Television & Film Production during the COVID-19 Pandemic; How does the Force Majeure Provision Apply?
COVID-19 has affected the entertainment industry in many respects, especially in the areas of film and television production. Given the nature of productions of this type, working from home is rarely an option, and being in close proximity to other actors is a necessary component of the endeavor. When national disasters such as this pandemic occur, insurance companies reevaluate coverage and often amend their policies accordingly. Actors’ guilds and unions are also forced to adopt new policies to address the crisis. These new insurance policies and union requirements can make the production of film and television an insurmountable task. What regulations have been put in place? How do film sets look during the current pandemic? What happens if someone gets COVID-19? Who is liable?
With new tight regulations involving safety considerations being adopted by unions, many productions have been forced by both the union and the insurance companies to hire COVID-19 compliance officers who create and enforce new pandemic protocols. Salaries and fees for these compliance officers can greatly increase a production’s budget and outlay. In addition to these expenses, union regulations have placed limits regarding when filming is allowed to occur. For example, the quantity of individuals permitted in a room has been considerably restricted, forcing many productions to re-write scripts and entire storylines in order to meet these requirements. When larger scenes calling for more cast members are necessary, unions require production companies to tests all involved for COVID-19. When the results come back negative, those individuals are then required to stay in place until the production is completed to prevent outside exposure. Of course, ensuring that all involved individuals remain on the production site for extended durations adds unplanned costs, including additional salaries for employees who are not working and provision of housing and food. These added burdens, while necessary in a pandemic, increase the costs of production and correspondingly decrease the net revenue.
The more complex issue created by COVID-19 compliance on production sets is what happens if someone tests positive for COVID-19. When someone involved in the production test positive for Covid, union regulations require not only contact tracing, but of course quarantining of those who have been in contact with the affected individual. Because the crews are limited by the compliance requirements already, the affected individual can often come in contact with most of those involved. Therefore, if one individual test positive, an entire production can quickly be canceled or put on hold until the test come back negative. These periodic and unexpected shutdowns are expensive because the workers are often compensated by the production company regardless
An affected participant in a production company that affects others involved in the project creates significant liability issues. Before the pandemic, productions could obtain coverage from insurance companies for such delays or shutdowns due to an illness. However, because of the pandemic, most insurance companies will not cover liabilities resulting from COVID. The few that provide coverage have strictly applied time periods, are so expensive that only high-budget productions can afford them, and come burdened with compliance requirements that, if breached, give the insurance company the right to deny coverage. If a production company for any reason chooses not to obtain liability coverage, and one of its participants contracts COVID-19, the liability resides in the deepest pocket: either the production company, the studio or those financing the production. Of course, many production companies, studies, and/or venture capital firms will choose not to incur this increased risk.
As lawyers, one of our jobs is to ascertain if coverage may exist in an existing policy regardless of the added circumstances brought about by the pandemic. The reason anyone obtains insurance coverage for anything is to prevent accidental and/or unforeseeable events that create liability for the insured. Most insurance agreements contain a contract provision called the force majeure provision, commonly referred to as the “act of God” clause. In fact, many different contracts and agreements, particularly in the entertainment industry, contain such a provision.
So, what is force majeure?
The phrase force majeure derives from the French meaning “a superior or irresistible force.” In the context of a legal contract, a force majeure event is frequently defined as an event or effect that cannot be reasonably anticipated or controlled, hence the frequent reference to the act of a higher power. These “acts of God” are sometimes specifically defined in the clause as natural disasters, random events, unavoidable catastrophes or pandemics – things like earthquakes, tornados, hurricanes, war, labor strikes, and riots are often listed – that prevent a party, or both parties, to the contract from completing their contractual obligations. If the prevention results from the unavoidable event, the obligation is removed.
What qualifies as force majeure?
It is important to understand that a force majeure provision is activated when contractual obligations become impossible to perform, not when they become merely burdensome or inconvenient. Every force majeure event must be considered on an individual factual basis based on the precise language of the contract.
Some general terms common to force majeure include:
- The event was outside the parties’ reasonable scope of control;
- The event was not foreseeable, and therefore, the effects could not have been avoided by either party;
- The event affects the ability of the party/parties to perform their contractual obligations;
- The party/parties took reasonable steps to attempt to provide notice or to mitigate the consequences of the event.
Using these force majeure principles, a party to a lease agreement containing the provision could, for example, ask to be relieved from the obligation to pay rent during the period that COVID is affecting their ability to receive income.
How does force majeure affect TV/Film production during COVID-19?
As noted, the force majeure provision must be analyzed on a case-by-case basis by examining the language contained in the specific contract and applying it to the facts relating to the individual client. Application of the provision might apply to certain COVID-19 circumstances involving television and film production under their existing policies of coverage. If a claim were brought against the production company, or a claim for coverage is made by the production company, being forced to quarantine by a union, or falling ill because of the pandemic, might qualify the production company for coverage because of the force majeure event. But of course, the insurance company is going to make the opposing claim that coverage does not exist because of the force majeure event. In addition, if a breach claim is made against a member of the production team for not showing up to work, or if an actor sues the production company for not compensating them when they are out of work, the force majeure provision may apply. By examining the basic terms of force majeure, the issues can be illustrated:
- The event was outside the parties’ reasonable scope of control: Although one can take preventive measures to avoid getting the virus, it is generally easy to acquire. In a production setting, individuals, specifically those on camera, cannot wear masks or practice social distancing. For this reason, there will always be a chance that they contract the virus. Getting COVID-19 is based on many factors, including chance, and for this reason, it is outside of the reasonable scope of control.
- The event was not foreseeable, and therefore, the effects could not have been avoided by either party: COVID-19 is an unforeseeable event that has negatively affected the entire world. We do not have complete control over contracting COVID-19, making it an incalculable circumstance that could not have been prevented.
- The event affects the ability of the party/parties to perform their contractual obligations: When individuals contract COVID-19 or are subject to quarantine, they are no longer able to perform their contractual duties. This is true on either side of a performance contract. For example, the production company may not continue producing the show/movie because their producer got sick. Similarly, the actor that signed the contract with the production company will be unable to act if they are forced to quarantine.
- The party/parties took reasonable steps to attempt to provide notice or to mitigate the consequences of the event: Although up for interpretation given each situation, often, it could be said that those forced to quarantine or who have contracted the virus were forced to maintain a lifestyle of trying to avoid receiving COVID-19. With all the strict rules and regulations put in place by unions as well as COVID-19 compliance officers, there is an undeniable effort that those on set try to mitigate the consequences that could come from the current pandemic.
The bottom line is that the pandemic undoubtedly qualifies as a force majeure event. The issue is how does it affect the contractual obligations of each affected party. If you have questions about these issues, please do not hesitate to contact Shrum Hicks & Associate PC, Nashville’s premier entertainment law firm.