Secrets of a Successfully Insured Production
If the dirty little secrets of production insurance are worrying you, stop worrying – and start asking questions. That’s the only real secret to a successfully insured production. You can explore all the options in the world with your insurance agent, but unless you ask the right questions to begin with, the disconnect between what you think you're getting and what you're really getting can become costly.
Let’s start by taking a look at the most common types of coverages for film and video production insurance, and outlining some of the important exclusions. To ask informed questions you’ll need to know the basic coverage definitions, especially those that relate to general liability (often misunderstood), property, inland marine, work comp and specialty coverages.
It’s this simple: if you understand the needs behind the different types of coverage, you’ll be able to ask the questions that help correctly insure your production.
Where Do I Get a Policy that Covers Everything?
Sorry. There’s not an insurance policy on earth that covers every eventuality. Expect your insurance to cover the major causes of loss that are typical and can be predicted; that's why the insurance company works so hard to make a complicated legal document explaining what is - and is not - covered. But every claim is unique. And the world is a crazy place where extenuating circumstances can make clarity of coverage seem frustratingly impossible. Accept the fact that there is always the possibility of a one-time event that won’t be covered no matter what insurance policy you buy. In the eventuality of a major claim involving a lawsuit, it can come down to who has the better lawyer and can sway the judge or jury. That’s just the way it is.
Now for the good news. You can prepare to cover your production as securely as possible by working with an agent who can explain your coverage options. Don’t leave it to the agent to do the understanding or make the decisions. You must do that. An agent probably can’t predict whether you’ll be covered if the noise of your production traumatizes llamas on a neighboring ranch, but he or she can tell you what is covered, and for how much. The more homework you’ve done, evaluating your needs and possible eventualities, the better information you’ll get – and the less risk you’ll be exposed to.
How Do I Know What to Cover and What Not to Cover?
The state of New Mexico and most municipalities require a $1 million general liability minimum limit in order to obtain film permits.
Larger productions (budgets over $200,000) often buy package policies that include a number of what are called “producer’s risk” coverages. One of these production package policies may have general liability limits of more than $1 million per occurrence, with a $1 million total maximum payout per policy period. A producer’s risk package often includes coverage for the total budget, if necessary, to re-shoot an entire production. Smaller productions tend to pick and choose the actual coverages (called lines of business) they are most likely to need. Your lines of business will be added to your core general liability policy.
Large productions tend to factor their liability and producer’s risk insurance premiums at around $15,000 per $1 million of budget, not including workman's comp.
Nationwide (U.S. and Canada) general liability coverage for short-term, one-time productions with budgets under $1 million starts at a minimum premium of $500 that covers up to 10 contiguous days of principal photography, and goes up from there.
General Liability is a Must
Liability coverage comes in two parts: injury to people and damage to property. So general liability covers the risk, due to the negligence of you or your crew, of bodily injury to others or property damage during what insurers call operations in progress. “Others” does not include people working with or for you, so don’t think that your general liability policy will cover you when a light stand collapses during principal photography and breaks a grip’s finger. On-the-job injuries for those who work for you are covered under workman’s compensation. General liability is for third parties. That can include bystanders or volunteers, neither of whom are covered under workman’s comp.
The term general liability includes four other types of liability coverage:
- Personal and Advertising Injury - slander and libel, invasion of privacy, malicious prosecution and copyright infringement;
- Products and Completed Operations - goods or products manufactured, sold, handled, distributed or disposed of as well as operations that are completed and therefore no longer in progress;
- Medical Expense - minor medical costs if someone is injured in an accident on your set;
- Fire Legal - damage by fire to premises that you rent.
You should be aware of the common exclusions to core general liability policies, which can include: Intentional Injury; Contractual Liability; Work-related Injury; Copyright; Liquor; Aircraft; Auto; Watercraft; Transportation.
