The state of play: entertainment insurance in the age of COVID

Damian Schleifer, EVP at Front Row Insurance Brokers, on production shutdowns, coverage, advice for producers and what insurance policies will look like going forward.

damian schleiferSince production sets across Canada were abruptly closed in mid-March, the industry has looked for clarity on whether suspended projects are eligible for insurance claims, and, perhaps more importantly, what future film and TV insurance policies will look like in an environment where subsequent waves of the COVID-19 pandemic could cause another shutdown.

Playback Daily spoke with Damian Schleifer, EVP at Front Row Insurance Brokers, about the state of play for the domestic production industry, and what the future of insuring film and TV might look like. Front Row is an entertainment insurance broker specializing in the film and TV industry, music, theatre and photography, with offices in Vancouver, Toronto, Montreal, Halifax, L.A., Nashville and New York. The company works across the entertainment industry to negotiate the best coverage and lowest premiums for its clients, and ensures insurance companies pay money owed in the case of a claim.

What’s the situation with regards to recovering COVID-19-related costs?

In the film industry there is a coverage called “civil authority,” which may apply for some productions that have to suspend operations. So once they start filming again, if they incur costs that are above their original budget, some of them might have coverage.

When we look at it in the context of COVID-19, however, the civil authority policy was never really intended to deal with a viral pandemic, nor an order from the government to cease operations. That’s significant and I think that caught a lot of people off guard. Certainly the economic impacts are quite serious for lots of companies in the film industry.

We’re waiting for insurers to come up with a coverage position, because a lot of productions were affected. Civil authority is one of the only coverages that doesn’t require actual property damage for the coverage to apply, but it’s intended only to respond [to a situation where] a government prohibits your ability to film at a specific location, so usually that would be because there is fire or serious water damage to a neighbouring structure [that makes] it unsafe to work at your filming location. But in the case of a government ordering the entire province to shut down, that’s really not within the intent of the policy, so it’s a bit of a complicated issue.

That’s where we’re at with claims right now – trying to get clarification from insurers as to which producers will be able to get some compensation for their shutdowns, if any.

Looking ahead, will insurance policies change to address the threat of COVID-related production closures?

Moving forward, insurers have been putting on exclusions for COVID-19 specifically, or, more broadly, for any communicable disease. That could be a pandemic or something that’s transmitted from person to person. Again, it goes back to the fact the policy is intended to cover damage to property that the production is using; it’s not really contemplated to deal with a suspension of the entire economy because of a pandemic.

For the insurance industry, it’s a concern because the costs and the amount of assistance that governments are providing – in Canada, the U.S., Europe and elsewhere – is in the trillions of dollars, and that’s potentially going to be larger than the entire insurance industry can absorb. So if there was an ability to find some coverage, I’m not sure now would be the time, or that you would find an insurer willing to do so, because it’s hard to quantify and understand the potential loss – that’s the issue insurers are having.

What are the main issues you’re hearing from producers?

The main issue is trying to find out where producers are on existing shows that have been suspended, and if they have insurance coverage that will help them with the costs to ramp up again. And then, in the larger sense, it’s what do we do now and where do we go from here?

With insurers putting exclusions on policies, it means that insurance is still available (they will still cover things like damage to equipment, or rented cars), but the main risk people are concerned about is a second wave of COVID, or something coming up in the fall or maybe even sooner. And without insurance, how do producers protect themselves? How will funders respond to this area that there is no coverage or protection for?

In the absence of an insurance option to transfer the risk of a financial loss from COVID-19, producers really have to look at best practices, and what they can do to show they are not negligent as employers because they will be responsible for the crew members working on projects. The industry is coming up with this now, and there will be guidelines to follow.

As long as producers are properly implementing those recommendations, that will help their exposure for liability claims or people trying to sue them if they get ill as a result. However, on the other side, if a producer is being a little bit reckless or cutting too many corners, they could be exposing themselves to liability. And in the absence of insurance or other protections, that would not be advisable and would definitely be risky.

Another question is: for the funders who are investing in these projects, if there’s an interruption or a suspension again, what does that mean? There could be additional costs – does that mean we cut back on some of the things that were going to be put on camera, some of the important scenes? Are funders going to be willing and able to add more money to the production to help it keep going? Or can producers come up with any other interesting or neat ideas to work around a potential suspension? These are all things that are being discussed right now within the industry.

A lot of producers are really trying to look at physical distancing and the sorts of guidelines that will work. Different productions will have different requirements, so there might not be a one-size-fits-all approach. But broadly speaking, producers are looking at smaller groups of people working on production, staggering breaks, not having buffet lunches. Others are looking at health checks, things like having temperature checks and screening people before they start working. Other are looking at limiting travel in cases where they have people coming into Canada [from abroad]. There are some U.S. actors that are in quarantine right now in Vancouver and other places in anticipation of working, but they have to satisfy that quarantine requirement. And the other thing is – will there be masks and other protective equipment? Hygiene, sanitation stations, these are important things that producers need to come to grips with. Once all those things are in place, they might be in a better position to go ahead.

That’s what producers are looking at: how do we continue working if we can’t rely on insurance, and what can we do to limit our risk? It really means being creative and coming up with new ways of working, new ways of doing things.

