Film Production Management

Instructor: Mary Walbridge The Complete Film Production Handbook By Eve Light Honthaner Chapter 7 Insurance

• Securing insurance should be the first order of business at the start of any new production. • Coverage should be obtained from an insurance agency that specializes in insurance for the entertainment industry. • You may want to get bids from two or three different companies, or from one insurance broker with whom you have developed a good working relationship. Insurance Requirements Specialized Insurance Co’s

• There are relatively few insurance agencies that are experts in film production insurance. • The major players have offices in Los Angeles, New York and London. Near North Insurance Brokerage is one such company, as is: • Aon/Albert G. Ruben Insurance Services, Inc. • DeWitt –Stern • Marsh USA • Arthur J Gallagher

• As films continually become more complicated in terms of action, stunts, effects, technology and a • reliance on highly paid actors and directors to carry entire pictures on their names alone, • levels of financial exposures increase as well. • Insurance companies and the agencies who represent them are taking a much closer look than ever before at each picture, • investigating potential exposure and carefully assessing the risks.

Risks Risk Management • In addition to budgets and schedules, insurance companies examine: 1. the track record of the production company, 2. the producer and director; 3. where the show is to be shot; 4. its financing source; distribution and bond company agreements; 5. cast; 6. story line; 7. all potential hazards; safety guidelines and protection methods to be utilized; 8. proposed travel; 9. crew specifications and anticipated pay-roll; 10. rare and expensive set dressing, 11. props or wardrobe to be used; 12. the use of animals, motorcycles, special vehicles and equipment, watercraft, aircraft or railroad cars and all proposed action, stunts and effects. • The information necessary to complete a risk management survey is now required when applying for production insurance. • Risk management personnel (i.e.. in-house risk managers, brokers, and underwriters) review all scripts, budgets, in addition to detailed break down of proposed stunts and effects. Stunts

• The background and experience levels of stunt coordinator effects supervisors are scrutinized, • pyrotechnic licenses • On films containing action, loss control representatives might contact stunt coordinators and effects supervisors to discuss: • the concerns of underwriter: • how each stunt and effect is accomplished, • the anticipated use of personnel and the safety procedures to be implemented. • These reps are extremely knowledgeable in areas of stunts and effects and will offer and spend time on the set when action sequences are shot. • Their sole purpose is to minimize risks and to curb the escalating losses suffered by insurance companies on action pictures ERRORS & OMISSIONS

• Errors and omissions (E&O) liability provides coverage for claims made for: • libel, • slander, • invasion of privacy, • infringement right, • defamation of character, • plagiarism, piracy or • unfair competition resulting from the alleged unauthorized use of: • titles, formats, • ideas • characters, • plots, • performances of artists or performers or other materials. • It includes coverage legal expenses incurred in the defense of any covered claim as well as indemnity. • Delivery requirements might dictate this is to be a one-year or a three-year policy. • A three-year policy is cost-effective, and should continue at least throughout the distribution period. Errors & Omissions

• Obtain an errors and omissions liability insurance application from your insurance broker immediately upon starting pre-production. • This is the only insurance application that is completed by the production company and must be signed by an authorized member of the production company. • Submit the application and secure coverage as soon as possible. • It is extremely important to make sure that your E&O application has been approved by the underwriters prior to the start of principal photography. • Significant financial loss can be incurred if a part or all produced material is not approved ahead of time. • It is suggested that writ-confirmation from the underwriters be obtained before the cameras start to roll.

E&O application • This coverage typically provides a combined single limit of $1,000,000 per occurrence and $2,000,000 in the aggregate for bodily injury and property damage liability. • The liability coverage includes: • blanket contractual liability, • products and completed operations, • Non ownership watercraft liability (usually restricted to vessels twenty-six feet in length), • personal injury endorsement and fire damage legal liability (smaller limits of coverage might apply).

Comprehensive General Liability • Evidence of this coverage is given in the form of a Certificate of Insurance.

• Certificates of Insurance are issued by the production office (or in some cases, the insurance agency) to a third party (e.g. a location owner) as evidence of coverage.

Certificate of Insurance • Frequently, you will be requested to name a certificate holder as additional insured and/or loss payee.

