As we pass eight months since COVID-19 was first declared a pandemic by the World Health Organization on March 11, 2020, those in media, entertainment, and the arts continue to grapple with the virus's impact on their business. Companies in the broader media and entertainment industry have adjusted as best they can to life during the pandemic, offering everything from virtual concerts to new, quarantine-special shows. Still, many in the industry have suffered dramatic losses and will continue to experience diminished profitability in the coming months. Companies in the media and entertainment industries often carry a variety of insurance policies and may be looking to these to cover some of their recent losses. Organizations in this position are wondering: Which policies offer the best chance of coverage? How can we find economic relief?
Like most businesses, companies in the media, entertainment, and arts industries will likely look first to their business interruption policy, if they have one, to cover their losses from the past several months. Intuitively, these policies seem relevant to the pandemic, during which business in nearly every sector of the economy has been interrupted. However, even though these policies are often marketed as providing all-risk coverage, they are typically written in such a way that coverage must be triggered by physical "damage or loss." Insurers have taken the position that the virus and associated government stay-at-home orders do not cause any such physical damage or loss, arguing that these terms refer only to structural damage, such as a collapsed roof or a broken window. Insureds take a different view, arguing that "loss" is separate and distinct from damage and includes loss of use even without any damage. Hundreds of cases on this issue have been filed in the last six months; to date, courts have mostly sided with insurers, although there have been several notable exceptions, and no appeals courts have yet weighed in on this issue. Thus, although it is certainly worth reviewing your policy to determine its scope of coverage, insureds should not expect a favorable coverage determination from their business interruption insurer without pursuing them in court.
Two related types of specialty insurance may also be relevant for those organizations that carry them: event cancellation insurance and non-appearance insurance. These policies are most often purchased when organizations want to protect large-grossing events or a set of events (event cancellation insurance), or to insure against the sudden unavailability of a key speaker or performer (non-appearance insurance). These policies sometimes have coverage exclusions for losses caused by viruses or pandemics but could also have been purchased with virus coverage endorsements, or extensions, that cover these circumstances. Subject to these and other exclusions, these policies may offer a promising avenue for recovery for those organizations that carry them. To date, many insurers have agreed to pay for losses under these policies without litigation.
Event cancellation and non-appearance policies may cover isolated events or a series of events, but what about losses stemming from an entire season of adjusted business and production? Media organizations that carry production-specific insurance policies may be covered for some of their costs. Production-specific policies often contain several different sub-parts of coverage, some of which may offer relief from COVID-19-associated losses. For example, some production policies protect against the unavailability of a cast member for any number of reasons, including illness. If production is halted because a key cast member contracts COVID-19, these policies may cover the associated losses. Some production policies also contain an extra expense provision, providing coverage for interruption, postponement, or cancellation of production where certain conditions are met. Unfortunately, some of those conditions may mirror the coverage triggers in business interruption policies, requiring a physical "loss." Nonetheless, media organizations with policies that contain this coverage should review their policies carefully to determine what conditions apply and submit claims to their insurer(s) where appropriate. Production policies will likely not cover the entire panoply of losses caused by the dramatically changed landscape of media production and the broader U.S. economy, but may offer at least limited relief that can help cash-strapped organizations weather the economic headwinds.