Hollywood restart stymied by COVID-risk averse insurance companies

Insurance companies refusing to sell film or television production insurance without excluding COVID-19-related coverage is throwing a big wrench into Hollywood's plans to resume production.

If production companies cannot secure insurance, financiers will not provide funding for a film or TV show. Until a solution is found, attorneys, insurance experts and the Producers Guild of America say a lot of content is not going to be made.

Longtime entertainment lawyer Martin D. Singer of Lavely & Singer PC in Los Angeles said while some production companies can afford to self-insure or fund their own projects, many of the independent or mid-sized companies cannot.

"If production resumes in early 2021 and it's determined we're going to have another outbreak of COVID-19 that would have the same impact as the one in 2020, a financier for a production company knows there is a huge risk that without the production company able to secure insurance for a movie, that movie may never get finished," Singer said in an interview Tuesday.

Most financiers and bankers who provide funding to independent productions require producers to obtain a completion bond, a contract ensuring a film will be completed. However, according to the Producers Guild of America, to get a bond today, producers must have an approved COVID safety plan to protect their cast and crew, as well as proof of adequate insurance covering COVID related claims or delays.

"Without COVID insurance, the bond won't close, making it impossible to secure financing," a guild spokesperson said in an email Wednesday.

Loretta L. Worters, vice president of the Insurance Information Institute, said all businesses are suffering from pandemic-related interruption losses, estimated at $220 billion to $383 billion per month in the U.S. alone. The insurance industry could not possibly cover a loss of this magnitude, and business interruption policies were never priced to do so, Worters said. Until a vaccine or some other mitigating solution is found, most insurers will not be offering COVID-covering policies, she said.

"It's kind of like insuring a burning building right now because the pandemic is still here and businesses are exposed, so if you offered that kind of coverage, it would mean you would immediately be paying out on that," Worters said. "So it is not that they [insurance companies] want to exclude it [the virus], but if you think about it ... everyone is susceptible to infection. Especially when you're exposed on a movie set, there are a lot of people there, and even if you're taking precautions ... there is still a risk factor."

"We can certainly sympathize from the production standpoint and the frustration for them, but you have to look at it from a business perspective," Worters continued.

One solution involves the federal government stepping in to act as some sort of insurance underwriter, so insurers could offer government-backed policies, Worters said, and the Producers Guild agreed.

"Other countries are offering government-backed insurance and we will lose many projects to those markets if we don't find a way to support these independent producers whose voices and stories should be heard now more than ever," the guild spokesperson said. "The PGA has signed various letters in support of a legislative solution addressing government-backed insurance for the industry, including the Pandemic Risk Insurance Act of 2020, and will continue to support the independent producing community in any way it can."

The Pandemic Risk Insurance Act introduced by House Financial Services Committee Member Carolyn Maloney, D-New York, is a proposed program in which insurers would be required to make their policies available without an exclusion, limitation, or other special condition for pandemics. In return, the program would reimburse participating insurers for a certain amount of losses from those events -- referred to as the federal backstop.

Sarah L. Cronin of Venable LLP, who represents media and entertainment companies in insurance recovery and breach of contract matters, said unless a production company can self-insure, or find a niche insurance company willing to write an insurance policy that includes COVID related shutdowns, media production will certainly be stifled.

"Insurance companies are not going to be issuing production-specific policies that cover COVID related shutdowns moving forward. There might be some niche area, where one or two smaller carriers attempt to do it, but for the most part any new policy will exclude COVID related shutdowns," Ronin said. "The problem is when you take out that one piece of the puzzle, which is a big piece, insurance, it prevents the puzzle from being completed and you can't get a television show or movie made."