Indie Film Ecosystem At Risk With No COVID Insurance, And Solutions Far Off

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A restart for film and television is bearing down but looming uncertainty around COVID-19 insurance has the business on edge.

Pandemic insurance disappeared in March. Three months later there’s still no viable alternative to put many independent producers back on a path to completion bond backed financing. It’s pressing, as interrupted productions restart mostly covered by preexisting insurance, while new projects may remain in limbo.

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“Right now there is no insurance for [COVID] at all, at any price,” said Steven Ransohoff, CEO of Film Finances, at a recent panel hosted by Cinetic Media.

A few insurers are exploring limited policies that are very costly, between 10%-15% of total budget by some accounts. “Ridiculously expensive,” said one film executive. “It’s really not even like having insurance.”

These policies, said another, “will be limited to a couple of million dollars – maybe $2 [million], maybe $5 [million]. But what’s going to happen if you have a $20 million movie and an actor become incapacitated? The liability is on the producer to cover the gap between $2 million and $20 million.”

“You are going to be left with independent equity financiers taking the risk that insurance companies won’t,” he said.

Brian O’Shea, CEO of international sales company The Exchange, said the firm “has done a couple of mid-sized non-bonded films in the $5 million-$10 million range and plans to do a few more where financiers have guaranteed delivery. This means that we as a sales company/distributor are able to release deposits and set release dates to our buyers. Both of which are very important during this time of uncertainty.”

“At this moment,” he said, nothing going into production is fully bonded. It has to be self-financed.”

Completion bonds cover cost overages and guaranteed delivery of a film by a certain date. The bonds require production insurance but all policies now exclude pandemic coverage.

“The way it’s going to work is … they won’t bond for production overages [or] if you miss your delivery date resulting from COVID. So you’ll get your bond. It’s just that any costs, an extra costs, you incur that the bond would usually pay for … if it’s related to COVID, they won’t pay,” said one executive.

“If you have to shut down because your star or your director got sick for two weeks, the incremental cost is born by the production company,” he added.

Millennium Media, the studio behind the Has Fallen and The Expendables franchises, is finishing post on Asset, Jolt and Hitman’s Bodyguard 2. Tesla, Blackbird and The Outpost are done, awaiting release. President Jeffrey Greenstein said it’s working on scripts for Red Sonja (with Jill Soloway) and The Legend of Sinbad, but as for getting them into production it’s “wait and see,” he said. “The risks are too big to roll the dice.”

High and low budgets – from deep-pocketed studios and streamers that can self-finance on one hand, to inexpensive, non-union productions on the other, have the advantage. Paul Bales, partner and COO of The Asylum (home of Sharknado), with projects mostly under $1 million, small casts and quick shoots, recently filmed three productions — in Florida (Shark Season) and Los Angeles (Monster Hunter, Asteroid-A-Geddon).

The Asylum “rarely has cast insurance and has never had a completion bond. So those issues don’t exist for us,” Bales said. “But for the people bigger than us, the bigger companies, I can see the pain.”

That means for many independent producers with mid-range films, an eventual government backstop could be the only viable option – short of a vaccine.

Rep. Carolyn B. Maloney (D-NY), a senior member of the House Financial Services Committee, introduced the Pandemic Risk Insurance Act of 2020, or PRIA, in late May. PRIA and pandemic insurance will be addressed at a subcommittee hearing in mid-to-late July (It was first set for June 26 but postponed). The hope is to pass PRIA by year’s end. But Maloney’s chief of staff Andrew Lowenthal said it needs more support from the Trump administration and Republicans in Congress than it currently enjoys.

Part of the issue is focus as legislators juggle multiple crises, from potential mass evictions to a spike in new infections. So Lowenthal, speaking on the Cinetic panel, urged media and entertainment players to turn up the heat. “You have a far more influence with your members of Congress than you realize. Call them!” The broader the nudge the better, he said, “From the NFL to documentary filmmakers.”

After all, major sports leagues, Hollywood studios, TV networks and stadium owners all want pandemic insurance. “Whether it’s a five-person or a 5,000-person production, you can get folks to pay attention. To see this is not a partisan issue, this is not a geographical issue.” Industry trade groups should also speak up, he said.

PRIA creates the Pandemic Risk Reinsurance Program, a shared public-private compensation structure for business interruption losses from COVID-19 and future pandemics. It calls for the insurance industry to fund 5% of payouts with the government shouldering the rest.

(Maloney, meanwhile, faced a primary challenge this week and has a narrow lead over challenger Suraj Patel in New York’s 12th Congressional District that includes parts of Manhattan and Queens. Absentee ballots are still coming in.)

Insurers, through trade group the National Association of Mutual Insurance Companies, have proposed an alternative to PRIA where the government covers 100% of claims. Called the BCPP (Business Continuity Protection Program), it would provide business revenue replacement assistance to reimburse up to 80% of payroll, benefits and expenses for three months. It’s less adapted to particularities of independent film and TV production than PRIA.

Other countries — Canada, the UK, France — are farther ahead in designing a government backstop for production insurance, but the amounts are limited, in the millions, not billions, said Film Finances’ Ransohoff, and not a realistic model for the U.S.

One executive believes states may be part of the insurance solution. “What I’m hearing is that it’s going to be at the state level and will be somehow related to production, to how much you’re spending in the state… I know that there are some states with commissions that are working on it.”

The question of independent film financing with no pandemic insurance blends into the issue of whether indies could afford coverage even if it’s offered and, regardless, how their slim margins will absorb the extra expense of COVID safety protocols, including higher contingencies.

“When you’re taking a movie to Cannes this week, your German distributor isn’t going to care if what should be a $10 million movie is now a $13 million movie” because of COVID, said one executive.

Passion projects have an advantage. “We see a lot of people being excited and wanting to go back to work,” said O’Shea. “But we are [also] seeing that the talent, director or writer or primary cast are going to be more or less cautious about going on set, depending on the project. … The more passionate they are about the project, the more wiling they are to set a date regardless of COVID.” Ditto with a financier.

Meanwhile, the industry is seeing a migration of production – restarting and new – to countries that opened earlier and have contained the virus better than has the U.S.

“Everyone’s negotiating,” said Jean Prewitt, president of the Independent Film & Television Alliance, which represents the industry in D.C. “Some are going without pandemic insurance. Some are self-bonding. Some are paying for an additional policy out of their own pocket. Whatever is necessary… [to] assure a bank you are covering risk yourself. That you have five cast members and a limited crew … and calculate what that is going to cost you.”

“It’s really shifted the nature of what is being produced and how it will be distributed. People are doing what they need to do to Band-Aid it all, but Band-Aids are not going to be … able to produce a broad range of diverse product at lots of different price points.”

“What is going to be lost is the bigger budget, more elaborate [indie] productions.”

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