Errors & Omissions Insurance (E & O) acts like a shield to help protect indie film producers from a lawsuits dealing with copyright infringement, using music without proper permission, chain of title issues and a lot of other lawsuits that can come up when distributing a movie.
Without E & O insurance most film distribution companies will not release a movie through retailers. It’s a necessary cost of doing business with a majority of distributors, even at the independent film level.
There are producers that already have E & O insurance in place before shopping their movie to distributors. When they finalize their distribution agreement they submit a copy of the original certificate of insurance to the distributor adding the distribution company as an additional insured on the policy. Indie film producers that complete movies on a steady basis usually have an E & O insurance policy in place before principal photography begins.
A good rule of thumb to remember is that indie movies should have E & O insurance coverage not less than $1,000,000 for each claim and $3,000,000 aggregate for all claims with a policy deductible no greater than $10,000. A good E & O insurance representative can explain the entire process based on your movie’s unique elements.
There are those times a producer realizes the original movie budget did not include a line item expense for E & O insurance or they had no idea that it would be a needed to get their movie sold and distributed. When they step to the table to sign a distribution agreement there is no money to pay for E & O insurance policy.
It’s not the end of the world if you find yourself short on money to get E & O insurance. If a distributor is really hot for a movie they can front the cost through a carrier they deal with on a regular basis. The indie film producer will not have to go out of pocket upfront for the cost. But the distribution company will recoup the money spent from any sales, commonly referred to as a “charge back” to the indie film producer.
Be realistic that it’s most likely the distribution company will not get an indie film producer a great rate on E & O insurance. Think of it like buying something on credit you can’t afford and paying a higher interest rate later on. But if an indie film producer’s pockets are light money there is not another choice unless you pass on the deal. Easy credit will cost indie film producers more of their future movie profits down the line.
An indie film producer is better off if they look around for E & O insurance, get a firm quote, and include that real cost into the overall movie budget before shooting one frame. Making indie movies takes a squeeze a nickel until it bleeds approach. Save all the money you can where you can in production! This is indie filmmaker Sid Kali typing FADE OUT.