Many of these exclusions are available for what we call buy back, meaning that, although they are excluded from your core policy, you can pay to add them back. Be aware that the name of the coverage may not mean what you think. So don’t assume. Always ask your agent, no matter how obvious it seems. For example, liquor liability is excluded only if your production is required to have a liquor license. “Host liquor liability,” for non-regular, incidental occurrences relating to alcohol, is included on a general liability policy and would likely provide coverage for an accident that happens, say, at a wrap party.
Which exclusions should you consider buying back? That depends on your project, but most film and video productions look at these: Auto; Equipment; Stunts; Pyrotechnics; Driving (precision, public or private roads, off road, race tracks or courses); Animals; Fights; Guns, blanks, or squibs; Jumps and falls; Water; Boats, aircraft, railroads or motorized craft of any kind; Cast (accident, sickness, essential element, bereavement and extra expense).
Another consideration is location. Production operations in the U.S. and Canada are all automatically covered. But other countries will require a specific endorsement, or may not be available for coverage inclusion because of travel, security or international “unstable government” concerns. The underwriters who work with your agent will let you know what additional information they need in order to price coverages. When you talk to your agent, be prepared with a preliminary list of exclusions that might apply to your production.
Be Sure You Have Complete Automobile Coverage
One piece of liability insurance you should pay special attention to is your automobile coverage. While your general liability policy covers “others,” which means anybody or anything that may get hit in the course of production, it won’t cover the vehicle your person is driving or the driver. Unless you have found a way produce a film without anyone driving anywhere for any reason, you’ll want to be sure you have both “hired auto” and “non-owned auto” coverage. Hired auto covers any vehicles you rent, regardless of who drives them (as long as the drivers work for your production). Non-owned auto covers vehicles that are owned by your employees or people working for you. Hired and non-owned auto liability is one of the most important coverages for any film or video production, because it covers just about everybody, everywhere, driving anything!
Errors and Omissions Covers Intellectual Property Issues
E&O, also known as professional liability, covers contract disputes, especially those over royalties, rights (music & script), copyright and permissions. E&O provides legal defense and damages coverage against those who may come after you for a share of your revenue, claiming that you stole some portion of their work. E&O policies, unlike other policies, are often written for a three-year period, and if they are renewed, provide coverage back to the date the first policy was written. This is called a claims made coverage form. Be sure you put this on your list of questions for your agent.
Inland Marine: Very Important, and Not About Boats
In the early days of insurance, property on a barge was called “inland marine” to distinguish it from property on an ocean-going vessel. As the transportation industry grew to include railroads and all other types of land transport, the term inland marine evolved to mean any moving or movable property that is not at a specified or permanent location.
An inland marine policy in the film industry includes seven types of property coverage:
- Miscellaneous (rented) Equipment – equipment that you pay a fee to borrow;
- Props, Sets and Wardrobe;
- Negative/Film and Faulty Stock (includes hard drives and camera equipment functionality);
- Third Party Property Damage (a.k.a. Care, Custody and Control) – equipment or items that you borrow and are responsible for, but do not pay to rent and do not own;
- Extra Expense – loss-related costs you would not have incurred had the loss not happened, such as additional night stays in a hotel;
- Vehicle Physical Damage – vehicles that you rent or that are driven or owned by employees/workers;
- Animal Talent and Animal Extra Expense.
By far, the most common additional coverages (besides general liability) that we write for small productions are auto liability, miscellaneous rented equipment and vehicle physical damage. For the same minimum premium coverages as the above noted small/short-term production 10 day policy, auto liability can be added for an additional $322; and $100,000 (replacement cost) of miscellaneous rented equipment can be added for about another $300.
Know Your Workman's Compensation
Workman’s compensation coverage (work comp) is a must for your production. But it’s often misunderstood. Any employer with more than two employees is required to have work comp in New Mexico. Work comp policies are rated based on total dollar amount of payroll, and include all non-covered contractors as well as employees. Your work comp premium is currently one of the best insurance deals for the money in New Mexico, running about $1.89 per $100 of payroll (plus fees & charges), or around 2% of your payroll.
