COVID-19 insurance considerations

Generally speaking, most commercial insurance policies will not respond to a business interruption claim from a pandemic because typical business interruption coverage usually requires that some type of physical damage prevented access to your place of business (i.e., if a fire caused the shutdown of your premises).

However, some insurers in Canada appear poised to pay COVID-19 claims under the Civil Authority coverage on production policies. If you had a production that shut down due to the pandemic and you incurred costs as a result, talk to your broker about whether your policy may cover the specific circumstances of your production and whether you should be making a claim with your insurer.

It is likely that production insurance rates will increase in the future. Consult your broker to understand the impact on insurance costs for your production.

Insurers are adding COVID-19 or “communicable disease” exclusions to new production policies, which means that future claims related to COVID-19 will not be covered by new policies. Your broker will be able to advise you about the different types of exclusions that might apply to your production and discuss the risks that your production might face going forward.

There are no barriers to obtaining an insurance policy for your production as you normally would. Once productions are permitted to re-start, your insurance policy should cover your production with respect to all normal risks other than COVID-19 and/or communicable disease.

We recognize that the COVID-19 exclusion is a critical issue for producers – perhaps even an existential one. Producers are now faced with shouldering the entire financial risk of future COVID-19 losses, not to mention any uninsured costs of the current shutdown. We know that companies are deeply concerned about their ability to restart production with this amount of risk.  The CMPA is looking to develop a made-in-Canada solution to this problem. We have been examining proposed solutions in other jurisdictions, such as government-backed plans announced in France, and similar programs being considered in the UK, Holland, Australia and other territories. Other potential areas we are considering include tax credits, shared risk pools, or government liability protections.

The lack of insurance for COVID-19 puts the risk associated with subsequent production delays or shutdowns onto producers. This will have an impact on financing contracts, bank loans, and completion bonds. These arrangements may become more challenging as financing partners become increasingly risk-averse.

Having a plan to manage the uninsured risk of future COVID-19-related shutdowns will be a critical part of production in the near term. Producers should expect to take additional measures to assure financing partners that the risk is being managed as effectively as possible.  Here are some recommendations to position you to speak with your financing partners about risk management:

– Consult your bank or completion bonder about risk management measures that can be taken to help offset the insurance risk.
– Consider setting additional contingency and/or interest reserves to account for subsequent shutdowns.
– Develop written health and safety protocols to minimize the risk of infection or exposure to your staff, cast and crew. Industry protocols are being developed now and will be released in the near future.
– Put practices in place to ensure that you follow all health orders in the jurisdictions in which you plan to film.
– Develop a plan for how you will manage any subsequent production delays or shut-down orders.
– Consider whether you can build additional flexibility into your contracts with buyers, locations, facilities, equipment and cast and crew to account for potential disruptions in the production schedule.
– Pay close attention to force majeure clauses in all agreements and look at whether they provide you with the necessary flexibility on the agreement terms and delivery dates.

Developing a set of health and safety practices and policies are a critical element of any risk management strategy for producers; provincial regulations, in fact, require employers to maintain health and safety programs. COVID-19 Industry Best Practices are being developed in British Columbia and Ontario cooperatively by the CMPA, US studios, unions and guilds, film associations and other industry stakeholders. These guidelines will be released in the near future. We recommend that producers use these guidelines as a starting point for developing detailed protocols that are specific to your own operations and productions.

With or without individual company protocols, all employers are obligated to follow all relevant health orders, and we strongly encourage producers to follow all health and safety recommendations from the provincial and federal authorities, workers compensation boards, and industry safety associations.