Umbrella Insurance for the Entertainment Industry

Some professionals in the entertainment industry may unsure what an umbrella policy is or what it covers. I will explain the basics of Umbrella or Excess Liability Insurance and the benefits to your company.

When you are outside and there is a light rain or breeze you generally don’t need or want an umbrella. However, if it is pouring down rain with high winds, you take your umbrella. An Umbrella Insurance policy works much the same way.

Umbrella Insurance provides extra protection or limits above the liability insurance you currently have. An Umbrella Insurance policy protects you from losing the entirety of your resources and assets in the event of a large claim. Umbrella Insurance provides limits above your primary commercial insurance program.

Here is an example: A production company leased a studio for the filming of commercials. During filming, part of the rigging fell on an employee of one of the advertisers causing major injuries. The employee’s medical expenses were $750,000 plus an additional $200,000 for two years of lost work. The production company had a primary commercial liability policy with limits of $500,000 but also had an Umbrella with a limit of $1,000,000. The Umbrella policy covered the excess $450,000 of the claim.

It is true that Umbrella Insurance may not be for every firm, but if you are building financial resources for your company’s future, Umbrella coverage needs to be part of the plan.

What is Extra Expense Insurance Coverage?

A typical property insurance policy will cover the cost to repair or replace buildings or equipment.  However, it will not cover extra expense a business is likely to experience during the time period from the occurrence of the loss to the resumption of the business operation.

According to the International Risk Management Institute, “Extra Expense Insurance is commercial property insurance that pays for additional costs in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss”. If you are operating a business that cannot afford to stop production for any period of time, Extra Expense Insurance is likely right for you.

Claim example:

There is a fire in your production building and you are required to temporarily share space at another location. The expenses you incur, including sending out notices to your clientele to notify them of the change, the cost of renting the temporary space and equipment, the cost of staff sharing, the cost of utilities as well as the cost associated with setting up the new phone lines to receive calls from clients, are all covered under Extra Expense Insurance coverage.

These types of excess expenses must be incurred to avoid or minimize the suspension of business due to a covered cause of loss, and can include repairs and replacement of property as well as the restoration of lost information. We recommend Extra Expense coverage for all our clients. Limits can be adjusted according to need. 

The Value of Replacement Cost Coverage

Most production companies, and related businesses buy insurance to cover the repair/replacement of loss of damaged property, cameras, production equipment and office equipment. Generally speaking, insurance companies do a good job of managing claims and helping the owners get their property back to a pre-loss condition. One important part of the insurance process is to understand the difference between Replacement Cost (RC) and Actual Cash Value (ACV) coverage.  Let’s start with definitions of each:

Replacement Cost (as defined by the International Risk Management Institute)

A property insurance term that refers to one of the two valuation methods for establishing the value of most of the insured property for purposes of determining the amount the insurer will pay in the event of loss. It is usually defined in the policy as the cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation.

Actual Cash Value (as defined by the International Risk Management Institute)

ACV is typically calculated one of three ways: (1) the cost to repair or replace the damaged property, minus depreciation; (2) the damaged property's "fair market value"; or (3) using the "broad evidence rule," which calls for considering all relevant evidence of the value of the damaged property.

When you suffer a loss of equipment you want to have the funds to replace it, as close to the actual item cost as possible. Replacement cost does that. This is especially true for companies that have expensive production equipment. We will always recommend replacement cost coverage.

Is there ever a time when ACV would be recommended?

The only time we might consider ACV is if there is such a unique building or piece of equipment that the insurance company might only offer ACV, or if the cost of replacement cost is so expensive that it is not cost effective.  

The good news is today, most insurance companies have reduced the cost of RC to the point where it motivates the buyer to not even consider ACV. Considering the high value of production equipment, cameras and specilaity equipment, RC coverage is important.There is little doubt that RC provides the most positive claims experience.  So unless cost becomes the obstacle, RC is the preferred way to go

Certificates of Insurance

If you rent production equipment or shoot on someone’s property, there is a good chance you will be required to provide a certificate of insurance. Here are a few things to remember about certificates of insurance:

What is a certificate of insurance?

