|Insurance only covers what it says it covers… There’s simply no way to provide for every eventuality.
The dirty little secret of insurance is that there may be an unvoiced disconnect between what you think you’re getting and what you’re really getting. Nobody likes to read the 497 pages of high-level legalese that comprise your policy, especially since everybody knows that there are impossible to read clauses in there for all sorts of things, and it would just be more cause to lose sleep worrying about. When in doubt, ask your agent – it’s what they are there for!
In this article, I’ll provide a look at what the most common types of coverages for film and video production insurance are, as well as outline some of the important exclusions. Some exclusions are offered as “buy backs” that you can add back on to a policy for an additional fee. I’ll give an overview of that the definitions of the coverages are, especially breaking down parts of the often-misunderstood general liability core policy and information on property, inland marine, work comp & specialty coverages. Rather than trying to bore you to death with too much of the pseudo-legalese that is insurance jargon, my hope here is that by understanding the differences and intentions of the coverage available, you will be able to ask more questions about coverages to correctly insure your production.
The important thing to remember is that insurance cannot and does not cover every eventuality or hypothetical situation. It covers the major causes of loss that are typical and can be predicted, and that’s why the insurance company works so hard to make a complicated legal document explaining what is and is not covered. Every claim situation is unique, with extenuating circumstances that can make the clarity of coverage akin to a sludgy mix of dirt and water. I hear occasionally from denied claims “Is there any insurance we could have purchased that would have covered this (odd) situation” and the answer unfortunately is just “No.”
The reality is that insurance companies look at the known and expected or unexpected risks that could happen for your production, and they insure as best as they are able, without exposing themselves to huge unknowns. Insurance companies are not in the business of providing coverage for everything under the sun. And, regardless of what insurance companies cover or say they cover, 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 to fit a square peg into a round hole.
The best way you can prepare to be covered is to understand as much about the available coverages, and to work with an agent who can explain them to you. An agent cannot tell you if there would be coverage in some hypothetically described incident, but they can tell you what is covered and for how much.
So… how do you cover your production?
Larger productions (budgets over $200,000) often buy package policies that include a number of what are called “Producer’s Risk” coverages in a production package policy and may have general liability limits in excess of $1 million per occurrence with a $1 million aggregate maximum payout per policy period. Large productions tend to factor their liability and producers risk insurance premium at around $15,000 per $1 million of budget, not including work comp. Smaller productions tend to pick and choose the actual coverages (called lines of business) they are most likely to need.
All lines of business extend from a core general liability policy. The state of New Mexico and most municipalities require $1 million general liability minimum limit in order to obtain film permits. While general liability is often explained as “slip and fall” coverage, there is a bit more information that is good to understand.
What is liability, general liability and professional or employers liability?
Liability coverage comes in two parts: injury to people and damage to property. General liability is the risk, due to the negligence of you and the people working with/for you, of damage to other people’s property or bodily injury to others General liability covers you for “operations in progress.” “Others” does not include people working with/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 workers compensation. General liability is for third parties. That can include bystanders or volunteers, both whom are never covered under workers compensation.
The broad term “General liability” also includes four additional types of liability coverage:
- Personal & Advertising Injury liability includes slander and libel, invasion of privacy, malicious prosecution and copyright infringement.
- Products & Completed Operations liability includes 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 is a quickly and easily reimbursable coverage for relatively minor medical costs if someone is injured due to an accident on your set. General liability stands behind the medical expense limit in the event you are negligent and the expense grows.
- Fire Legal liability covers damage by fire to premises that you rent. All of these comprise General liability.
Nationwide (US and Canada) general liability coverage for short term, one-time, productions with budgets less than $1million start at a minimum premium of $500 that covers up to 10 contiguous days of principal photography, and goes up from there.
Liability Exclusions and Buy Backs
Exclusions to general liability can include:
- intentional injury
- contractual liability
- work-related injury
Many of these exclusions are available to be bought back. In addition, they may not mean what you think and you should always ask questions of your agent. As an example, liquor liability is excluded only IF you are required to have a liquor license. “Host liquor liability” which is for non-regular, incidental occurrences relating to alcohol, is included on a general liability policy and would likely provide coverage for that accident that occurs at a wrap party, an informal, workers-only private event if you are not required to have a liquor license.
Some specific exclusions that are important for film and video productions to consider buying back are those for:
- driving (precision, public or private roads, off road, race tracks or courses)
- guns, blanks or squibs
- jumps & falls
- boats, aircraft, railroads or motor craft of any kind; and
- cast coverages (accident, sickness, essential element, bereavement & extra expense)
Another consideration is location – production operations in the U.S. and Canada are all automatically covered. 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 is needed in order to consider various coverages
Other Types of Liability
In addition to General liability, there is one more important piece of liability insurance to consider which is automobile liability coverage. As with general liability, this covers bodily injury and property damage to Others, but is considered to be a “hired auto” and non-owned auto” coverage. Hired Auto means any vehicles that you rent, regardless of who drives them (as long as they work for the production). Non-Owned Auto means any vehicles that are not owned by you, but are instead owned by your employees or people working for you. The liability, as before covers “others,” which means anybody or anything that may get hit, but not the vehicle your person is driving or themselves. Hired and Non-Owned Auto liability is one of the most important coverages for liability purposes, because it covers just about everybody, everywhere, driving anything!
