As partners at Los Angeles-based Donaldson + Callif, Lisa Callif and Christopher Perez help their clients apply for errors and omissions insurance on a daily basis. Here’s their top seven “preventable pitfalls and mistakes” to watch for.
“I don’t need E&O until I get distribution.”
While sometimes that’s true, it’s definitely not always true. It’s especially not true for non-fiction projects that are controversial or docs or narrative films that are based on true stories where not all of the rights have been obtained. Worst-case scenario – you’re in development on a biopic film and you don’t have the life rights. You issue a press release. The next day the subject’s lawyer sends you a “cease and desist” letter saying you can’t make your movie.
Well, legally he can’t stop you, but an insurance company will likely view the receipt of a claim letter as posing too high of a risk to insure. This could prevent you from getting insurance and potentially make your project unviable.
Lesson: Get E&O before there is any publicity about your film.
Filling out the application incorrectly
The E&O application can be daunting if you’ve never filled it out before. But it’s important to take the time to understand it and fill it out correctly. Did you get a warranty of originality from your composer? You should have, but if you didn’t, don’t say you did. If there’s a copyright infringement claim related to the score and your composer didn’t represent that the score was original to him – no insurance coverage. The list goes on. Innocent mistakes can cost you coverage.
Lesson: When in doubt, ask your lawyer how to fill out the application, or even your broker.
Intentionally omitting information from the application
This is a variation on the above. Sometimes a producer will make a mistake, or sometimes he doesn’t want to disclose something for fear of not getting coverage. Not a good idea. When in doubt, disclose. If you are denied coverage early, you can likely fix the situation. If you are denied coverage after a claim is filed, you are likely going to be SOL.
Lesson: Be honest!
Not disclosing claims to the insurance company
Let’s say you get a cease-and-desist letter from an attorney who claims you didn’t secure permission from her client for the use of her name and likeness in the film. A cease-and-desist letter will always be something you need to report to your broker, who then must notify the insurance carrier. Usually the insurance company will allow your transactional attorney to make the first contact with opposing counsel to resolve the issue, but it’s the insurance carrier’s decision to determine which attorney handles any “claim” that comes in. If you don’t disclose the claim, or if you disclose it too late, then the insurance company may decline coverage.
Lesson: Read your insurance policy to find the definition for a “claim” that must be reported. Whenever a “claim” comes in, notify your broker immediately.
Thinking that E&O covers contract claims
Your E&O policy will cover claims related to copyright, trademark and personal rights, such as defamation, libel, slander, the rights of privacy and the right of publicity. It does not cover breach of contract claims. Let’s say you entered an agreement with your director of photography to provide a credit in the main titles, but you decide not to credit him at all. If he sues for breach of contract, your E&O policy will not cover that claim.
Lesson: Be aware that contract claims are not covered by E&O.
Accepting a higher deductible or lower limits than a distributor will accept
Insurance companies are sometimes hesitant to quote policies for films they think will attract claims and, consequently, defense costs. Some insurance companies may be willing to quote policies with a higher deductible for either (a) any claim related to the film or (b) a claim coming from a specific individual or rights holder. However, most distributors will require an E&O policy with a deductible of no greater than $25,000. Sometimes you have no option but to accept a higher deductible from your E&O carrier, but you should expect a negotiation with your distributors if that’s the case.
Lesson: Try to keep the deductible at $25,000 or lower if possible.
Not selecting a broker who is experienced in non-fiction programming
You need to enlist the services of a broker who has experience with non-fiction programming so that they understand the kinds of issues that might arise. While your broker doesn’t need the expertise of a lawyer, your broker should still have a basic understanding of the law on copyright, trademark and personal rights.
Lesson: Ask experienced non-fiction filmmakers who they use as a broker for their projects, or ask your clearance attorney who he or she recommends.
Lisa Callif and Christopher Perez are partners at Donaldson + Callif, a Los Angeles-based law firm representing independent producers of film, television and web-based content with an emphasis on all clearance matters.