For the entertainment industry insured, cast insurance covers loss in the event that a production is delayed or cancelled as the result of the injury or death of a lead actor, among other things. In the pantheon of insurance products, cast insurance may well be the subject of the fewest written judicial opinions. Nonetheless, two recent decisions have addressed issues which should be of interest to entertainment industry policyholders.
The first is an opinion issued last summer in Alta Vista Productions, LLC v. St. Paul Fire & Marine Insurance Company, concerning the film “The Expendables.” During preproduction, Jason Statham’s physician discovered that he had a growth on his vocal chords that required surgery, resulting in a delay in production. A post-surgical exam then suggested Statham might need additional treatment, and Alta Vista put production on a further two-week hiatus to mitigate any losses if it had to halt production in progress. Alta Vista tendered a claim for the initial delay and the hiatus to St. Paul, its insurer, under policies that covered the cast during preproduction and principal photography. St. Paul denied coverage for the hiatus and Alta Vista sued.
St. Paul moved for partial summary judgment on the grounds that the production policy did not provide coverage for a self-imposed hiatus. The policy provided coverage for loss “that results from any described artist who is prevented by their death, injury or sickness from commencing, continuing or completing their duties or performances in a covered production,” and included an exclusion for losses resulting from the insured’s own intentional acts. St. Paul argued that coverage was barred by both provisions because Statham was ultimately able to perform, and because the producers halted production of their own accord. The district court rejected both arguments, emphasizing that Statham’s condition was inherently unpredictable, and that the policy expressly required the producers to mitigate any damage in the event of a potential loss. The only issue for a finder of fact was whether instituting the hiatus was reasonable and otherwise consistent with the policy.
Earlier this year, the California Court of Appeal decided Capitol Films U.S., LLC v. Aon/Albert G. Ruben Ins. Svs., Inc., which arose out of an injury that Samuel L. Jackson suffered prior to principal photography on the film “Black Water Transit.” At the insistence of its insurer, USSIC, Capitol recast Jackson’s role and commenced principal photography, although it made a claim for costs resulting from production delays. USSIC filed a declaratory relief action against Capitol in November 2007, and the parties later settled the claim.
More than two years later, Capitol filed an action for professional negligence against Aon, its broker on the USSIC policy. In short, Capitol claimed that Aon should have procured a policy which covered preproduction injury to an “essential element” of the film such as Jackson, but had failed to do so. In the absence of such coverage, Capitol was forced to go ahead with production, rather than abandoning the film and recovering its investment. Aon demurred to the complaint on the grounds that the relevant two-year statute of limitations barred Capitol’s claims. Capitol had acknowledged during the USSIC action that it incurred more than $10 million in preproduction costs, and was thus injured by USSIC’s May 2007 refusal to permit Capitol to abandon production. Capitol and Aon had since entered into a tolling agreement regarding the claim, but not until October 2009, more than two years after USSIC’s decision.
The trial court sustained two successive demurrers by Aon, the second without leave to amend. The court of appeal affirmed, emphasizing that Capitol knew of any defect in coverage in May 2007, and that it was injured by any negligence on Aon’s part at that time. Again, since Capitol conceded that it incurred these losses more than two years before entering into the tolling agreement or filing its action, it could not cure the defect in its complaint and the court of appeal upheld the dismissal.
The Alta Vista Productions and Capitol Films opinions offer a rare glimpse into the problems that can arise in the context of cast insurance claims. The good news in Alta Vista is that a preemptive stoppage in production may properly be covered, even if the cast member is ultimately able to perform. The Capitol Films opinion offers, by contrast, a cautionary tale regarding the risk of coverage gaps, the need to enter into tolling agreements before the time lapses on a potential claim and the danger of judicial admissions. To the extent that both opinions are instructive in these regards, this is a positive result.