A step by step guide to help you secure protection for your film production
By Winnie Wong
Producer’s Errors & Omissions insurance (E&O) is usually required by distributors prior to the release of any production. It provides legal liability coverage for claims alleging unauthorized use of titles, format, ideas, characters, and plots; plagiarism; unfair competition; liable, slander and defamation of character; or invasion of privacy. The first step to getting the coverage is to complete an application. In our 3-part blog series, Momentous Production Insurance expert Winnie Wong goes through each section of a typical application.
Name of applicant – In the film world, a single purpose production company is established for a specific film. The purpose of this is to separate any liability that can occur from the individual producers and financiers. In addition, it separates accounting and tax issues that surround a film. When a policy is placed the company will then be considered the Named Insured. Please note that the name of the insured protects all individuals that work on the film which includes cast and crew members.
Address/Phone no. – A legal address is necessary so that copies of the policy and any claims documentation can be officially received by an individual that has full knowledge of the films activities.
Website – Many production companies promote their films on the internet. Please supply your various sites so the insurance underwriter can view the trailers of the film as well as the bios of the director and actors.
Normally the distributor will require that you indemnify them by including them as an additional insured under your Errors & Omissions policy. In addition, they will designate the limits, deductible and policy terms will vary dependent on the distributor’s contract. If you secure distribution through a studio or larger distributors they will require higher limits and designate a licensing periods that can range from 7 to 10 years. These measures are put in place primarily to protect the distributors from lawsuits and legal costs that can exceed millions of dollars. There is a far greater potential of lawsuits arising from theatrical distribution because a larger audience will see the film. In addition, there is a perception that a production company has “deep pockets” and can afford to pay out large settlements.
Unlike other insurance policies, the limits for this coverage are broken down two ways:
The standard limits are $1,000,000 per claim and $3,000,000 aggregate
Higher limits may be required by various theatrical, television and cable distributors. The higher limits are required because they want to make sure that there are ample limits available under the policy to defend them if a claim arises. Please note that the distributor will require you include them as an additional insured and indemnify them for any claims arising from your film.
Self insured retention/Deductible
Besides the above limits, the coverage is subject to a “self insured retention” also known as a deductible, which means the producer must pay a portion of the loss if a claim occurs. The standard deductible for films can range from $10,000 to $25,000. Typically, the higher deductible of $25,000 is applicable if the film’s budget is larger than $2,000,000, being theatrically released (both domestically and internationally) and if higher limits are required by the distributors. There are occasions when higher deductibles may be warranted because the film has higher potential for legal issues. The deductibles can range from $50,000 to $100,000.
The standard term policy term is one or three years. For feature productions, a three year is the best option because it allows the producer more time to secure alternative distribution thorough cable/television, DVD, internet and foreign markets. To accommodate the distributor’s licensing periods which can be 7 to 10 years insurance companies can provide a rights period endorsement or term of insurance to the policy. This means an endorsement can be added to the policy that would protect the distributor for the length of their contract. All that the insurance underwriter will require is a copy of the executed (signed and dated) agreement and an additional premium may be charged.