Is there any sense that insurance companies could offer pandemic insurance as a premium product within their offerings?

It’s a little too early [to know that]. When we had SARS, it mainly affected production in Toronto. There was a lot of production that was originally scheduled to film in Toronto that moved to Vancouver, and some insurers introduced SARS exclusions which remained for a couple of years. And by that time, SARS had pretty much gone away and wasn’t the huge impact that COVID-19 seems to be.

In this case, it’s a bit early. We’ve talked to brokers and insurers at Lloyd’s of London, because Lloyd’s is known as a unique insurance marketplace where you can get a lot of unusual risks insured. We’ve even proposed insurance language/policies ourselves and discussed that with insurers – about ways of providing some coverage, but limiting it so that an insurer wouldn’t be devastated with a catastrophic loss, and producers would have enough money so that they might be able to weather an interruption.

Unfortunately we have not had an insurer willing to do so. And we’ve even gone to unusual insurers, including life insurers and others, to see if there’s an option and, unfortunately, right now is not a good time. There’s too much uncertainty, and insurers are still trying to assess what the impact will be on broader society, but also on them specifically. They have a lot of lawsuits underway – people suing them and them counter-suing over interpretation of insurance policies – so I don’t see anything in the near term at all. Certainly, for the next year, we have to work based on the assumption that COVID-19 is something that’s not insurable right now. We’ll continue to push the envelope and see, and then test insurers from time to time, but at present there’s nothing available.

From an insurance perspective, how big of a concern is this to Canadian producers? 

I know it’s something producers are concerned about, but broadcasters and funders are aware of what’s going on and the lack of coverage in the insurance marketplace. Some of them have said they understand the need to be flexible, and they’ll look at each project on a case-by-case basis.

Of course, they have other constraints, and everyone’s limited with how much money they can invest, but I think it will take a little bit of creativity on the part of funders. So, for example, do they allow producers to have a slightly higher contingency? Or, some people have been floating the idea of an industry-supported fund, with some seed money from government and broadcasters, so that if there are a couple of productions that are affected negatively, they can draw upon an industry fund. I don’t know how much traction that will get, but these are the thoughts producers are having – how can we manage this?

Some of the service work, where producers are relying on U.S. studios or larger companies, might be in a better financial situation to absorb some overages and additional costs. But for independent Canadian producers, it is definitely yet another challenge to deal with. But if funders can see the issue and come on board, or producers and funders work out a contingency plan, that might be the best we can do at the moment.

For Front Row, what are some of the other things you’re working on right now? 

A lot of it is talking with producers and others about the best ways to proceed.

I think most brokers are submitting to more insurers, basically trying to get the very best terms for our clients. So, where a client may have had an exclusive relationship with one insurer in the past, we’re having to canvas all of the insurers to really try and get the best value for clients. Until the insurance industry stabilizes a little more, it’s best to explore all sorts of options. There’s going to be pressure on budgets, so we want to make sure the price is good and also that the coverage available (aside from COVID) is as broad as we can get in the market. A lot of it is talking to clients, explaining the insurance situation and trying to brainstorm ideas with them. We’re a specialty insurance broker, so this is our lifeblood, we really want the industry to do well.

It’s a little bit sobering, being the bearer of bad news in many respects, because people are looking for help and looking for an option from the insurance industry, and unfortunately there isn’t one at the moment.

Any advice you would give to producers? 

If a production had insurance, and then shut down and they’re gearing up again, it would be to make sure they update their filming dates with their insurance broker and make sure the policy, if needed, is extended so the insurance coverage doesn’t run out. That’s easier said than done, because producers might not know until they’re filming how much they can get done in a day, and how much time they need.

Keep a regular dialogue with your insurance broker, and update them on your plans. If budgets are going up as a result, and they need to spend more money on hygiene crews or different food arrangements, my advice is to review that with the insurance provider as well to make sure those costs are being covered by insurance and that they’re not breaching any conditions.

And more generally, as you’re ramping up, even though you have insurance coverage, it might be a good idea to go over your plans with the insurance broker to make sure the insurance coverage is still on side with the new plans.

In terms of what insurance policies will look like going forward, do you see anything being resolved within the next two or three months?

From an insurance standpoint, we’re probably at the best place that we’re going to be for a period of time. Certainly for the next six months to a year, I can’t see much of a change. As I mentioned, we’ll continue to push the envelope to see if we can find some coverage, even a very limited coverage, before then, but it’s unlikely. And based on our experience with SARS a number of years ago, we’re not very hopeful that there will be an insurance solution for COVID. In terms of getting insurance in place, yes – insurers are quoting business, they are agreeing to accept business and issuing policies, but the production industry is going to have to grapple with what working on set is going to look like. It’s going to be quite a bit different.

Once the provincial governments agree to let productions go ahead, it could become a race and we might see some [productions get up and running] fairly early. A lot of production slated for the year could be compressed into the summer and fall, so there could be stress on producers getting crews, locations, equipment. It could get a little bit crazy, or it could be that producers say “let’s wait” or “we can’t get the right safeguards implemented yet, it’s going to take us a little bit more time.” So that will be interesting to see.

Keep up with Playback‘s ongoing coverage of COVID-19 here.