Additional Insured and Lost Payee

• If a certificate holder is named as additional insured, the insurance coverage will protect the certificate holder for claims arising out of the activities of the production company.

additional insured • A certificate is named loss payee is the owner of a vehicle or equipment being used on your film. • If there is a claim resulting from the loss or damage to this vehicle or equipment, reimbursement for the loss or damage would be paid to the loss payee. loss payee • Your Insurance agency may require that you call their office to request additional insured or lost payee certificates when a certificate holder requests 'additional coverage. Often, however, these certificates may be issued directly from the production office.

certificate holder requests • On a rental vehicle or a picture vehicle, it is a good idea to include the make, model and I.D. number of the vehicle. • If the value of the vehicle exceeds the limits of the policy, additional coverage will be necessary. If you are doing a series, the episode and production number should be indicated on the certificate. • The top copy of the certificate (the original) goes to the owner of the vehicle, property or equipment. • Two copies are to be sent to your insurance representative. One copy should be given to your production executive, and one is to remain in the production files. If the certificate is for a vehicle, a copy should also be kept in the vehicle's glove compartment. Filling out a Certificate of Insurance • The top copy of the certificate (the original) goes to the owner of the vehicle, property or equipment. • Two copies are to be sent to your insurance representative. One copy should be given to your production executive, and one is to remain in the production files. If the certificate is for a vehicle, a copy should also be kept in the vehicle's glove compartment.

copies HIRED, LOANED, DONATED OR NON-OWNED AUTO LIABILITY

• This coverage provides liability insurance for: • all hired, • loaned, • donated • and non-owned motor vehicles. • Vehicles owned by or leased to the company must be scheduled separately, and a charge is incurred for each vehicle. • It is not generally intended to cover physical damage to employees' vehicles being used for production activities • If an employee should have an accident while driving his or her personal car for company business, his or her own insurance is primary. • The company's policy only insures the production company if the employee's coverage is insufficient. • Such coverage is provided under the non-owned automobile coverage. • A supply of auto accident forms (Automobile Loss Notice) should be on the set at all times. One should be filled out and submitted to the insurance agency immediately after an accident occurs.

When crew insurance is primary

• A supply of auto accident forms (Automobile Loss Notice) should be on the set at all times. • One should be filled out and submitted to the insurance agency immediately after an accident occurs. • If a vehicle is damaged as a result of more than one incident, • notation must be made as to the specific damage caused during each incident, • the date and time of each, • what the vehicle was being used for (was it a picture vehicle or a production vehicle?) and • how the accident occurred. • It treats each occurrence as a separate accident, and a separate deductible applies to each occurrence. • If you plan to use a picture vehicle for stunt work, include this information in your break-down. Be aware that physical damage to vehicles used in stunts is generally not covered.

Automobile Loss Notice HIRED, LOANED OR DONATED AUTO PHYSICAL DAMAGE

• This coverage insures against physical damage to: • hired, • loaned and • donated vehicles, • including the risks of loss, theft or damage and collision for certain vehicles the production company is contractually responsible for. • If coverage is required, there must be a written rental agreement between the production company and the employee. • The agreement must establish that the production company is respon- sible for the physical damage to the subject vehicle. • It is strongly suggested that the insurance agency be contacted to confirm coverage for employees' cars. Your agent must review the contract. • As with the auto liability coverage, vehicles owned by or leased to the company must be scheduled separately. • All employees are entitled to workers' compensation benefits if they are: • injured or acquire an illness directly resulting from or during the course of their employment. • The benefits are established by state laws. • Workers' compensation coverage should be supplied by the employer of record, that is: • the paying entity, which is either the payroll service or the production company

WORKERS' COMPENSATION & EMPLOYER'S LIABILITY • Although payroll services generally supply workers' compensation, it is a prudent practice to obtain a certificate of workers' compensation coverage from them prior to any commitment of services. • Even if all employees are being paid through the payroll service, prudence further dictates that the production company still carry a minimum premium policy: • insuring independent contractors, • volunteers or interns who might work on your picture. • A contingent workers' compensation policy would also provide employer liability coverage

WORKERS' COMPENSATION & EMPLOYER'S LIABILITY • If the employer of record is other than the production company or payroll service: • (for example, a stunt coordinator hiring other stunt personnel, or a special effects supervisor hiring his or her own effects crew), • you should obtain a Certificate of Insurance from the employer (department head) to show evidence of workers' compensation coverage for his or her employees.

