Know your E&O
Errors and omissions insurance is an expense producers can’t even consider trimming from their budgets if they hope to work in the United States. In a land where the right to sue for damages is exercised openly and often, ‘E&O is something you can’t do without,’ confirms Sylvia Strobel, senior partner with St. Paul, U.S.-based law firm Lehmann Strobel. This is the insurance that protects program-makers from claims against the content. ‘No distributor [or broadcaster] is going to take your program unless you have this insurance. It’s a must,’ she adds.
The price for E&O depends on the project’s subject matter, whether all rights, materials and releases have been cleared, and where the prodco is based (rates can be higher for producers living in more litigious states).
Heidi Schuster, senior managing producer with DragonflyTV/Twin Cities Public Television in St. Paul, U.S., says US$2,500 to $4,000 is the average range for E&O on a one-hour TV doc.
Like all forms of insurance, however, the higher the risk, the higher the cost. A lot rides on how well producers do their groundwork before shooting begins. ‘The best advice is to get your releases at the time [of the shoot], and ask for worldwide in perpetuity,’ Schuster says. She recalls one project from her days as a production manager with the Independent Television Service in the U.S. (from 1996 until early 2001) that narrowly averted a legal landmine, because the director did not secure releases at the beginning.
The project was Travis, a Peabody Award-winning documentary about a young boy with AIDS. Director Richard Kotuk died unexpectedly shortly after completing the program, so Schuster stepped in to oversee the paperwork. She soon discovered the film featured several kids in full view at an aids camp and in a hospital from whom no releases had been obtained, including one child whose parents had successfully sued The New York Times for running his photo without permission. Says Schuster, ‘[Those parents] informed me, after I’d sent them a letter trying to get a release, that if I showed their child in this film, I would be sued too. I had to blur the show and send them a copy of it.’
Racing against the clock to make Travis’ premiere airdate, Schuster ultimately secured a few releases, but not all. ‘We ended up knowing which ones we had to blur and blurred them. Then, we made it clear to the insurer what we had done,’ she explains. Not informing the insurance provider, she adds, was too risky an option. ‘If you tell them and they rate it risk-wise and you pay, then you’re covered. If you don’t tell them and John Doe sues you, you’re not covered.’ ITVS ultimately contributed an additional $4,400 towards insurance for Travis. Total insurance for the project rang in at $13,000, or about four percent of Travis’ $340,000 budget. Legal costs amounted to $3,000.
Aside from E&O insurance, Schuster says producers working in the U.S. need to get workers’ compensation, which is usually around two percent of payroll; general liability, which costs a minimum of about $2,500 (calculated using net insurable budget – total budget minus contingency and insurance cost); and videotape negative insurance, which has minimum premiums starting around $500.
Insurance rates began to rise last summer when the stock market dropped, and continued to skyrocket after September 11. Debra Kozee, president of New York-based C&S insurance brokerage, says general liability has increased by 10% to 15% with most carriers, while E&O, which is only carried by a few companies in the u.s., has gone up 20% to 50%. ‘When the insurance companies aren’t making profits from their investments, they have to look to underwriting,’ she notes, adding that total losses are estimated at upwards of $50 billion.
Less than a king’s ransom
For producers fortunate enough to secure full commissions from the bbc or Channel 4 in the U.K., insurance is a non-issue. Clare Healy, head of production for London-based Brook Lapping Productions, explains: ‘If you’re fully funded by these u.k. broadcasters, you don’t put insurance in your budget. It’s their cost, they cover it. They find it’s cheaper to do it as a blanket agreement.’
Aside from these lucky few, however, British doc-makers confront most of the same insurance costs as U.S. producers – workers’ comp, general liability and video negative – but not E&O, which isn’t deemed essential by broadcasters in the u.k. However, if a British prodco plans to film in the U.S. – as is the case for Brook Lapping for Tackling Terror (w/t), a two-hour program that will look at the aftermath of September 11 – separate American insurance is required. Healy notes that Britain has bilateral agreements on insurance with most Commonwealth and eu countries, but not with the U.S.
Healy has also budgeted for one additional type of coverage for Tackling Terror: kidnap and ransom insurance. She explains why she will purchase the insurance for crew members when they film in Kabul and Pakistan: ‘We as a company have always believed that we have a moral obligation to the people who work for us, therefore we have to do everything in our power to ensure they are insured. And, of course, one has to ensure that one can deliver, because these projects are quite expensive.’ She adds that Tackling Terror has tight time constraints, as it has been promised to broadcasters in time for 9/11′s first anniversary.
