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Hollywood icon Tom Hanks and his wife Rita Wilson recently tweeted that they had been diagnosed with coronavirus while in pre-production on an Elvis Presley movie directed by Baz Luhrmann in Queensland, Australia.
Production of the movie has since been suspended indefinitely as Mr. Hanks continues his recovery, according to several news reports.
Amid lockdowns, travel restrictions and government orders to limit gatherings of people, the COVID-19 pandemic has caused disruption and delays to many businesses, not least the movie industry, experts say.
But whether insurance policies will respond to the millions of dollars lost by studios, investors and actors due to the coronavirus outbreak will depend on the terms, conditions and triggers of the various policies in play and may ultimately become a coverage question for the courts, they said.
Universal’s “Jurassic World: Dominion,” Warner Bros’ “The Batman” and Paramount’s “Mission: Impossible 7” are among the movies that stopped filming amid COVID-19 health concerns, according to a March 24 analyst note from S&P Global Market Intelligence.
The situation is changing by the hour and minute, depending on guidance from the World Health Organization and the Centers for Disease Control and Prevention, according to Bob Jellen, Los Angeles-based managing director, entertainment, at Hub International Ltd.
“Everybody has fallen into suit now with social distancing. Every studio in town is shutting down productions. There are about 150 television shows that have been shut down, and somewhere between 100 to 150 motion pictures around the world shut down,” Mr. Jellen said.
TV networks and movie studios are behaving like other sensible employers and changing their plans, said Lee Brenner, Los Angeles-based chair of the entertainment and media litigation group at Venable LLP.
“Right now, international travel is all but frozen. Travel has been discouraged and some companies have suspended production,” said Mr. Brenner.
CBS, for example, recently announced it had suspended production of “The Amazing Race” due to coronavirus concerns, he said.
“They curtailed the cycle so the participants could get home safely,” he said, adding that this is the type of corporate responsibility you want to see.
Everybody has “an obligation to mitigate and to use due diligence to avoid loss,” said Mr. Jellen. Theoretically, an insurer could refuse to cover costs, if it deemed that a policyholder didn’t mitigate a potential loss, he said.
As for insurance coverage, experts had differing views on whether the television and movie industry will be able to recover pandemic-related costs from their insurers.
In the movie industry, coverage varies according to the insurer and the type of policy purchased, and “whether it’s a studio type policy or an independent producer trying to purchase insurance, or a production that is insured specifically,” Mr. Jellen said.
For an independent producer needing insurance for a movie starting in the immediate future, “every insurer is going to want an exclusion for coronavirus,” Mr. Jellen said.
“That being said, the studios do have blanket policies with terms and conditions that have been pre-agreed upon and independent producers may have bought insurance a month or two ago, and they probably don’t have a coronavirus exclusion,” he said.
All production company policies have “a communicable disease exclusion,” and whether it’s SARS or COVID-19, it’s deemed to be a communicable disease, said Matt Lawford, London-based specialist film and television broker, at Chesterfield Group, an H.W. Kaufman Group company.
“Film production companies do not have any cover whatsoever for aborted or additional costs for their shoot being affected by the coronavirus,” Mr. Lawford said.
However, in the last few weeks there have been amendments to the contracts between production companies and advertising agencies that have “passed the responsibility” for these additional costs onto advertising agencies, he said.
“At the moment, some advertising agencies do have cover for additional or aborted costs following communicable diseases, subject to exclusions in advertising agency policies. That is an inherent error on behalf of insurers to the extent that they’ve not covered costs from MERS and SARS going back 15 years,” Mr. Lawford said.
Insurers are now looking to put communicable disease exclusions on to all advertising agency policies with effect from their next renewal, he said.
“If you renewed in January, effectively you’ve got 12 months of cover. If you renew at the end of March, you’ve got days to cover your shoot at which point you’ll have this exclusion applied,” Mr. Lawford said.
For a shoot itself, if the production company and the advertising agency no longer have cover, this means that the responsibility is being pushed back out to the client, he said.
“It is then up to the client to decide whether they go ahead with the filming process or whether they delay any particular shoot. Any additional or aborted cost will be down to them to make good to the agency or production company,” he said.
If a production shuts down or gets delayed due to coronavirus concerns a claim will be tendered to insurers and there will be a period of time while both sides are “figuring out” if there is coverage, said Sarah Cronin, a Los Angeles-based partner at Venable LLP.
Given the wide scale of the pandemic and the fact that a lot of productions are shutting down, the situation will likely result in increasing insurance coverage litigation, she said.
One of the legal issues that will arise is the so-called “force majeure” provisions in business contracts that are triggered when an event, sometimes referred to as “an act of God,” relieves a person from performance under terms of their contract, said Mr. Brenner.
Such provisions can be a defense to a breach of contract claim, he said.
Because coronavirus is not a foreseeable event and not within any party’s control, it is “likely a force majeure event,” he said, adding that increased litigation around this issue will also follow.
Businesses should be looking at their contracts and reviewing their specific insurance coverages to determine how pandemics are treated, the experts said.
If there isn’t a communicable disease exclusion on a feature film policy, then insurers will be relying heavily on force majeure, said Mr. Lawford.
“I do believe big studios will try to recover any of their costs from insurers. Whether they are successful or not is a difficult decision to take. It will be down to the U.S. courts to decide that,” he said.
More insurance and risk management news on the coronavirus crisis here.
Fitch Ratings Inc. on Tuesday added the London market to the list of international insurance markets for which it moved its outlook to negative from stable over coronavirus concerns.