Industry trade groups last week introduced a new, optional approach to negative insurance coverage for commercial and music video production.
A team of representatives from the Association of Independent Commercial Editors (AICE), the Association of Independent Commercial Producers (AICP) and the American Association of Advertising Agencies (4A’s) conceived this new option, which entails a separate policy purchased by the editorial company. That policy would cover the negative from the time the editorial house takes possession of the negative until final delivery. The insurance would be added to the AICE bid form as a line item.
Typically, the production company’s contract with the agency represents total negative insurance coverage until final delivery. But a review of negative insurance-prompted in ’97 by a New York State Department of Taxation ruling that permitted
direct payment by the agency to the editorial company (SHOOT, 2/21/97, p. 1)-revealed an ambiguous scenario where there may be a lapse in negative insurance coverage during postproduction.
"If an actual claim were made [for a negative damaged in editorial], none were very sure it would be paid, even though the production company contract said it would," explained 4A’s broadcast production committee chair David Perry, who is executive VP/ director of broadcast production at Saatchi & Saatchi, New York. "Now there is no question that editorial is covered. … This is a smart, low cost solution."
"The ambiguity [surrounding coverage] left a very high level of discomfort for agencies and their clients," agreed AICE president John Palestrini, CEO of New York-based The Blue Rock Editing Co./Palestrini Post Production. "We are all taking our heads out of the sand and addressing something that had to be addressed. In reality, it was unclear whether editorial houses were covered. With the new option, we can make everyone feel a lot more comfortable."
"We were not convinced there was a gap [in coverage]," said AICP president Matt Miller. "We did see gray areas. … This specifically clarifies and addresses the issue."
Miller explained that when the direct payment option was initiated, there was also a perception at numerous agencies that insurance coverage was in jeopardy. "That was not a correct perception," Miller said, "but you had less [direct payment] compliance." He anticipates that this negative insurance clarification will prompt wider use of the direct payment option.
Miller identified additional benefits: "The production company is often not involved in the selection of the editorial company. This alleviates responsibility for a supplier they are not selecting," Miller said.
Perry encouraged agencies to use this policy, pointing out that by declining the coverage, an agency might be exposing itself to liability.
Scott Taylor, senior VP of bicoastal insurance firm Taylor & Taylor-and an associate member of AICP/East-was an active participant in the effort. He explained that in addition to reducing the chance of liability, the new option also clarifies where the risk ends for the production company and starts for editorial.
Presently, the new editorial coverage is expected to cost agencies and clients in the neighborhood of one half of one percent of the total editorial portion of the budget. A few entertainment insurance carriers already offer this coverage. More are expected to come on board.
Taylor explained that the challenge was for the group to "change the way carriers look at the business." He expected that now other carriers would follow. "We hope this will spark some competition," Palestrini added.
Some AICE chapters were looking into finding additional insurance carriers than those identified at press time. For instance, AICE/LA chapter president Greg Laube, CEO of Santa Monica-based Brass Knuckles, was reviewing the proposed policies as well as alternatives with other AICE members. "I’m not sure [the available policies] offer the best coverage," he said.
"We [who created this new negative insurance approach] feel confident this is this is the proper direction to take," Palestrini said, adding that "there will be a period of adjustment; there will be questions." Letters have been sent to AICP and AICE members, explaining the new approach and including required riders. Forms can also be downloaded from www.aice. org or www.aicp.com/benefits.
The core team that helped initiate the change following the direct payment review included: AICE/East board member Bob Friedrich, controller at First Edition, New York ; AICE/East board member Mitch Garelick, controller at New York-based Horn/Eisenberg; Palestrini; David Rosen, CFO, Palestrini Post Production; and AICE national and AICE/East executive director John Held. Perry and Bob Nelson, executive VP/director of broadcast production, Lowe & Partners/SMS, New York, were the key participants from the 4A’s broadcast production committee. AICP representatives active in the effort were Miller; AICP vice chairman Al Califano, executive producer of bicoastal OneSuch Films; and Bob Sacks, partner in New York-based law firm Steinbrecher & Ross.
