The coronavirus pandemic has made it nearly impossible for production companies, sporting events, theaters, concert organizers, and other limbs of the entertainment industry to obtain or renew insurance policies that cover pandemic-related business interruption losses.

As COVID-19 spread across the U.S. like wildfire, governors and other officials issued stay-at-home orders allowing most people to venture out only when necessary and banned gatherings of more than 10 people.

Hollywood on halt

These government-ordered shutdowns hurt businesses of all sizes, and the entertainment industry is no exception. The coronavirus effectively shut down Hollywood and stopped the production of movies, television shows, and live events in their tracks, not only in the U.S. but globally.

While major studios have enough capital to safely weather the COVID storm, many smaller producers and event organizers aren’t just teetering on the brink, they are wondering how they can ever move forward before a vaccine is in place.

Insurance companies were also blindsided by the coronavirus pandemic, and now find themselves facing a staggering number of claims for business interruption losses. According to Risk & Insurance, some sources say the entertainment insurers are looking at business interruption claims between $300 million and $1 billion while others peg much higher figures that potentially stretch into the billions.

The prospect of paying out billions in coronavirus-related claims has made insurance underwriters “wary of writing new policies” for the entertainment sector, sources told Risk & Insurance. Without production insurance and/or event cancellation coverage, companies may find it difficult to shoulder the risk and move forward with production.

In the future, insurers will likely exclude coverage explicitly for COVID-19 and other infectious diseases, starting with any policy renewals that entertainment companies are able to obtain.

Property damage and government-ordered shutdowns

The coronavirus pandemic has turned a spotlight on how business interruption policies are written. Insurers outside of the entertainment industry have been denying claims almost uniformly, arguing that the coronavirus or any other viruses for that matter does not amount to physical property damage that would require a shutdown.

Whether or not that is a valid interpretation is still being hammered out in courts and legislative sessions throughout the country.

Most policies, however, do cover business interruption losses when they are caused by a government-mandated shutdown, as many, if not most, of the restaurants, bars, and other coronavirus claims have been.

But as Risk & Insurance points out, government shutdowns have been inconsistent and confusing, One insurer told Risk & Insurance that “civil authority is all over the place during the pandemic,” with governors’ lockdown orders conflicting with local orders or lack of orders:

“Mayors sometimes impose different restrictions than the governor in their state. President Trump further muddled things, by making declarations about what he thinks should reopen and when. This lack of clarity from civil authority is a departure from other events that triggered production shutdown coverage and event cancellations,” the publication reports, such as after hurricanes when roads are blocked and buildings are shuttered for safety purposes.

Business interruption insurance claims

Many small business owners across the country are fighting back and filing lawsuits against their insurance companies for denying coverage they believe they are entitled to. Beasley Allen is actively pursuing cases with clients whose insurance companies denied their business interruption claims. Dee Miles, Head of our Consumer Fraud Section, Rachel Boyd and Paul Evans are spearheading this litigation for our firm. They would like to talk to you about any potential claims.

Contact us for a free consultation regarding your business interruption insurance claims.

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