Blumhouse Plans Film Shoot on Universal Lot Despite Insurance Risks (Exclusive)

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Blumhouse CEO Jason Blum

A small team of filmmakers and studio execs are working out how to proceed on a $6.5 million project that could become a blueprint for COVID-19-era productions.

As Hollywood yearns to get back to work in the COVID-19 era, Universal Pictures and producer Jason Blum are working out a daring plan to shoot a low-budget film on the studio lot. Cast and crew would live in a hotel nearby and a set of safety protocols would be in place. Forget craft services, for example.

Also, forget about insurance that would cover a shutdown due to a coronavirus-related outbreak of illness. Universal, which benefited greatly from its coverage when Paul Walker was killed in the midst of shooting Furious 7, is going to have to be prepared to shoulder the financial burden in the event that the Blumhouse production — despite precautions — has to shutter due to members of the cast and crew coming down with COVID-19, the illness caused by the novel coronavirus. At this point, embattled insurers won't cover that.

Universal and Blumhouse are not the only companies scrambling to find a way to shoot something, however small and experimental, in pandemic times. But a studio source tells The Hollywood Reporter that Blum's long-established low-budget model provides opportunity. "Blumhouse productions, specifically, are typically smaller and require a lighter crew, shorter shoots and limited location work, [which is] part of the reason we can consider a fully on-location production on the studio's sprawling lot," this person says.

This source adds: "Blumhouse and Universal aren't moving forward with any plans until we get the green light from city, county and public-health officials. None of this preproduction planning work is being conducted on the lot itself. A small team of filmmakers and studio executives are currently working on those plans remotely. Safety of everyone involved is a huge priority, and nobody wants to rush into anything."

If the $6.5 million project goes forward, the source continues, "There will be a lot we'll be able to learn from this when the time comes as we think about starting up other productions."

While Universal and Blumhouse — and potentially others — may be willing to take on the risk that a small project has to shut down due to an outbreak, the lack of insurance creates such a great roadblock for most productions that many in Hollywood and Washington believe it will have to be addressed through federal legislation.

Rep. Ted Lieu (D-Calif.), who has many constituents in the film and television business, tells THR, "To really solve this problem we would likely need a federal backstop" — that is, legislation requiring insurers to cover pandemic-related claims while limiting their exposure. He believes there is bipartisan support for that type of legislation — one such bill is being spearheaded by Rep. Carolyn Maloney (D-N.Y.) — though he is not sure it will win the backing of a majority in the House.

On its own, the industry will have great difficulty getting to a place where insurers are willing to provide coverage, says Brian Kingman of Gallagher Entertainment. "Insurers don't react quickly," he says. "They figure out how to make corrections, but meanwhile they go into paralysis. … The process moves slowly and that's the problem for Hollywood and a very frustrating thing for me. Our business moves fast and can move quickly and pivot. And then you've got this plodding banking, financing, insurance world that really needs to be more deliberate."

While giant companies may be able to self-insure or potentially use their leverage to work out some kind of liability-sharing arrangement with insurers, the head of physical production at one major studio says, "It's a difficult decision to get back into production [on a big-budget project] knowing you have massive exposure."

Independent filmmakers generally cannot make a move without insurance. For those who need bank financing, there is no going forward without completion bonds and there are no completion bonds without insurance. "It's a gigantic stumbling block," says John Sloss, principal of media advisory and management firm Cinetic Media. "No insurance company in its right mind is going to insure a production against someone potentially going down [with COVID-19] at this point in time. I don't even know how it's a conversation."

Roeg Sutherland, head of CAA Media Finance, says in certain, very limited circumstances it may be possible to get some insurance, though that is hardly a template for fully restarting the business. "For the moment we're having to work on a case-by-case basis," he says. "There's no standard agreement, and that is not likely to happen for months. For each movie, the producers and financiers are essentially writing a plan on how the production will be shot in a safe way."

The challenge is such that the MPA and the Independent Film & Television Alliance — which advocates on behalf of such non-MPA companies as Lionsgate and Millennium Films — are pushing for a federal approach. Insurance broker Kingman likens the current era to post-9/11, when no insurer would write a policy covering terrorism. There was such paralysis across the business community — not just in Hollywood — that the government passed the Terrorism Risk Insurance Act, which required insurers to cover a percentage of losses in the event of terrorism. Getting that legislation passed took months, but it created a model. Now, once again, the industry is looking to Congress to provide some relief.

The question for the film and TV business, says IFTA president and CEO Jean Prewitt, "is how do we address risks that are specific to this industry, and can [such provisions] be added into one of those more general bills that are floating around?"

Peter A. Marshall, a managing director of the DeWitt Stern Risk Strategies insurance brokerage, has helped craft language that could specifically address media production. The MPA and IFTA are hopeful those provisions would be part of any bill that goes forward.

It's hardly surprising that insurers don't want to write policies that cover costs arising from the pandemic: Kingman estimates that major insurers covering film and TV production face a potential hit of hundreds of millions of dollars due to the shutdown, saying his clients have already filed about 400 claims ranging from $200,000 up to $5 million. While Marshall estimates the potential exposure is somewhat lower because of limits on policies, he says, "You're asking someone who's being bitten by a snake how much venom they can tolerate next month."

But Marshall says one big silver lining to the insurance crisis is that it will force productions to be zealous in enforcing measures to protect cast and crew: "One of the beauties of insurance is it can actually promote good behavior."