New York Rep. Carolyn Maloney said Thursday that the nation desperately needs pandemic insurance, a “public private partnership that has a mechanism in place that you can depend on,” and hopes some version of it will pass early in the Biden administration.
“There are a number of proposals out there. People who are serious about passing a bill will support my effort to make this part of the first 100 days [when] you can get a lot of things passed,” Maloney told Deadline shortly after a House Financial Services subcommittee hearing on Capitol Hill. “My goal is to work with all these factions and see if we can come together.”
(The first 100 days of a new administration are often called the 100-day honeymoon.)
As film and TV production struggle for a way ahead alongside all kinds of businesses walloped by COVID-19, the hearing – postponed from July – was the first one on the crucial topic of now vanished pandemic coverage. Jean Prewitt, President & CEO, Independent Film & Television Alliance, has estimated that as many as 400 film projects may have fallen away due to lack of COVID insurance.
Independent filmmaking has slowed dramatically as traditional financing dries up with completion bonds mostly unavailable. Producers that can are turning to alternate sources, moving overseas or pondering expensive specialty insurance products that have recently come to market.
Maloney was first out in May with a solution called the Pandemic Risk Insurance Act, or PRIA, modeled on the TRIA, the terrorism insurance act that was passed after 9-11. Members of the Subcommittee on Housing, Community Development & Insurance today repeatedly called PRIA, a symbolic first step, a marker, a start – which was a bit disheartening nine months after the coronavirus shut down the country and in the midst of a second wave. Maloney, however, has always said it was a first draft open to revisions. She believes PRIA in some from can be tweaked to incorporate diverse interests and move ahead.
The act is a public-private solution that has insures pay the first 5% of claims and the federal government backstop the rest up to $750 billion. But insurance companies called pandemics uninsurable, by them, balked and PRIA stalled. Most are standing by their own less comprehensive alternative plan that is 100% funded by federal dollars – which Maloney said means it is unlikely to pass Congress.
A group called the Business Continuity Coalition, which includes media and entertainment, real estate, gaming, hotels, retailers and other groups, has also forged a proposal drawing on existing plans out there. One complex but key element is to take into account industry-specific needs.
Prewitt said insurance industry proposals so far all are limited to “the classic salary and overhead costs of a shut-down,” which don’t apply to production. In a statement after the hearing, she said IFTA, along with the MPA, Fox Broadcasting and others in the film and television industry, supports a BCC proposal that recommends legislation “contain provisions adapted to the specialty insurance lines including film and television production, sports events, and event cancellation.”
Business interruption insurance in fact is what’s captured most of the headlines as small businesses ordered to close often found their policies either excluded pandemic insurance or only covered shutdowns caused by physical property damage, sparking a wave of lawsuits.
Film and TV production, in contrast, was well covered under preexisting policies so production that temporarily halted in March could finish shooting. The problem is that all new standard coverage for new production now has a pandemic exclusion. Production, a source of jobs in many states, was mentioned a few times in passing at the hearing but would require tailored treatment in any bill for the three main categories of insurance it relies on — cast, imminent peril and civil authority.
IFTA is also supporting efforts to secure immediate relief in the short-term along the lines of measures adopted in the U.K., Canada, and elsewhere. A group of 25 production companies, distributors, sales agents and completion bond guarantors, the American Coalition for Independent Content Production (ACICP), is also pushing for government support.
One push includes U.S. tax stimulus — renewing and strengthening a tax incentive (IRC Section 181 to be specific) that allows faster depreciation deductions for the first $15 million of film and TV production costs. A higher cap would help offset higher expenses due to COVID-19, which can inflate budgets by up to 30%.
Hollywood players helped develop IRC 181 in 2004 when tax incentives around the world had ramped up but there were still none in the U.S. Film and TV producers can deduct what they spend in the U.S. — up to $15 million — as they spend it without waiting for the project to land commercially. The measure was extended until the end of 2020 although few productions could take advantage of it this year due to COVID stoppages.
IFTA is working with the MPA and others to bring the production industry’s concerns to the Hill, including to members on Ways and Means, the chief tax-writing committee of the House. “Section 181has been of enormous value in the past in terms of keeping production and employment in the U.S. As we struggle to re-start, strengthening this provision for some short term relief would be an important step,” said Prewitt.
IRC 181 is separate from state tax incentives and credits, which some in the industry fear may be squeezed as states and cities face major cash shortfalls.
Maloney called it a big step ahead that witnesses at the hearing included representatives from giant insurer Chubb, which has proposed its own pandemic insurance plan, and global insurance broker Marsh. Chubb North America chief underwriting officer Michelle Melendez McLaughlin and Marsh CEO John Doyle both said said they believes pandemics are, in fact, insurable.
Other witnesses included Ann Cantrell, the owner of Blue Ribbon General Store, a struggling gift shop in New York City, on behalf the National Retail Association. She described her shock and distress when she found she wasn’t covered.
“Small business have been devastated and unable to rely on their business interruption policies. Economic forecasters are warning that small businesses, many of which have not recovered, may permanently close if policy makers don’t act,” said Rep. Maxine Waters, chair of Financial Services Committee said at the hearing.
Lawmakers agreed but saw the problem and how to solve it differently and didn’t have much data or information. Their questions ran the gamut: Should pandemic insurance be compulsory? Should we wait until this pandemic is over and just plan to cover the next one? Should we focus on a second CARES Act instead? (There was some inter-party sniping about that.) Would it be affordable? Are pandemics insurable? How much have insurers lost this year? What would the premiums be?
“Are we just blowing in the wind right now?” asked Emanuel Cleaver (D-MO). “We are dealing with an extremely important program right now and we are dealing with it without data … Let’s just say that if we had to vote on something now, we would be voting in ignorance.”
That’s kind of okay, said one D.C. insider, “These hearing are largely kabuki, signaling that members of Congress are now ready to address this issue.”