The
Hollywood Economist
The numbers behind the industry.
How
The Insurance Business Runs Hollywood
Insurance is not a word usually associated with the power
and glory of Hollywood—at least not to outsiders.
To insiders, especially those involved in the behind-the-scenes
decisions of who will be the stars and what movies will
be made, it connotes a sine qua non reality of the entertainment
universe. After all, once the media dressing is stripped
away, what is the New Hollywood about other than minimizing
risk? The stars are no exception to this rule. Sure, it
may help a career to have talent, a well-connected agency,
and a hot media image, but unless an actor can get insurance,
he or she can't play a part in a major movie.
To
begin with, movies that receive outside financing from banks
or other sources—which nowadays are most movies—need
a completion bond. This bond guarantees the financiers that
they will be repaid the entire cost of the production (including
script development, finance charges, and bank interest)
if for any reason a movie loses one of its "essential
elements." These elements, which often include the
star and the director, are defined by the guarantor that
sells the bond. In the case of Terminator 3, the
producers bought a completion bond from International Film
Guarantors for $2.54 million that named Arnold Schwarzenegger
as an essential element. If Schwarzenegger had been disabled
during shooting or had abandoned the film for any reason,
IFG would have repaid the bonded cost, which was $181.6
million.
As
it turned out, IFG won the bet and walked away with $2.54
million. Before a bond company will assume such a gigantic
risk, however, it also requires the production to purchase
cast insurance from another insurer, such as Fireman's Fund,
AIG, or Berkshire Hathaway. These entities will reimburse
the production if anything happens to the star. With Terminator
3, Fireman's Fund provided the cast insurance, bringing
the entire insurance bill to $4.54 million. The completion
bond company still has the risk that the production budget
will spiral out of control—in which case it has the
right to take over the production—but it transfers
the risk of the star to the cast insurer.
Even
if a studio uses no outside financing for a film—and
therefore does not need to buy a completion bond—cast
insurance is a requirement for a Hollywood movie. (This
has been the case ever since the '20s, when Harold Lloyd
nearly lost two fingers during filming and almost derailed
a production.) Since both independently financed and studio-financed
movies require insurable stars, the companies that provide
this coverage have immense power. By setting the premiums
prohibitively high for a star who has made past claims,
they can relegate a star to Hollywood's near-dead status:
the uninsurables.
Nicole
Kidman is a case in point. Kidman injured her right knee
during the filming of Moulin Rouge in 2000, which
resulted in two claims for delays and a $3 million insurance
loss. In 2001, she quit Panic Room after three
weeks of shooting because of her knee, a decision that almost
resulted in the entire production being canceled and a $54
million insurance claim. Fortunately for the insurer, the
producers decided to continue with a replacement actress,
Jodie Foster. Still, they had to pay $7 million for the
delay and additional expenses. As a result of all these
claims, Kidman's acting career was in limbo. When she was
proposed as the star of Miramax's Cold Mountain,
Lloyd's of London effectively turned her down by asking
a 20 percent premium, which no movie could afford, while
Fireman's Fund, after noting "we have really bent over
backwards and taken risks on this that no one in the marketplace
was willing to take," turned down coverage on the grounds
that "the major fact that can't be changed is our paying
three claims for this actress's knees over the years."
At
this point, executive Michael Segal, who was a 50-50 partner
with Fireman's Fund in the completion bond company IFG,
engineered a solution. Kidman put a substantial part of
her salary in an escrow account, which would go to the insurer
if she caused any delay, and she agreed to wear a support
bandage on her knee during the preproduction and filming
of Cold Mountain (leading to false reports in the
press that she had cosmetic knee surgery). For their part,
the producers agreed to substitute a double for any activity,
even bending down, that might stress her knee. With this
deal, she got out of her insurance hell.
Providing
coverage, however, is only the beginning of the insurance
regimen. Insurers may require periodic medical examinations
during shooting, including testing for illegal drugs, or
even continuous medical treatment for some actors. (Kidman,
for example, was required to take daily doses of medicine
for her thyroid gland.) They also place stringent restrictions
on what actors can do off the set—no motorcycles,
surfing, or flying planes. As for what happens on set, the
insurer analyzes every shot in the script for potential
risks. Once the production starts, they also station hawk-eyed
agents, called loss-control reps, on location to make sure
that the stars are not put in harm's way. If a shot presents
the slightest danger of causing an injury that might delay
shooting, the reps bar actors from participating in them.
Either a stunt person substitutes for the actor or the shot
is changed to eliminate the danger.
Even
when studios base their marketing campaign on stars performing
the perilous stunts of their action-hero characters, the
loss-control reps make sure these claims remain wholly in
the realm of media make-believe. Consider, for example,
the video game-inspired movie, Lara Croft: Tomb Raider—The
Cradle of Life, starring Angelina Jolie outfitted in
skin-tight action-toy garb. The hype of this sequel was
that Jolie did "most of her own stunts" out of
her own "edgy quest for danger." In reality, the
insurer, AIG, was so strict that it did not even allow director
Jan de Bont to be at the Luna Temple set during shooting
because he had a prior leg injury. To avoid the possibility
that he might slip on the set's wet floors, the loss-control
rep had him direct the entire seven-day sequence via closed
circuit TV from a remote location. The insurer took even
more precautions with Jolie, the only cast member insured
by AIG as an essential element, since even a broken toe
could cost the insurer a cool $134 million. Her "edgy
quest for danger" notwithstanding, no fewer than three
stunt doubles substituted for Jolie, bringing the stunt-person
budget to a near-record $1,894,662. (Click here
to see the film's entire budget.)
Almost all the stunts were done by a second unit, which
shot for 60 days while Jolie and the other actors in the
principal unit were elsewhere. If a scene could injure Jolie,
the loss-control representative watched to see that she
was trussed up in a double-wired safety rig or hand-held
by safety men in green spandex suits. The scenes were then
scanned into a computer and the harnesses, wires, and safety
men were digitally removed. Visual effects were also used
to allow Jolie to safely battle a giant shark (she would
punch away at a bag in a dry, empty studio and later a digital
shark would be substituted). Such visual effects cost $13
million (which was just slightly less than the $13.5 million
Jolie got for acting in the movie).
None
of these insurance realities interfere with Hollywood's
culture of deception as long as everyone on the set, including
the stunt people, technicians, and loss-control rep, is
"NDA-ed." Nondisclosure agreements prevent anyone
involved in a movie from contradicting the PR claims used
in media campaigns that fuse the celebrity stars with their
heroic characters, such as the stories of death-defying
feats they performed. Fortunately for the studios, such
stretches—unlike the kinds of stretches that might
result in a pulled tendon on the set—go largely unchallenged
by TV interviewers.
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