10

Insurance

Production companies are not legally required to carry any insurance other than (1) workers’ compensation and employer’s liability, and (2) comprehensive general and automobile liability (CGAL). The first is required at all times and everywhere; the second is required only when commercial filming is conducted outside a studio on state, county, city, or private property, or on any other location requiring a permit. It is customary and sensible, however, to put together an insurance package that addresses the potential problems and risks of the production. It is a good idea to have a broker put together the best deals, usually he researches a variety of different insurance companies and is not bound to any one specific.

The requirements as spelled out by the California Film Commission are exemplary:

Certificate Holder

• The State of California

   

• 7080 Hollywood Blvd., Suite 900

   

• Hollywood, CA, 90028

   

Limit Requirements

• General Liability: coverage in an amount not less than $1,000,000 for each occurrence.
• Automobile Liability: “Owned”, “Hired” and “Non-Owned” coverage in an amount not less than $1,000,000 for each accident. (No Automobile Liability coverage is required if no vehicle is used in or for filming.)
• Workers Compensation: Statutory Workers Compensation and Employers’ Liability with a limit of $1,000,000 is required. If a company has no employees, a Workers Compensation waiver letter must be submitted to the CFC (please create your own document based on the attached sample).
• Aircraft Liability: coverage in an amount not less than $5,000,000 for each accident.
• Unmanned Aircraft System (UAS): see section below for insurance requirements.

1. 1) On the Certificate of Insurance under “Description of Operations/Locations/Vehicles”, the policy(ies) (except on Workers Compensation) must be endorsed to include: “The State of California, including its officers, agents, employees and servants is named as additional insured, with respect to liability arising out of the operations related to filming on California state owned or operated property.” An additional insured endorsement(s) must be submitted with the certificate(s)
2. 2) Endorsement Form

ADDITIONAL INSURED ENDORSEMENT

This endorsement must be submitted on a SEPARATE PAGE and is in addition to the additional insured language required on the certificate of insurance as described above (see attached sample).

Insurance Coverage for The Use of Unmanned Aircraft Systems (UAS)

As detailed above, a production entity that wishes to film on state property must provide the CFC with a certificate of insurance evidencing coverage of General Liability, Workers Compensation and Automobile Liability. If the production’s proposed activities include the use of a drone, additional aerial coverage must be provided by the UAS operator. The additional requirements are to provide:

1. 1) Proof of Unmanned Aircraft Systems (UAS) coverage (listing the specific aircraft to be used) with a limit of at least $2,000,000. This can be submitted in one of two ways:
   1. If UAS coverage is being added to a general liability policy, there must be a separate endorsement showing proof of UAS coverage.
   2. If the coverage is coming from an aviation-specific insurance carrier (such as Global Aerospace), a separate policy endorsement is not necessary, as the entire policy represents the UAS coverage.
2. 2)  A separate endorsement naming the State of California, its officers, agents and employees as additional insured.

When purchasing insurance, production companies generally ask an insurance company or broker to examine the screenplay and a detailed budget and provide estimated quotes for all coverages they should consider. Naturally, the ideal insurance package varies with each production, depending on the nature of the film. Documentary and commercial production companies usually obtain an annual producer’s insurance policy (PIP) that combines various types of insurance.

Generally, a fee of about 2 to 3 percent of the total budget—the premium—is calculated. The actual fee will depend on the following:

• Size of budget
• Location of shooting
• Duration of principal photography
• Number, ages, and physical condition of cast members
• Number, ages, and physical key crew members such as director or DOP
• Value of equipment, props, sets, wardrobe
• Unusual exposures and risks

The final item is especially important and should be discussed with the insurance agent prior to filming. The existence of the following factors can strongly influence the premium to be paid:

• Distant locations (insurance coverage is usually in effect 24 hours a day)
• Unusual or dangerous activities (scenes involving airborne aircraft, motorcycles, violent stunts, etc.)
• Boats, ships, and harbors (production personnel scheduled to film on boats or ships or around harbors could fall within compensation areas with generally much broader benefits, reserved to U.S. federal law)
• Use of animals, railroad cars or equipment, underwater filming or pyrotechnics

The different types of coverage generally offer deductibles of varying amounts, depending on the limits of the required insurance.

Based on the above criteria, the production company makes a deposit premium during the pre-production period. After the production period is complete, the insurance adjuster conducts a final audit and evaluates any changes made during production to the original screenplay, schedule, and estimate, and he or she adjusts the premium accordingly.