WORKERS' COMPENSATION & EMPLOYER'S LIABILITY • If your workers' compensation coverage is coming from more than one source, • generate a memo indicating which staff, crew and cast mem- bers are covered under which policy. • The memo should also include information on each of the insurance companies: • (name, address, and phone number), • the name of an insurance agency or pay-roll company representative to report claims to the policy numbers of each, • and a copy of the accident report form (Employer's Report o Injury) that each insurance company uses. • Make sure your company medic and second assistant director have copies of this memo And a supply of accident forms on the set at all times.

WORKERS' COMPENSATION & EMPLOYER'S LIABILITY • When a staff, cast or crew member is injured on set: • fill out an Employer's Report of Injury form and • note the incident on the back of the daily production report for that particular day. • Send report directly to the insurance agency or payroll company, • keep a copy for the production files • send a copy to your production executive. • Also attach an additional copy to the back of the production report. • Forward all medical bills, doctor’s reports and all other relevant materials to respective insurance agency or payroll company. Employer's Report of Injury • When applying for workers' compensate during pre-production,: • declare the need for coverage for employees hired in your state of operations as well as coverage for any other state where your employees are living at the time of hire. • Include an All States ‘Endorsement with workers' compensation policy to protect the company if employees are hired from a state or states you had not initially declared. • Injured employees will receive benefits in accordance with the compensation laws of the state in which they living at the time of hire.

Applying for workers' compensation • Your insurance agency representative and/or the state's workers' compensation fund will supply you with appropriate injury report forms. • Reporting procedures are the same in every state. • Should a SAG-covered performer be injured in the course of employment with your company, the Screen Actors Guild requires that you send a copy of the accident report to them.

appropriate injury report forms. • Employees traveling on company business are covered under a Travel Accident Policy, which provides coverage as specified in their governing guild or union bargaining agreements. • If an employee is not a member of any union or guild, coverage is provided for a minimum amount. • No employee, while on the company payroll, is allowed to fly as a pilot or as a member of a flight unless specifically hired for that duty and scheduled on the insurance policy.

Guild/ Union Accident Coverage • Under guild/union travel accident coverage, each production is required to keep track of 1. the number of plane and or helicopter flights taken by any guild/union member on each show 2. the number of hours each person may spend in a helicopter; 3. the number of days each guild/union member may be to hazardous conditions; and 4. the number of days any DGA member may be exposed while filming underwater • This specific information may be requested from the insurance company at the completion of principal photography. • Coverage for guild members pursuant to guild should be provided by your payroll company if one is involved. Producers might obtain Guild/Union Accident coverage for nonguild members. This decision should be by production company.

Production should keep track of: Production Package (Portfolio Policy)

• The Production Package provides coverage for: • cast insurance, • negative film and videotape/direct physical loss; • faulty stock, camera and processing; • props, sets, and scenery, costumes and wardrobe; • miscellaneous rented equipment and office contents; • extra expense and third party property damage. • The premium for the Production Package is usually based upon what is referred to as net insurable costs: • —the final budget, minus the costs of post production, story, music and finance charges. • Rates then range from $.75 to $1.25 (depending on negotiations, exposures, etc.) per each $100 of the net insurable costs. • In some instances, however, third parties (i.e., banks or completion bond companies) have requested that story and finance charges be included as covered expenses. • Under these circumstances, underwriters are usually willing to charge a lower rate for the premium. Your selection of optional cover-ages on any one show will be based on script and budgetary considerations, as well as requirements imposed by distributors and bond companies. • Your insurance representative will discuss all variables and policy options Cast Insurance

This coverage is placed on: • a designated number of cast members, the director and possibly the producer or director of photography: • any key person whose disability or death would cause a shut-down of the production. • If an accident or illness of a covered actress, actor, director, etc. creates a postponement, interruption or cancellation of production, the production company, subject to a predetermined deductible, would be reimbursed for extra expenses if it is determined that the production must be abandoned due to an insured cast loss. • The production company would then be reimbursed for all covered expenses incurred. • • Physical exams are required for those who are to be covered under cast insurance, and the insurance agency will furnish you with the name of a physician (or a choice of physicians) with whom you can set up appointments. The insurance company will pay closer attention to a cast member's medical history when that per-son is either over-aged or under-aged.