The only other liability coverages highly visible on the radar are what is called Film Producer’s Errors & Omissions (E&O), and the Employers Liability portion of a Workers Compensation policy which we’ll get to a bit later. E&O a.k.a. 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 against 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 3 year period at a time, and if they are renewed, provide coverage back to the date the first policy was written. This is called a claims made coverage form, and itself bears another whole article to explain!
That does it for the most important of the liability coverages. Many of the remaining common coverages for film productions are “property” coverages, with a Producer’s Risk package covering exactly what it sounds like… for covered “causes of loss,” it covers up to the cost (total budget) to re-shoot an entire production if necessary. Producer’s Risk includes a large and important section oddly named “Inland Marine.”
A quick digression on this term… The origins of the insurance industry come from covering trade on the seas, and boat owners pooling a collection of money to cover the inevitable lost cargo due to various risks on or related to the high seas. The original insurance was called ocean marine insurance and held the transporter liable for loss of property during a voyage. That later grew to include before and after the voyage. In the 1800s, before and after voyage grew to include cargo that would get moved onto non-ocean-going vehicles. The first usage of insuring property on a barge was called “inland marine” insurance to distinguish from an ocean going vessel. As other vehicles besides barges grew to include railroad and other “on land” transportation, the same term remained, and now “inland marine” comes to mean any moving or movable property that is not at a specified or permanent location.
An “inland marine” film insurance policy itself has seven types of property coverage:
- Miscellaneous (rented or borrowed) equipment – Equipment that you pay a fee to borrow
- Props, Sets and Wardrobe
- Negative/Film & Faulty Stock (also hard drives & camera equipment functionality)
- Third Party Property Damage (a.k.a Care, Custody & Control) – this is coverage for real property (e.g. locations) damage – a coverage that is significantly restricted under normal General Liability
- Extra Expense – These are the extra expenses you incur because you have a covered loss; Expenses that you would not have otherwise normally incurred in the production had the loss not happened, such as additional night stays in a hotel
- Vehicle Physical Damage – This covers vehicles that you rent or that are driven or owned by employees/workers
- Animal Talent & Animal Extra Expense
For more detail on the above types of inland marine coverage, see the film insurance page at www.RioGrandeIns.com or email me at firstname.lastname@example.org
By far, the most common additional coverages besides general liability that are seen 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.
Workers compensation coverage (work comp) is important and often at-least-partly misunderstood. The aspects of on-the-job injury or disease contracted as a result of employment are pretty straightforward. Also, most people understand that 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,” which includes all non-covered contractors as well as all employees. Work comp premium is currently one of the best insurance deals for the money in New Mexico, In 2008, premium ran about $1.89 per $100 of payroll (plus fees & charges), or around 2% of your payroll. By 2014, that had doubled to about $3.65 per $100, but at less than 4% of payroll is still a fantastic deal on workers compensation insurance as compared to states that classify workers on a per diem basis such as California.
The confusion tends to lie in two areas:
- Contractors & Volunteers
- Single entity contractors who do not have their own insurance are required to be covered by you. There is a form that a sole proprietor (single entity 1099 contractor) can fill out that declines coverage for themselves and that you can 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 helicopter to get my person immediately to safety and get medical care, without it costing me anything.
- 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 normal/standard insurance company again; You will be forced to go to the “assigned risk” pool which carries even more fees and fines.
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, and a state unemployment insurance ID number is asked for. On larger productions, often a payroll service or PEO will charge you for and handle reporting of your work comp insurance. 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 in our Work Comp category
Other Film Production Specialty Coverages
If you haven’t gone to sleep yet, there are some other specialty coverages, mostly pertaining to the exclusions previously mentioned. As for options that I have not yet mentioned above and that can be important in the film industry, you should at least be aware of the existence of coverages and endorsements for:
- Owned Equipment Floater – covers equipment that you, the production company, owns, regardless of where it is
- Additional Insureds – most film policies include “blanket” additional insureds for 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 – Death and possible loss of future earnings
- Excess Liability – often called an umbrella, this can extend your liability coverage by up to an extra $10 million or more.
- Valuable Papers, Accounts Receivable, Money & Securities
- Civil Authority
- Rental Reimbursement
- Office Contents
- Rented Furs, Jewelry, Art & Antiques
While beyond the scope of this article, if you have any questions for clarification on the above types of coverage, contact Sam Levy, Film Division Manager at Rio Grande Insurance.
An insurance agent’s job is to understand your business, assess where the likely possibilities for loss could be, and offer you options to protect you. However, it is your job as an “insured” to analyze likely loss scenarios yourself, and yes, unfortunately, to 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 to have 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.
When in doubt, ask! No question is stupid when it comes to protecting yourself.
For questions, comments or inquiries, please contact us