Fighting COVID-19 Insurance Could Help Tighten Policies for Hollywood Productions

After COVID-19 closed business in the United States, dozens of companies asked insurers to cover losses under traditional property insurance policies and received multiple denials.

But Hollywood had another safety net: production insurance. These specialist policies cover a wide range of risks, including pandemics, at least for policies issued before a world-changing event. Unlike other types of insurance, manufacturing policies have not been the subject of extensive litigation until recently.

While the historical willingness and ability of entertainment companies, insurance companies and their intermediaries to resolve claims amicably is positive, it could also mean that policy language has not been tested and refined through litigation.

As we move beyond COVID-19 and focus on other risks such as geopolitical instability and extreme weather, policyholders should consider the issues raised by COVID-19 claims and review their policies when planning to maximize coverage in the future.

Check Production insurance usually includes several different coverages for a single production or group of products. The policy includes various “first party” coverages when a production is forced to close or suspend operations due to a covered hazard, such as an injury to an artist, damage to the set, or an order from a government official. Other coverages include liability or “third party” coverage that protects the manufacturer from the costs of defending and resolving a lawsuit. (Products may also have many other coverages, such as cyber risks or media liability, although these risks may be covered by corporate policies that insure other types of entities and lines of business, not just products.)

Loss Mitigation Provisions The amount of insurance available under a production policy often depends on the specific risk. For example, an insurance policy issued to Paramount Pictures Mission: Impossible 7 It charges up to $100 million for interruptions caused by an actor’s illness or injury, but only $1 million for interruptions caused by “civil authorities” such as shelter-in-place orders issued by governments at the height of COVID-19. . According to the lawsuit filed by Paramount, the insurer allegedly paid $1 million for the “civil authorities” coverage, but only $5 million of the “actor” threshold, apparently because only one artist or other “covered person” contracted. the COVID-19. He argued that unless other “covered people” were sick or injured, the remaining $95 million in “caste” limits would not be available.

In these cases, insurers have tried to take advantage of the fact that the March 2020 shutdown prevented many infections, as well as the extensive safety protocols in place when production resumed. Had the play gone ahead in March 2020, or restarted without extensive safety protocols, more cast members would have been infected, resulting in ever-increasing claims, apparently covered by the limits available for the play.

But the law recognizes that coverage must also have to do with the value reliever disaster. The manufacturing policy includes clear coverage for such expenses, including “imminent risk” coverage and “due diligence” clauses. For example, a controversial policy M: I7 promised to cover costs or increase costs “to avoid or mitigate such loss or claim,” according to court records. Therefore, it is recommended to use the cover when production has ended or safety protocols have been put in place to prevent people from getting sick from an airborne virus that attacks the body when inhaled. Insurers disagreed, suggesting that the coronavirus infection causes illness but not the kind of acute injury often seen in industrial insurance claims such as car accidents.

In addition to covering the cost of injury mitigation, production policies typically also cover the increased costs of completing insured production. Consequently, the restart must cover the extensive costs of adhering to COVID-19 security protocols. Once again, insurers disagreed, arguing that there was no coverage for such costs because they were not required by the initial closing order.

Policyholders must be prepared to challenge these types of claims by insurers. When making difficult decisions about closing or continuing in the face of rising costs, companies must be aware of key insurance provisions and develop facts to support coverage early in the process. This can help us understand why and how decisions were made to support coverage.

the language of politics Knowing the fine print can help you avoid disputes. For example, in one policy, coverage included expenses incurred “to protect persons and property … against direct physical loss or imminent damage caused by hazards not otherwise excluded.” Despite the clear reference to the protection of “people”, the insurer claimed that coverage was triggered only when there was “imminent direct physical harm or loss”. Property. If the provision also included a reference to “injury” or “illness”, it could more clearly reveal that coverage would be available for measures taken to protect individuals.

delays and extensions Policyholders should note that the insurer may refuse to extend the term of the policy if necessary to complete the principal photograph, or it may only agree to do so under onerous conditions, effectively holding production hostage. In a discussion involving hypnotic s M: I7, pandemic-related delays meant principal photography was not completed before the policy expired. The policies limited events that occurred during the policy period, and the insurer reportedly refused to extend the policy on similar terms, insisting on adding a “communicable disease” exclusion and a higher premium. Insureds must make every effort to ensure that the original policy has provisions allowing for extension or renewal to allow for the completion of the process.

Before the pandemic, companies may have relied on the long-standing practices of insurers, but their response to COVID-19 deserves reconsideration and caution.

Covington & Burling attorneys Jeff Kiburtz and Gretchen Hoff Varner focus on representing policyholders in complex insurance coverage issues.

A version of this story first appeared in the September 6 issue of The Gossipify. Click here to subscribe.