The insurance company issues certificates of insurance, which name the insured production company, the coverages, and the certificate holder, who is an additional insured party. The certificate holders generally comprise all the individual companies from which the production company rents equipment or to which it applies for filming permits. Copies of the certificates of insurance are kept by the insurance company, the production company, and the certificate holders.

 Types of Insurance

The remainder of this chapter presents brief, nontechnical descriptions of the various types of insurance coverage available. For detailed contractual information, the production company should contact an insurance agent or broker.

Pre-production Cast Insurance

This policy reimburses the producer for legal liabilities that take place prior to the sickness, injury, or death of one or two principal actors and/or the director. However, this coverage is only in effect if the sickness, injury, or death causes the producer to abandon the project completely because of the unavailability of the insured.

Workers’ Compensation and Employer’s Liability

State laws require production companies to carry this coverage, which applies to all permanent and temporary cast and crew members. It pays for hospital and medical bills and provides disability or death benefits for any cast or crew member who becomes injured or dies in the course of employment. Specifically, this coverage provides the following benefits:

• Medical care. The employee is entitled to all medical and surgical expenses that might be required to cure or relieve injury. In a serious case, the employee is entitled to the services of a consulting physician of the employee’s choosing.
• Temporary disability. An employee who misses work due to an on-the-job injury is entitled to compensation for time lost. Benefits generally begin on the fourth day following an injury. When the disability lasts longer than 21 days or results in the employee being hospitalized, benefits begin from the first day of injury. Currently, the weekly benefit is based on 66.33 percent of the worker’s actual wages, subject to a maximum of $266 weekly.
• Permanent disability. If an employee’s injury results in a permanent disability, the extent of the disability is determined, and the benefits are based on (1) the degree of total or partial disability, (2) the employee’s earnings, (3) his or her age, and (4) his or her occupation. The determination of benefits is usually made by the Industrial Accident Commission.
• Death. When an on-the-job injury results in death, the benefit for the surviving spouse is subject to a maximum of $95,000. Where there is a surviving spouse and one or more dependent minor children, the award is $115,000. A burial allowance of $5,000 is granted in each case.

Workers’ compensation and employer’s liability insurance is usually in effect 24 hours a day while employees are on location away from their homes. This coverage can be obtained in one of three ways, depending on the state in which the production takes place: (1) through a private insurance company, (2) through a state fund, and (3) through a self-insurance program. People who classify themselves as independent contractors are usually considered employees as far as workers’ compensation is concerned.

The California Workers’ Compensation Act states that employees shall be entitled to medical expense and compensation for time lost from work due to injury or illness arising during the course of their employment. An employer who does not carry this insurance for an injured employee (1) is liable for any payments required by law, just as if the policy were in effect, (2) might be required to pay attorney’s fees, and (3) might be subject to a10 percent penalty, based on the amount of the award, if the failure to provide insurance is judged to be “willful.” Failure to secure this coverage is, in itself, sufficient proof of “willfulness.” (The provisions of this insurance may not necessarily apply to employers in other states, but most workers’ compensation laws are quite similar nationwide.)

 Payroll Considerations

Workers’ compensation rates are based on job classifications, and the actual rates charged are based on the type of work employees perform. The production company is expected to maintain accurate payroll records that reflect which classifications apply. Employees may be assigned to one of three different job classifications. Each classification carries a description of the job function and has a code number assigned to it. The classifications are as follows:

1. Motion picture production (code 9610). This classification applies to all employees involved in filming operations, including talent and production crew. For payroll audit purposes, the entire production crew is reported on the basis of the total gross payroll. The payroll for the director, production manager, assistant directors, and talent is reported separately, subject to a maximum reportable salary of $1,000 per week per person regardless of actual salary. The current premium rate for this classification is $3.93 per $100 of salary. It is even higher when special hazards exist. Full-time permanent production employees are reported under this classification only when they are actually involved in film production activities.
2. Motion picture development of negatives, printing, and editing (code 4360). This classification applies to all production personnel whenever they are not involved in film production duties and to all pre-production and post-production functions, including editing employees. This classification carries a lower rate (currently $2.20 per $100 of payroll) than code 9610 due to a lesser degree of accident exposure.
3. Clerical office employees (code 8810). This classification includes all office employees not involved in filming or editing activities. Corporate executives and most producers are eligible for this classification unless they have direct responsibilities during filming operations.