A document issued by an insurance agent/broker that is used to confirm the existence of insurance coverage. The document provides the effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability.

Is there a cost?

A certificate of insurance does not cost anything to issue.

Can certificates of insurance change coverage?

No, certificates of insurance cannot modify insurance coverage. Certificates only provide information about policies that are in place. Certificates of insurance are designed to be informational. That is, they are not intended to confer any rights on the insurance company, policyholder, or the certificate holder.

What is usually on a certificate of insurance?

• Name of insured
• Company to which the certificate is issued
• Insurance company
• Policy dates
• Limits
• Type of coverage
• Any special policy terms
• Additional insured (with limitations) 

Additional things to remember

• Certificates issued incorrectly don’t necessarily bind the insurer.
• Additional insured issues must be addressed on the actual policy.
• When you receive a certificate, do not just file it away. Read it to see whether it complies with the contract’s requirements. If it does not, then do not accept it.

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TEN CLAIMS REDUCTION IDEAS

TOP TEN CLAIM REDUCTION IDEAS

Want to reduce claims? Try some of these ideas. 

1.    Spend the time to double-check the inventory on the returns to lessen the L&D.

2.    Treat it like you own it. Make sure the person who is dealing with very valuable equipment has the experience to use it.

3.    No Slurpees! – Never leave the truck unattended. A white box van on the street screams out, “Steal Me”.  There have been claims where the PA went in for a Slurpee and the truck was gone. Or the $15,000 camera in the van was stolen.

4.    Remember, Separate Occurrences follow as they happen. Just like your car insurance, if you smash the side of the car in the morning and wreck the rear at lunch, it is two separate occurrences and subject to two separate deductibles.

5.    Mitigate the Loss – act as if you didn’t have insurance. It will help you later when you go make the claim.

6.    A great film is when nobody gets hurt. Start every day with the safety meeting

7.    Repeat After Me – Counter to Counter. When shipping equipment, repeat the mantra as you go to the airline counter to ship and continue it when you pick up at the other end.

8.    Make sure you have two sets of eyes when backing up the 5- ton truck. Think of all the blind spots. When backing the truck out of the location parking lot, make sure there is someone outside the truck that you can see in your side mirrors watching your rear-end. Also think about this when pulling into a gas station and the roof.

9.    A little video goes a long way. When locking a location, take a video of the all the areas that the company will use. If or when a claim arises the video is proof that the crack in the wall was there before your crew set foot on the premises.

10. I am convinced that shows with good craft services have fewer claims. Don't skimp on the healthy snacks and munchies. A happy crew is a safe crew.

      While I can't guarantee you won't have any losses, you will have fewer losses and you will have a happy crew and production company. When everyone is happy you have a better time, and tend to get things done on time and budget. 

John Hart Insurance Coverage for Key Artists

The success or failure of your production is often tied to the artist or talent that you have selected. Usually the bigger the artist the bigger the risk and profit potential. Many artists also have a large fan base which can bring in additional revenue for the production. Insuring your investment often is a good way to protect your investment. We understand it is important to protect your assets and offer a variety of insurance products that address your issues.

John Hart Insurance offers cast insurance that protects your investment when the unexpected illness, injury or even death occurs. Cast insurance covers additional costs that may arise if a production loses a cast member, director, or scheduled personnel. Call John Heart Insurance today for more information. 

Completion Bonds

Many times some investors will have a contract that requires  the production to be completed. Completion Bonds are the instrument used to protect  the investors.

A Production Completion Bond monitors the production and  steps in if your production can’t be completed or is going over budget. These bonds are written by a special group of bonding companies. The bonding company will finish the film, so that it can be released allowing the investors the opportunity to recoup their investment and or profits. The bonding company can’t guarantee the production will be a “success” but rather it will be completed.

John Hart Insurance does not write the Completion Bond.  We work very closely with the Bond company making sure the production is sufficiently covered and professionally underwritten.