BY:Steven Beer, Jake Levy & Neil Rosini
This Q&A was originally published in the Fall 2017 issue of Documentary magazine, a publication of the International Documentary Association, a nonprofit media arts organization based in Los Angeles.
E&O insurance covers out of pocket “losses” arising from certain types of claims associated with litigation (and sometimes pre-litigation) that fit within the monetary limits of the policy.
Covered losses include the insured’s attorney fees and costs, payments made to settle a claim (if the insurer approves the settlement) and, in the event of an adverse judgment, payments made to a complainant in damages and attorney fees. Every policy includes a deductible (often called a “retention”) which are losses the insured is obligated to pay out before the insurer’s obligation begins. This amount can be substantial – for example, $25,000 or $50,000. Every policy also includes a limit per claim, which is a cap on the insurer’s obligation to pay. For example, a $1 million policy will cover losses above the deductible up to a policy limit per claim of $1 million. After that, the insured is on his own.
Policies also tend to have a limit on losses “in the aggregate” in addition to the policy limit “per claim.” A policy with limits of $1 million per claim and $3 million in the aggregate annually would cover, for example, six claims in one year in which the insurer pays out $500,000 each, but would not afford complete coverage for a single claim in which covered losses exceed $1 million.
E&O policies are issued either on an “occurrence basis” or a “claims made” basis. “Occurrence” policies cover only claims that arise from acts and omissions – including those associated with production and distribution — occurring during the policy period, no matter when the claim is brought. “Claims made” policies cover only claims that are brought during the policy period, no matter when the relevant acts and omissions occur. Occurrence policies with policy periods that include the first several years following initial exhibition of a film are generally preferred.