Insurers scramble to add #MeToo to Hollywood risks

The publicity surrounding the "#MeToo" sexual harassment scandal has irrevocably damaged countless Hollywood reputations. Among the many famous faces you won't see strolling down the red carpet at this year's Academy Awards ceremony on Sunday, March 4, include Harvey Weinstein, Kevin Spacey and James Franco.

And it has also shaken numerous high-end insurance companies that provide coverage for the film and entertainment industry, which is expected to gross $50 billion a year by the end of the decade. The insurers, which include Allianz, Chubb (CB) and the Lloyd's of London syndicate, cover virtually every movie, music video, TV series and even the "indies," or independent films. This production insurance covers accidents and injuries to cast and crew, damage to filmed footage, as well as location delays caused by everything from floods to terrorism.

But in one important regard, almost everyone has dropped the camera, so to speak. A little-known clause called "Death and Disgrace" was once an important feature of film insurance, but it subsequently "went by the wayside," for key individuals, according to Derek Townshend, film and media executive with Chesterfield Insurance Brokers, which works with Lloyd's. "Celebrity scandals are no longer covered by production insurance," he said. Then again, he added, they probably will be soon.

But in many instances, that's not good enough. Filmmakers lose millions of dollars when a star such as Kevin Spacey falls out of favor due to multiple allegations of having harassed and created a toxic environment for men who worked on the set of his hit Netflix (NFLX) series "House of Cards." Filming of the show's sixth season was shut down in October when these accusations became public, costing Netflix $39 million, but the show is now scheduled to resume production with different actors.

Spacey's alleged indiscretions also cost well-known producer and director Ridley Scott millions of dollars. Spacey, who had been cast in Scott's "All the Money in the World," was replaced on short notice by actor Christopher Plummer who had to reshoot all of Spacey's scenes. In the movie, which tells the infamous story of the kidnapping of billionaire J. Paul Getty's grandson, Spacey played J. Paul Getty. 

One such sign of the necessitated extra cost was that actor Mark Wahlberg garnered $1.5 million for reshoots, but co-star Michelle Williams earned only $1,000.

Harassment charges against filmmaker and actor James Franco not only cost him power and prestige, but resulted in his getting Photoshopped out of a  Vanity Fair magazine cover, ultimately leaving one person in the picture with three legs and another with three hands.

The film industry can probably endure mistakes like these given its enormous profits, but it appears to have sparked a lot of anger among filmmakers who feel their losses should be covered. One insurer declined to comment for the record, saying "the wounds on this one are still too fresh."

Insurers are already under pressure to make changes. Contracts for future movies will be renegotiated, and the "Death and Disgrace" clause probably will be reinserted. Insurance coverage for the film industry is regarded as essential due to the unexpected risks moviemaking can endure. 

One such aspect is how the director revises the original script. "I've almost never seen a script that didn't change," said Townshend, whose film credits include insuring "Three Billboards Outside Ebbing, Missouri," nominated for seven Academy Awards and the winner of top honors at this year's British Academy Film Awards, or BAFTA.

Film insurers and brokers are well-rewarded, netting about 1 percent of a film's total budget. Brokers like Townshend's Chesterfield earn slightly less than a third of that for arranging the transaction between the insurer and the film company, and then working closely with the producer and director to ensure that all goes according to plan. Total annual revenue for this segment of insurance is close to a half-billion dollars.

But they work hard for their money. "We have to read the next day's script the night before. With film companies shooting all over the world, it becomes a 24-hour-a-day job," said Townshend, who has been in the business for 30 years, working out of London.

A standard insurance package usually covers travel, as well as inclement weather, terrorism and war since filmmakers work worldwide. Compensation for stars, stunt people and workers who are injured is also included because cast and crew often have to put themselves at risk to shoot a scene. 

In one instance, a camera assistant was killed when she was hit by a train while filming a scene on a railroad bridge for the movie "Midnight Rider," about the life of singer songwriter Gregg Allman of the Allman Brothers Band. Her parents sued and won $11.2 million.

While the "#MeToo" movement and the insurance complications that come with it are relatively new, problems with stars and producers have been around for years. Due to the danger of losing the services of a star, just about anyone with a leading role has to undergo a complete medical exam before filming begins. Townshend recalls one actor who refused to do it and, because of his importance, Chesterfield had to negotiate a separate contract with him, including an additional premium.

Some actors might be unwilling to do so because they don't want to hear any bad news. "John Wayne found out that he had cancer during an exam for a film," recalled Townshend. "The Duke" eventually lost his life to stomach cancer.

  • Ed Leefeldt

    Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.