INSURING THE BLOCKBUSTERS

Rough Notes, May 2005 by Zinkewicz, Phil

The entertainment unit of Fireman's Fund writes coverage for Hollywood's big hits

When the Big Night finally arrived on February 27, members of the film industry gathered at the Kodak Pavilion in Los Angeles for the annual ritual that we have come to know as the Academy Awards, or Oscar Ceremony. First there was the traditional walk along the red carpet, during which actresses paraded their avant garde gowns and sometimes gaudy jewelry. Male actors sported tuxedos that were tuxedos in name only, and reporters from the entertainment and fashion fields shoved microphones into the plastic, smiling faces of nominees to elicit bland remarks about how they were feeling that night, as if they were feeling anything but sheer terror.

For actors, directors, producers, writers, composers and technical talent, a lot rides on that night. An Oscar can mean that an actor's failing career will be turned around, that a director will be able to raise the money for that next project or that a producer will see box office success to warm the cockles of the hearts of anxious investors.

But for the Novato, Californiabased Fireman's Fund's entertainment unit, there was no tension at all. Fireman's Fund was a shoe-in that night because, no matter what movie won the Oscar for best film-The Aviator, Finding Neverland, Million Dollar Baby, Ray or Sideways-the winning production had already been insured by Fireman's Fund.

"That's not surprising," says Lauren Bailey, head of the entertainment unit for Fireman's Fund. "In fact, we had provided insurance coverage for 16 contending films, which together garnered 61 of the 113 nominations in all categories. Our insureds captured all five nominations for best film, best lead actor and best supporting actor as well as four out of five for best director and best supporting actress."

Bailey says that Fireman's Fund is the premier international insurer for the entertainment arena, particularly the motion picture industry. "Without insurance, motion pictures as we know them today would be impossible to make, especially when a simple loss could easily cost upwards of $500,000 a day," she says. "Fireman's Fund is comfortable with that kind of risk because we've been the top insurer of the entertainment industry since the days of the silent screen. Back in those days, all that Hollywood needed was protection against fire damage to sets and props. Today, we provide a full range of sophisticated insurance protection, including the latest in special effects for a modern blockbuster."

Bailey and Fireman's Fund Underwriting Manager Suzy Wozniak say that, despite the glitz and glamour associated with Hollywood, this type of coverage is run strictly according to the business principles of any other line of insurance, and both had significant experience in the traditional property and casualty insurance industry before entering the entertainment insurance world. However, they admit that entertainment insurers often need to display flexibility and imagination in determining how to control loss and hedge risk.

Rats, corn, and more

For example, they say, in the classic Indiana Jones and the Last Crusade, hero Harrison Ford found himself in a catacomb crawling with rats, about 2,000 of them. "Few people realize that such a scene is always reviewed in concept by underwriters before the film begins production," says Bailey. "The producer wanted to know whether Fireman's Fund would pay for the delay in filming if something happened to the rats before the scene was shot. Since a day's filming can easily run to between $200,000 and $700,000 in costs-location, actors, extras, equipment, buildings, etc.-Fireman's Fund underwriters asked the producer how many rats they could lose and still film a reasonable scene. The director believed that camera angles could be used to work with as few as 1,000 rats. With that, we wrote the world's first insurance policy with a 1,000-rat deductible."

In the film Field of Dreams, a cornfield was the center of the action. Says Bailey: "Unfortunately, 1988 brought a terrible drought to the Midwest. So little rain fell in Iowa that the corn that was needed to fill up the field was threatened. Unless something was done, the film might even have to be canceled, which would prompt a major payoff."

Here's where the insurer's underwriters' imagination and flexibility came into play. Fireman's Fund paid $200,000 to install an irrigation system in the cornfield so that corn could grow as high as the proverbial elephant's eye. "We also dug a trench in front of the corn so that, when the actors stood in it, the corn appeared even higher," says Bailey.

It's not unusual for Fireman's Fund to take a hand in controlling losses. For the New Line Cinema release of Pleasantville, the 1950s-era town was actually constructed in the parking lot of Malibu Creek State Park, in the Santa Monica Mountains of Los Angeles. Fireman's Fund insured the entire set, which was valued at $6 million, against "all risks," including brushfires, which are common in this mountainous terrain. However, underwriters required adequate brush clearance, water supply and access to the set before taking on the risk.