Physical Exams Cast Insurance Continued

• When employing minors, your insurance broker needs to be aware of the childhood diseases they have had, because the diseases (e.g., chicken pox, mea- sles, mumps) may Not have been excluded from the cast insurance policy. • There may also be specific exclusions imposed upon principals who have had a history of alcohol or substance abuse. • If any of these circumstances do exist, they should be brought to the attention of the producer as soon as possible. • At times, certain exclusions can be "bought back" or modified (i.e., by using higher deductibles, etc.). • Cast insurance usually starts three to four weeks prior to the commencement of principal photography, although additional prep coverage is often required. • An example of this is a key actor who is involved with the project from the very early stages of pre-production. • If at any point during pre-production or production, the director, producer or one of the designated actors becomes ill, is injured or is incapacitated in any way: • call your insurance representative immediately. • If one of them feels ill yet continues working, but you are not sure how he or she will be on the following day, or how the schedule may be affected later in the week, • alert the insurance agency as to the possibility of an interruption in filming. • If there is ever a question as to whether you should call or not, DO IT! • If a cast claim is submitted, the director or performer who is ill or injured should be seen by a doctor as soon as possible. • The doctor's report is a necessary factor in substantiating the claim.

Cast Illness or Injury • An optional endorsement, an essential element would be an actor, actress, producer or director who carries an entire show on his or her name alone, someone without whom, if this person were to die or become ill or injured, the picture could not be completed and delivered.

Special Case Endorsement Negative Film and Videotape/Direct Physical Loss • Subject to specific exclusions, most of which are covered under Faulty Stock, Camera and Processing (described later), • this coverage protects against: • direct physical loss, damage or destruction to all negative and videotape elements, • including work prints, • cutting copies, • fine-grain prints, • sound tracks, • audiotapes, • videotapes, • cassettes and CDs. • coverage is included for accidental magnetic erasure on videotape production and has been adapted to cover the most up-to-date technological developments of videotape production. • It also includes coverage on all negative and videotape elements while in transit. • Subject to certain exclusions, this coverage insures against the loss, damage or destruction: • of raw film stock or tape stock, • exposed film, • recorded videotape • and sound tracks caused by or resulting from fogging or the use of faulty equipment, faulty developing or faulty processing. • It does not cover losses due to mistakes made by the camera crew.

Faulty Stock, Camera, And Processing Props, Sets & Scenery; Costumes & Wardrobe; Miscellaneous Rented Equipment; Office Contents

• Subject to specified exclusions, these provide coverage against: • direct physical loss, damage, or destruction to all property • contents, • equipment, • cameras, • sets, • wardrobe, • lighting equipment, • office furnishings, • props, supplies, etc.) used in connection with the covered production.

• Keep running inventories: • of all set dressing, • props, • wardrobe, • equipment and • other items that are purchased and/or rented for each show. • If anyone on your crew notices that something is missing or damaged, inform the insurance agency, make a note of it on the inventory log and on the back of the daily production report and file a police report applicable. • At the end of the show, the insurance company may not honor claims on lost or damaged equipment, props, set dressing or ward-be without sufficient documentation. • Advise all department heads to inform the PM or PC of loss and damages as they occur, and do not wait until the completion of principal photography to submit invoices for repairs and replacement costs.