Kidnap and ransom coverage isn’t cheap. Healy says it will cost about £7,000 (US$10,000) per person for a two-week trip and Brook Lapping plans to send two people. The expense isn’t high as a portion of Tackling Terror’s £900,000 (US$1.3 million) budget, but it’s pricey as an individual item – more than all of the other insurance combined, which Healy estimates at around £10,000 (US$14,500), or 0.8% of direct costs. ‘Insurance premiums for going into risky areas have increased hugely,’ she says. ‘And, there’s no negotiation, you either take it or you don’t. [Rates] depend on the area and on what has been happening. The bombing of a church in Islamabad will put my premium up, but if nothing happens for a month, it might come down again.’
Insurance costs may run a bit higher for various Brook Lapping projects (which include such reputable films as The Death of Yugoslavia and I Met Adolf Eichmann) than for less risky endeavors, but the company saves on legal expenses. Healey, who has 25 years experience in production, handles all standard contracts in-house, including copro agreements and release forms. ‘I am an overhead cost that our company covers,’ she says. Healey estimates legal fees for Tackling Terror will amount to only about .01% of the budget £1,000 (US$1,450), even though the project has 18 partners (Channel 4, France 2 and Germany’s ZDF are among the main financiers). ‘The legal costs on every single contract would be extortionate,’ she notes.
‘Where we have most of our legal costs are situations where you can’t get the rights cleared and you have to go to a lawyer to ensure your risk is minimized and you can get E&O insurance,’ she continues. ‘You take advice as to whether you can use the material. Given the sorts of subjects we do, we often find there are caveats and we therefore have to go under fair dealing or public domain.’
Keep your friends close, and your lawyer closer
Australian production company Hilton Cordell & Associates went one step further than Brook Lapping in reducing legal costs over the long term, by hiring lawyer Ian Collie as a full-time staffer three years ago. Says Collie, ‘I was a lawyer who was interested in getting into the film world and working in documentary. I spoke to Chris Hilton and he took me on as a business affairs person. He realized that since he had quite a bit of production, it was probably cheaper and more efficient for me to do the legals in-house than to farm it out.’
Along the way, Collie learned how to make documentaries and is now a producer in his own right. He continues to oversee the legal side of production, a skill that comes in handy, particularly for projects such as The Shadow Of Mary Poppins – a one-hour documentary about author Pamela Travers, the woman who invented the beloved fictional British nanny – which requires numerous financing and licensing contracts.
For Shadow, Collie first had to option the documentary film rights to Travers’ story, because a biography had been written about the author and the biographer owned those rights. Next, he negotiated with the estate of an artist (now deceased) who had illustrated several books about Mary Poppins, so he could use some of those images in the film. Then, he started talks with various archives for material on Travers and her storybook creation.
Of course, no project about Mary Poppins would be complete without some mention of the Disney film of the same name. Collie says he has already approached the ‘House of Mouse’ about a basic rate for the use of film clips, but because the movie is a musical, music rights are an additional consideration.
‘My mind boggles at how much they’ll charge us,’ he laments. ‘I hazard a guess that we’ll have to go back to the composers, the Sherman brothers, or their music publishers and negotiate separately with them, which no doubt will be an additional license fee. And because it’s such well-known music, one of the big music publishers probably owns it. I’m sure it’s not going to come cheap.’
Shadow has seven financing partners (Australian pubcaster ABC, distrib ABC International, RTE in Ireland, AVRO in Holland, U.K. digicaster Artsworld, CBC Newsworld in Canada and the Australian Film Finance Corporation), each requiring a separate contract. Because the FFC will likely contribute 50% of the budget (now that 50% has been secured on the market), Collie has to ensure that each investor/broadcaster contract is agreeable not only to Hilton Cordell, but also to the FFC. ‘They want to ensure that the copyright of the film is unfettered and has a clear chain of title,’ he explains. The FFC treats film financing as an equity investment, which they recoup from program sales.
Collie estimates total legal costs for Shadow will amount to about AUS$5,000 (US$2,600), as opposed to AUS$10,000 to $15,000 (US$5,300 to $8,000) if the company used outside counsel. The budget for the project is around AUS$400,000 (US211,000).
On the insurance side, Collie has budgeted about AUS$6,000 (US$3,100) for standard coverage. Australian broadcasters, like their counterparts in the U.K., do not generally ask for E&O, and Collie rarely buys it. The FFC does require a completion guarantee, however.
‘If we go over schedule or over budget, the completion guarantor will step in and take over the running of the project,’ Collie explains. A completion guarantee costs about AUS$8,000 (US$4,200) for a one-hour documentary.