Production companies tend to get confused about two aspects of work comp:
- Contractors and Volunteers
- Single entity contractors who do not have their own insurance are required to be covered by you. You’ll want any sole proprietor (single entity 1099 contractor) who declines coverage to fill out a form that you’ll keep on file. However, on a film production set, workers compensation is a very valuable coverage to have. If I were making a film, I would want to pay to make sure that everybody was covered. I would not want to be in the middle of the desert, have somebody break a leg, and not know that it takes just one phone call for an air ambulance to get my person immediately to safety and medical care, at no charge to me.
- Volunteers are always excluded from coverage on a work comp policy.
- Employers Liability
- If a covered worker does not get coverage for their medical expenses, they have the right to sue you. A work comp policy covers your liability as an employer in this case.
Work comp has a minimum limit of $100,000 per employee in the state of New Mexico. That limit is per year, and a multi-year work comp policy can pay out up to the maximum year after year. All work comp policies are auditable, which means that after a year is up, or after the policy is cancelled, your bookkeeper is required to swear to an affidavit certifying what your actual total payroll was. If the actual payroll was higher than estimated, you may be invoiced. If the actual payroll is lower than anticipated, you may receive a refund. If you do not respond to the audit, you will be assessed very steep fines and you will not be able to purchase insurance from a standard insurance company again; you will be forced to go to the assigned risk pool which carries even more fees and fines. You don’t want to go there.
Work comp coverage requires that an employer be registered, or intend to register, with the state unemployment office or department of labor. A federal tax ID number is required to procure a work comp policy; you will also be asked for a state unemployment insurance ID number. On larger productions, often a payroll service or PEO will handle reporting of your work comp insurance for a fee. However, you can purchase work comp insurance from any business insurance agent, and may often get a lower rate than a payroll service because independent agents work with many companies.
These and other work comp issues are explained in more detail on the FAQ page at www.RioGrandeIns.com
Put These Specialty Coverages on Your Radar
You should at least be aware of these coverages and endorsements:
- Owned Equipment Floater – covers equipment that the production company owns, regardless of where it is;
- Additional Insureds – covers your rental houses, location owners, police departments and municipalities;
- Waiver of Subrogation – the insurance company agrees not to sue someone with whom you have a contractual relationship, even if a loss was their fault;
- Animal Mortality – covers death and possible loss of future earnings;
- Excess Liability – often called an umbrella, this extends your liability coverage by up to an extra $10 million or more;
- Valuable Papers, Accounts Receivable, Money and Securities;
- Civil Authority;
- Rental Reimbursement;
- Office Contents;
- Rented Furs, Jewelry, Art and Antiques.
Where's the Pay Off?
An insurance agent’s job is to understand your business, assess where the likely possibilities for loss could be, and offer you options for the protection of your production. But for the sake of your bottom line, it’s your job to analyze likely loss scenarios yourself, and yes, really read your policy and ask questions if you are concerned or do not understand. If you don’t get a satisfactory answer from your insurance agent, then ask to speak to the insurance company or request an answer from an underwriter or claims specialist. Keep in mind that an insurance agent does not offer legal advice, but is trying to be your financial strategy partner. Just as you would carefully plan every other aspect of your production in the interest of saving time and money, your insurance should be planned in detail with your agent as your partner in a successful wrap.
When in doubt, ask! No question is stupid when it comes to protecting yourself!
Coming up next time: Not everyone is working on one production at a time… what are your options for ongoing projects, multiple projects and film industry support businesses and services that don’t even make movies?
Send questions or comments to firstname.lastname@example.org.
Sam Levy is the Film Insurance division manager at Rio Grande Insurance, www.RioGrandeIns.com. Providing superior service from Green light 'til Wrap, for all your production insurance needs, including: Single and Annual Production policies, Liability, Producer’s Risk, Rented equipment, Errors & Omissions, Work Comp, Directors & Officers, Hired and non-owned auto; Blanket additional insureds. All premiums count for 25% NM rebate.
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