You will need up to five different types of insurance for your production. Production insurance/general liability, equipment insurance, Workers Compensation Insurance, and completion bond insurance are purchased during pre-production. E&O insurance is purchased prior to the picture’s distribution. You must purchase insurance because your production company is contractually committed to do so by the companies from whom your production company rents equipment. You are also required to do so by the jurisdictions where your production company films and the unions to which the production company is signatory. Last but not least, you need to have a way to pay for and limit your production company’s financial losses.
Production/General Liability Insurance
Production/general liability insurance will insure your production against claims related to your production company’s filmmaking endeavors in the U.S. for up to one year. This insurance will cover damages to locations, accidents on the set or in the production offices involving non-employees of the production. It does not provide coverage for auto related accidents.
Equipment insurance provides coverage for the film equipment. The companies from whom your production company rents equipment will tell you how much coverage they require. Be sure that your limits are high enough, since you do not want to be out-of-pocket on replacement costs or repairs to expensive equipment.
Workers’ Compensation Insurance
Each state requires that you provide insurance coverage on behalf of employees, as will the unions if your production hires their members. Workers Compensation Insurance covers medical care and wage replacement for employees injured at their place of employment. The cost of Workers Compensation Insurance depends on how many employees are being insured and previous claims filed against the production company.
Completion Bond Insurance
A “completion bond” is a form of insurance that guarantees against the picture not being finished or completed on budget. I highly recommend that you purchase this insurance if you can get bonded. By “bonded” I mean that an insurer is willing to insure your production. Completion bonds are expensive. The cost is approximately 5% of your production budget—more if you are producing a low budget picture. Regardless, you must incur the expense if you are contractually bound to do so by a distributer or other party, and should if your picture is financed via private equity. Please refer to the “Studio Production Financing and Distribution Agreement” section of this chapter for additional information on “Completion Bonds.”
Errors & Omissions Insurance
The picture’s distributor will require you to purchase E&O insurance, which insures against copyright infringement, idea theft, plagiarism, trademark infringement, defamation, and right of privacy claims. The insurer will need to review your chain-of-title documents, a copyright report, screenplay clearance report, and a title report (see below) prior to agreeing to insure your production. Do not rely on the distributor providing an advance large enough to cover this policy—budget for it. The cost varies depending on the coverage you are seeking and the length of coverage. A policy that covers you in perpetuity will cost more than one that only provides coverage during a specific term.
The insurance carriers and distributors of your picture will require that you secure a copyright report, title report, and screenplay clearance report. Make sure to budget for them.
Screenplay Clearance Report
The screenplay clearance company report will point out any elements in your picture that might cause you to be sued for copyright infringement, trademark infringement, or invasion of privacy. The screenplay clearance company reads the screenplay and provides you with a breakdown of all of the names (characters, business, and organizations) addresses, phone numbers, products, music, artwork, etc., that may cause you to end up in legal hot water. The screenplay clearance company usually suggests alternate names, addresses, and phone numbers, and will point out when you need to secure permission for a use. You need to order screenplay clearance reports during pre-production, early enough you to make the requisite changes.
The copyright report will help the E&O insurance carrier, your picture’s distributor, and you to determine whether your picture is at risk for a copyright infringement claim. The company that writes the copyright report determines the copyright status of your screenplay and motion picture by researching the chain-of-title documents in the possession of the U.S. Copyright Office, internet and other databases. The copyright report is especially helpful when your screenplay is based on pre-existing material, since it can point out gaps that you may need to remedy and rights that you may need to acquire.
The title report will serve to inform the E&O insurance carrier, distributor, and you regarding the risk of trademark infringement. The company that researches the title report will do a search of the U.S. Patent and Trademark Office, internet, state records, newspapers, and other databases to determine whether the picture’s title is available for use. The title report will include a list of federal and common law trademarks that are in conflict with your picture’s title.