Production Incentives

What is E&O Insurance?

E&O stands for Errors & Omissions. Producers (and, by extension, their distributors and financiers) not only face financial risk, but also the additional risk of being sued for the content of their productions. To mitigate this additional risk, producers normally obtain an E&O insurance policy (sometimes referred to as Producer’s liability insurance). Such a policy protects the beneficiaries (producer, distributors and financiers, as the case may be) against lawsuits filed by third parties claiming invasion of privacy, defamation, violation of publicity rights, copyright  and trade-mark infringements, among other claims. The E&O policy will NOT cover the producer for contract-based claims, damaged film stock, bodily injuries, damaged equipment and props, workers’ compensation, third party property damage, etc. That sort of coverage requires a separate insurance policy. The insurer will require the producer to fill out an application form and will often require (depending on the insurer) that a lawyer vet the application and sign off on it. Warning to producers: the answers you provide in the application form are considered representations and warranties and if you fill it in incorrectly (of course, you would never deliberately misrepresent the facts...), you risk being denied coverage if a claim arises.  The insurer will expect the producer to have a clean chain of title before it will issue the policy. The producer must follow standard clearance procedures which, in some cases, may require the producer to obtain a copyright report and, in most cases, will require script clearance and title reports. Sometimes insurers will require the producer to deliver a title opinion (not to be confused with a chain of title opinion) prepared by a lawyer and concluding that the title of the production is safe to use.

By way of example: A producer completes a feature film. The film is released with great fanfare. The next morning, the producer receives a demand letter from a lawyer claiming that the film was based on his client’s original idea and that the production and exploitation of the film constitute an infringement of his client’s copyright. What’s the producer to do? Retain legal counsel and immediately call the E&O insurer to inform the insurer of the claim.