The insurance company requires the producer to submit periodic payroll reports, called voluntary audit reports, with payroll figures assigned properly to the respective classifications. All temporary production crew personnel or talent hired for a particular production are considered employees, and their salaries must be reported in the same manner as those of permanent employees.

Comprehensive General and Automotive Liability

Comprehensive General and Automotive Liability (CGAL) coverage is required before filming on any city or state road or at any location that requires filming permits or certificates. It protects the production company against claims for bodily injury and/or property damage caused by an employee during the course and scope of company business. The coverage includes the use of all non-owned vehicles, both on and off camera, including physical damage to these vehicles. Owned-automobile insurance covers vehicles registered to, produced by, or purchased by the production company. The following are the minimum insurance coverages applicable in Los Angeles:

• General city requirements, $1 million
• Department of Water and Power property, $2 million
• Harbor Department property (water areas), $3 million
• Aircraft use, $5 million
• Automobile Liability “Owned”, “Hired” or “Non-Owned” coverage in the amount of $ 500.000 (For student film productions, the reduced coverage of $ 100.000/300.000 is required).

The acceptable evidence of required insurance coverage is a city form called the Additional Insured Endorsement. This form must be filled out and signed by a representative of the insurance company, which also keeps copies of these on hand.

Cast Insurance

This coverage reimburses the production company for any extra expense necessary to complete the principal photography of an insured production due to the death, injury, or sickness of an insured performer or director. The insured individuals must undergo a physical examination before coverage begins, and the examination cost is paid by the production company. The coverage is usually subject to certain named exclusions, such as hazardous activities, stunts, and noncommercial flying. The coverage usually begins two to four weeks before the start of principal photography and covers seven people, including the director. Additional people can be added for a nominal cost. The cast furthermore may be insured covering the post-production phase if they are needed for dubbing or other activities.

Props, Sets, and Wardrobe

This type of insurance covers company-owned property and the property of others, including props, sets, scenery, costumes, wardrobe, and similar theatrical property, against all risks of direct physical loss, damage, or destruction occurring during production.

Extra Expense

Extra expense coverage reimburses the production company for any additional out-of-pocket expenses needed to complete principal photography for an insured production due to the damage or destruction of property (props, sets, or equipment) or facilities (such as a location site) intended for use in the production. The damage must have led to the interruption, postponement, or cancellation of the production. This coverage includes losses due to faulty generator operation but excludes damage or interruption caused by rain.

Third-Party Property Damage

This coverage pays for the damage, destruction, and loss of property of others while the property is in the care, custody, or control of the production company and is used or would have been used in an insured production. For example, this insurance covers damage to a house being used as a location site. It does not cover liability for destruction or damage of property caused by the operation of a motor vehicle, aircraft, or watercraft, including damage to these vehicles, or liability for damage to any property rented or leased that may be covered under props, sets, and wardrobe or miscellaneous equipment insurance.

This coverage is not included under the comprehensive liability policy. The property damage coverage included in that policy excludes damage to property in the production company’s care, custody, or control.

Miscellaneous Equipment

Miscellaneous equipment insurance covers the production company against all risks of direct physical loss, damage, or destruction to cameras, camera equipment, sound, lighting (including breakage of globes), and grip equipment owned or rented by the production company. This coverage is subject to certain exclusions, such as mechanical breakdown. It can be extended to cover mobile equipment vans, studio location units, and similar vehicles for an additional premium.

Negative, Film, and Videotape

This coverage protects against all risks and covers all costs incurred in reshooting as a result of direct physical loss, damage, or destruction of raw film or tape stock, exposed film (developed or undeveloped), recorded videotape, soundtracks and tapes, and work prints up to the amount of the insured production cost.

Coverage is continuous until the answer print is made, but it does not include losses caused by fogging; faulty camera or sound equipment; faulty developing, editing, processing, or manipulation by the camera operator; exposure to light, dampness, or temperature changes; errors of judgment in exposure, lighting, or sound recording; or use of the incorrect type of raw film stock or tape. This coverage, due to common post-production workflow techniques, nowadays extends to computer-stored data as well.

Money and Securities

This insurance covers cash on hand at any one location and cash on hand at all locations and usually is limited to $ 50.000.

Office Contents or Business Personal Property

This insurance generally is obtained on an annually basis and is more for the production company than the individual production.

