On April 9, 2020, Sarah Cronin was quoted in CNBC regarding upcoming litigation between Hollywood studios and insurance companies as a result of COVID-19 shutting down productions and delaying the release of films in theaters.
According to the article, studios paid an estimated $400 million in premiums last year to cover “unforeseeable events.” Premiums are typically between 0.6% and 1% of a film’s budget, which means they’re spending as much as $2 million on insurance for a $200 million, big-budget picture.
Insurance companies are seeing a growing influx in claims and are trying to figure out which ones they can deny.
“They’ve never had so many claims, which is I think what’s unique about this situation,” said Cronin. “This is one thing affecting people all over the world, and insurance companies are getting tens and tens of thousands of claims at the same time.”
Studios are starting to get denial of coverage letters now, which means lots of litigation in the near future.
“I think what the insurance companies will say is we never intended to cover you for losses sustained because a pandemic occurred and people now couldn’t go to theaters.... That wasn’t intended or covered,” said Cronin. “I think the studios would reply, ‘We took out insurance in case we need to make a change that was unanticipated and there were substantial losses.’ It’s all going to come down to what language is in each insurance policy.”