The Show Can’t Go On … Without Insurance. Coverage for Film and Television Shrinks Amid COVID-19

The virus has made it nearly impossible for productions to get insurance, begging the question will this be a summer without blockbusters?
By: | June 18, 2020
Empty directors chair production insurance

As COVID-19 swept the nation, our entertainment industry broke down. Sporting events were cancelled; movie productions were shut down, TV series ended their seasons abruptly; theaters closed; and streaming giants dominated.  

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Some production companies bumped their film release dates and premiered instead on streaming platforms, while other releases have been delayed indefinitely until theaters re-open. A few TV series, including Parks & Recreation and Saturday Night Live, recorded socially distant special episodes, often using Zoom, but the production values were, of course, not quite the same. 

With film production unable to resume, people started questioning whether 2020’s would be the first summer without blockbusters since Jaws premiered in 1975.  

“Hollywood was shut down,” said Brian Kingman, managing director of Gallagher’s entertainment practice. “COVID-19 literally stopped all production of movies, television shows and live events around the world.”

Massive Losses for the Sector

All of these production shutdowns and cancellations added up to massive losses for the entertainment insurance sector.

Unlike business interruption policies, which exclude communicable diseases, production insurance and event cancellation policies are often triggered by orders from civil authorities. Productions and events then receive insurance payouts up to a certain limit. 

When governors started issuing stay-at-home orders and banning gatherings of more than 10 people, these policies were triggered. A Variety article estimates that the sector is facing between $300 million and $1 billion in claims

While claims are still being filed and the exact number is still unknown, Joe Addison, U.S. entertainment and media practice leader at Marsh, pegs that number even higher. He suspects that there will be billions in claims. 

“The insurance companies were blindsided by this, as we all were,” said Paul Jones, managing director of entertainment at HUB. “It’s basically impossible right now to get coverage for pandemics.”

California Governor Gavin Newson announced that film and TV shoots could resume as early as June 12. However, facing massive losses, underwriters are wary of writing new policies. That means that some production delays could be extended.

In the meantime, productions are scrambling to come up with safety protocols and brokers are trying to find new policy triggers that could make insurers feel more comfortable underwriting the risks.  

The Future of Production Insurance Policies 

Due to the high volume of claims, some underwriters aren’t writing anymore production insurance or event cancellation coverage this year. 

Markel Specialty, the company that provides some of the event cancellation coverage for Wimbledon and the Tokyo Olympics, announced that it would be putting a stop on event cancellation policies while it calculates its losses. Many film and TV production insurance underwriters are doing the same, Variety reports. 

Markel Specialty reports $325 million in business interruption and event cancellation exposures so far due to the pandemic.

For productions able to obtain insurance, infectious diseases, like COVID-19, will likely be excluded.

“As far as coverage for infectious disease going forward, it doesn’t appear anyone’s going to have it upon their renewal,” Addison said.   

Productions are currently planning new safety procedures that could make underwriters more comfortable taking on the risk.

Included among these procedures is the requirement that cast and crew wear face masks whenever possible and increased cleaning requirements for sets, according to a White Paper that has been circulating through the industry. 

“The guidelines are exhaustive, everything from testing to isolation and hygiene. They’re planning all of the various things you could imagine as far as social distancing on set,” Kingman said. 

Brokers are also working on improving language in production insurance and event cancellation policies. One factor that has bedeviled business interruption claims during COVID-19 is how clearly and uniformly civil actions dictated business closures.

Mayors sometimes impose different restrictions than the governor in their state. President Trump further muddled things, by making declarations about what he thinks should reopen and when. 

This lack of clarity from civil authority is a departure from other events that triggered production shutdown coverage and event cancellations.  

“Civil authority after Hurricane Sandy was pretty clear. The roads were blocked. It wasn’t a safe place,” Addison said.

“Right now we’re seeing a complete divergence of where a municipality or a governor or a mayor will close something down because of local concerns. Civil authority is all over the place during the pandemic.”

Big Studios vs. Independent Producers

Even if production safety protocols are worked out and new policy triggers are defined, some movies simply won’t be able to be made this year. 

Major studios, like Disney and Netflix, will likely be unaffected by the same insurance woes as their smaller peers, Variety reports, as they have the capacity to assume the risk of COVID-19 shutdowns without turning to insurers.

“The production companies, networks and streaming services will have to take the risk because no insurance company will cover it right now,” Jones said. 

Mini-majors, smaller studios and independent producers are more dependent on financing shutdown risks through insurance policies. 

“I’m spending a lot of time trying to get capacity or insurance products for the independent producers since they’re the most dependent on pure risk transfer insurance products,” Kingman said.  

Other brokers are looking through workers within other policies.“The only coverage that I could get without a specific COVID-19 exclusion, and that doesn’t mean that underwriters won’t underwrite for it, is Key Person Life and Disability coverage,” Jones said. 

“So if I were to go out and write a Life and Disability coverage for an actor or director, it conceivably would not have a COVID-19 exclusion.  So, that’s sort of work around for cast insurance that might be a possibility,but I haven’t placed any yet.”

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Like other sectors, entertainment insurance providers are advocating for the U.S. government to step in and share some of the risk through a Pandemic Risk Insurance Act (PRIA). Under this act, a federal backstop would be created that would allow claims to be covered both by insurance agencies and the federal government similar to the one that was created after 9/11. 

“You could make something like a TRIA,” Addison said. “Marsh has been at the forefront of advocating for a public-private pandemic risk insurance program.” 

Until a solution is reached, productions will likely remain shutdown, however.

“I don’t see the traditional marketplace providing any kind of insurance products in the short term,” Kingman said. “Hundreds and hundreds of productions have been shuttered all over the world.” &

Courtney DuChene is a staff writer at Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

PART ONE: CRACKS IN THE FOUNDATION

Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.

PART TWO: BETRAYAL

As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.

PART THREE: FALLING DOMINOES

Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]