that do will get the customers – which also include retail, tech, travel and other sectors — and ones that don’t will miss out. It calls for insurers to cover the first 5% of costs, with the government shouldering the rest up to a total national limit of $750 billion. There’s a deductible for insurers equal to 5% of their total paid-in premiums, the price to be part of the program.
“It will help get the economy restarted, make it easier to reopen and make it easier to get some money back” in an insurance claim, said one top political staffer. The insurance brokers and policy holders love it, this person said. “The insurance companies wish it would go away until another day. We understand, but disagree on the timing.” This person said insurers have indicated “that they think there may be another model” but have not been specific. The dialogue is “respectful,” the person said.
It’s not surprising insurers are in a bit of a daze. One broker compared tottering insurance companies with “snake-bite victims helplessly sucking in venom.”
The pandemic “is a peril that has no bounds in terms of geography nor time,” noted a doleful Evan Shapiro, CEO of insurance giant Chubb on a recent earnings conference call. Chubb, along with Allianz and One Beacon, are among the biggest entertainment industry insurers. They didn’t immediately return requests for comment.
Lloyd’s of London, the world’s largest insurance exchange, said Thursday it will pay out up to $4.3 billion to its global customers as a result of the coronavirus outbreak. It estimates the industry will suffer around $203 billion in losses from the pandemic this year, including about $107 billion from underwriting claims, with the rest from investment portfolios.
A half dozen brokers and completion bond experts Deadline spoke with said all parties involved in TV and film production are having preliminary conversations. They know this has to be sorted but are still trying to figure out who will take the hit.
An advantage of Rep. Maloney’s bill is that it is proactive, not retroactive. Some states have been asking for retroactive coverage, an issue that’s become highly contentious. Also, “The fact that we are just trying to restore what insurers have previously offered makes it less complicated than TRIA, which was crafting something completely new,” Prewitt said.
The bill will get worked up in the House and if the support is there, be included in the Heroes Act, the next big infrastructure bill. Then it goes to the Senate. The hope is to get it signed by President Trump before the end of the year. It has good support, but Maloney’s advocates are at work hustling up more on both sides of the aisle.
“Things are moving fast,” said the staffer. “Circumstances and life could force us to clarify our thinking and get it done.”
The key is how well lawmakers understand the importance of film and TV production to state and local economies. This is not Red State versus Blue State, Prewitt said. “Some of the most popular states, like Georgia, are Republican. So it’s not a bad lineup in terms of getting attention, once we get past all these bills that are trying to put money in people’s hands so they can get food.”
“You have the state of Florida declaring professional wrestling an essential business,” noted Wolynetz of FilmRise. About Georgia, he said, “I brought The Walking Dead down there” and it was embraced “in a big way.”
Outside of a PRIA (Pandemic Risk Insurance Act), other models could potentially resemble the Hurricane Program adopted by Puerto Rico’s Film Commission and Office of Economic Development in 2009; or a public-private nonprofit, the California Earthquake Authority, established by the California Legislature in 1996 that now provides two‐thirds of residential earthquake insurance policies sold in the state.
Insurance “is on everybody’s mind,” said producer Dean Devlin, CEO of mini-studio Electric Entertainment. Including his — even with a prolific 15-year track record of successful deficit financing. “The bar has definitely risen. The path to greenlight is much harder now. Financing is harder. Margins will be smaller.”
Along with costlier insurance, new safety protocols will also significantly inflate a production’s total bill. In a recent interview with Deadline, producer Randall Emmett described a large hit but said he’ll swallow it. “We expect there to be a financial impact on the budget, and if it’s a quarter of a million dollar hit, or $150,000, we’ll do it. I want us as an industry to go back to work.”
Not all indies can afford that.
“It’s a brick wall,” said Peter Marshall, managing director of DeWitt Stern, an insurance brokerage and risk management firm, who helped design the Puerto Rico program. “If we want motion picture making to come back in the United States we are going to have to find a solution.”
Independent productions underway when COVID-19 hit and that were forced by authorities to shut down can resume — when they can — under preexisting policies with coverage. As many as 1,000 independent film and TV productions may have filed claims worth about $400 million, industry players speculated. (Both figures are unconfirmed estimates.) One of the big production and event insurers alone has had 600 claims since March versus a total of six last year, according to one person in the industry who wouldn’t specify which insurer. That person said Alliance was the first industry player in March to start putting a COVID-19 exclusion in its insurance policies; Chubb started a bit later. “People were running into our offices saying, ‘We have this magic ticket’ for a little while,” the person said.
The claims under civil authority and imminent peril clauses – which are the film and TV industry equivalent of business interruption – have by-and-large paid out. However, they have sub-limits, usually from $500,000-$2 million depending on the size of the production. So they will end up being most helpful to productions that were already near the finish line.
Cast insurance can be big-ticket, covering loss on a shutdown of a production – temporary or permanent – if it loses essential cast. Pending some solution, all three now exclude COVD-19 and communicable diseases.
One producer who shoots around the world said this will likely cut down on the number of productions, especially in film, which might not be a bad thing. “A lot of movies that shouldn’t get made won’t get made,” the producer said. “If you’ve got a track record and a long relationship with insurance and completion bond companies, you will find a way but it will cost you a lot more. The deductible will certainly be higher, and they might say, we’ll cover the first $2.5 million and then you cover the next amount of that, or anything above it. The wild card will be insurers who want to enter the space, and are willing to take the risk to establish themselves.”
Marshall says he’s created domicile research reports on 11 foreign countries where productions are less risky, like New Zealand, Australia, South Korea, Denmark and Norway, looking at a range of different factors. “In the U.S. we rank pretty far down because of where we are on the curve and regulation,” he said.
Not that he wants productions to leave U.S. soil. “We have to stop calling it Hollywood,” he said, ticking off high-production states like New Mexico, North Carolina, Georgia, Ohio and Louisiana. “If you ever show up on a film or TV set, 90% of the those people are blue collar workers, most are in unions and they are of all political stripes. There are a lot of jobs at stake, and good jobs, for people coming out of school, for the future.”
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May 16, 2020 at 03:07AM
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Reopening Hollywood: Will Prohibitive Insurance Hobble Production Restart & Will Government Have To Step In? - Deadline
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