Faulty Stock, Camera, and Processing

This insurance reimburses the production company for any additional out-of-pocket expenses incurred in reshooting as a result of damage to negative film, videotape, soundtracks, work prints, and tapes from faulty raw stock; faulty camera, sound recording, or editing equipment; faulty processing; or accidental erasure of videotape recordings. The coverage does not include loss caused by errors of judgment in exposure, lighting, or sound recording; use of the incorrect type of raw stock; or faulty manipulation by the camera operator or sound recordist. This coverage can only be purchased with the negative, film, and videotape coverage.

Errors and Omissions

Errors and omissions insurance covers the production company’s legal liability and defense against lawsuits alleging unauthorized use of titles, formats, ideas, characters, or plots; plagiarism; unfair competition; or breach of contract. It also protects against alleged libel, slander, defamation of character, invasion of privacy, wrongful portrayal, copyright infringement, and so on. It does not cover punitive damages. Distributors usually require this coverage before they will release a theatrical or television production.

 Clearance Procedures

Before applying for errors and omissions liability insurance, the production company should follow these clearance procedures:

1. The script must be reviewed by the applicant’s attorney before commencement of the production to eliminate material that might be defamatory, that invades someone’s privacy, or that might otherwise be actionable. The coverage cannot be bound until the insurance carrier’s clearance attorney has approved the complete application.
2. Unless the work is an unpublished original not based on any other work, a copyright report must be obtained and submitted with the application. Both domestic and foreign copyrights and renewal rights should be checked. If a completed film is being acquired, a similar review should be made of copyright and renewals on any copyrighted underlying property.
3. If the script or story is an unpublished original, the origins of the work should be determined, including basic idea, sequence of events, and characterizations. It should be ascertained whether the applicant has received submissions of any similar properties, and if so, why the submitting party may not claim theft or infringement should be described in detail.
4. Before the final title selection, a title clearance should be obtained from a title clearance firm. The title of the production is excluded from coverage until a satisfactory title report is obtained. The fee for obtaining a title clearance may range from $150 to $250, depending on research time involved.
5. Whether the production is fictional, with identifiable locations, or factual, no names, faces, or likenesses of any recognizable living persons should be used unless written releases have been obtained. Release is unnecessary if a person is part of a crowd scene or is shown in a fleeting background shot. The term living persons includes thinly disguised versions of living persons readily identifiable because of the identity of other characters or because of the factual, historical, or geographic setting.
6. Releases are not required for members of the Screen Actors Guild (SAG), the American Federation of Television and Radio Artists (AFTRA), or the Screen Extras Guild (SEG) because they are compensated for their performances. Releases obtained from living persons, as described in the preceding paragraph, should conform to the language used in the sample personal release (see Chapter 8).
7. If music is used, the applicant must obtain all necessary synchronization and performance licenses.
8. Written agreements must exist between the applicant and all creators, authors, writers, performers, and anyone else who provides material (including quotations from copyrighted works), or on-screen services.
9. If distinctive locations, buildings, businesses, personal property, or products are filmed, written releases should be obtained. This is unnecessary if nondistinctive backgrounds are used.
10. If the production involves actual events, the applicant must ascertain whether the author’s sources are independent and primary (contemporaneous newspaper reports, court transcripts, interviews with witnesses, and so on) and not secondary (another author’s copyrighted work, autobiographies, copyrighted magazine articles, and so on).
11. A final shooting script must be submitted with the complete application. If the production is a documentary, a shooting outline or treatment should be submitted.

Excess Liability

Excess liability insurance provides additional coverage in case the regular $1 million combined single limit is insufficient. For example, permits for the use of Los Angeles Harbor and Airport facilities involve a $5 million combined single limit.

Guild/Union Accident Insurance

This coverage meets motion picture and television guild and union contract requirements, including those of the International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists, and Allied Crafts (known as IATSE); National Association of Broadcast Employees & Technicians (NABET); SAG; and Directors Guild of America (DGA), for aircraft accidental death insurance for production company cast or crew members. The coverage is blanket, and limits of liability meet all signatory requirements.

Non-owned Aircraft Liability

This coverage is required when an airplane or helicopter is rented, leased, or borrowed for use as a picture plane for scouting locations or for aerial photography.

Animal Mortality

Animal mortality insurance protects the production company against loss or destruction of animals used in connection with a production. The value of the animals must be established before their use, and current veterinarian certificates are required for full mortality coverage.

Table 10.1 provides an overview of the insurance provisions of various guild and union agreements. Individual cases should be discussed with an insurance agent or broker.