Keep running inventories

Third Party Property Damage

• This coverage pays all sums that the production company shall become legally obligated to pay as damages because of accidental injury to or destruction of property of others while such property is in the care, custody or control of the production company. • Your insurance representative will advise you as to the specific limits and deductibles of the above-mentioned coverage's and any additional optional coverage's you might require based on the needs of your production. • There will be times, with locations, for example, when higher limits than those provided under General Liability and/or Third Party Property Damage are mandatory. This coverage carries limits of liability in excess of $1,000,000. • An Umbrella Liability Policy will indemnify the insured for the ultimate net loss in excess of the underlying limit or the self-insured retention, whichever is the greater, • because of bodily injury, • personal injury or property damage to which the insurance applies. • Umbrella liability policies providing limits from $1 million to $25 million, and higher, are available. • If, however, increased limits of liability are required for a short period of time only, excess limits can be obtained to comply with specific location or contract requirements. • If your operations are to include filming at any museums, air-ports, major office or manufacturing locations, umbrella liability is a must. Supplemental ( Or Optional) Coverage Umbrella (Excess Liability)

• Aircraft • Watercraft • Foreign Package Policy • Railroads • Political Risk Insurance • Valuables • Weather Insurance • Livestock or animals • Signal Interruption

Special Situations Completion Bonds

• Completion guarantees, also referred to as completion bonds, insure motion picture financiers against cost overruns in excess of their approved budget. • In addition, they insure that the film be delivered in accordance with all specifications contained in the financing and distribution agreements, and in other related contracts that define the deal. • Major studios with the resources to finance including overages, do not require bonding as the functions provided by a bond company are handled in house. • Bond companies do service smaller studios and independent production companies, whose financiers and distributors will require that their picture be bonded prior to the start of principal photography. • The formal issuance of a completion guaranty involves two separate documents. • The producer's agreement is signed by the producer and guarantor and is an acknowledgment and warranty by the producer to produce the film in accordance with the approved script, schedule and budget. • The Producer also agrees to take or cause no action that would void the approved insurance coverage or that would otherwise threaten the efficient production of the film. • In the event of default by the producer, this document gives the guarantor the ultimate right to take over the film, and to complete and deliver it in the pro- ducer's stead. • The completion guaranty is signed by the financier's and the guarantor. • In this document, the guarantor agrees to deliver the film in accordance with the approved script, schedule, budget and contractual specifications, and to pay any additional costs in excess of the approved budget required to so deliver the project. • If film cannot be delivered as guaranteed, the guarantor agrees to repay all funds that have been therefore advanced by the financier's to cover the costs of the approved budget. • In the event that the picture cannot be completed, the financier is repaid his or her investment. Completion Bond continued • If an accident, injury or theft occurs • if the director or a cast member becomes ill and unable to work; • if you have a scratched negative or damage to equipment, props, set dressing or any of your sets, • report it to the insurance agency as soon as possible.

Claims Reporting procedures • Back up each reported occurrence in writing by: • completing an appropriate claim form, • noting such on the back of the daily production report for that particular day, and/or by • writing a letter to the insurance agency containing as much detail as possible— • when the incident occurred (date of loss), • where it occurred, • how it happened, • who was there at the time, etc. Claims Reporting procedures

Submitting Claims

• When an incident occurs resulting in an insurance claim: • the accounting department should begin to tag each related invoice, indicating specific costs (or portions of costs) that were directly incurred as a result of the claim. • all related costs and overages should be presented budget-style, starting with a budget top sheet indicating the exact impact to each account. • police and doctor reports and copies of invoices • backup should also include: call sheets; production reports; and both original and revised schedules, day-out-of days, cast lists and anything to substantiate the changes created by the claim. • copies of cast and crew deal memos, time-cards, travel movement lists, equipment rental agreements and/or location agreements may also be required. • maintain a log of events pertaining to the claim on a day-to-day basis, or to write memos to the file on a regular basis. Submitting Claims

• Begin each claim with a cover letter: • referencing the production, • date of occurrence, • claim number (if available), • a description of the claim and • a brief summary of the backup you are providing. • Start processing insurance claims as soon as they occur. • Submit the full claim to the insurance agency as soon as costs can be assessed and backup provided. • Do not wait until the end of principal photography to start processing your claims. • Once a claim is reported to your insurance representative, it is then turned over to an insurance agency claim representative. • When all the information is in order, the claim is then submitted to the insurance company, who may or may not (depending on the claim) then assign it to an independent insurance auditor.