As the COVID-19 pandemic forced widespread postponement and cancellation of film and TV production in 2020, it brought a corresponding explosion of insurance claims by producers. This led inevitably to coverage disputes as carriers sought to deny coverage wherever they could. A recent lawsuit by ViacomCBS illustrates some interesting issues that can arise in these disputes.
ViacomCBS had a Television Production Portfolio Policy with Great Divide Insurance Company that covered all of its productions. The policy provided separately for each production, $30,000,000 of Cast coverage, $10,000,000 of Extra Expense coverage, $10,000,000 for Imminent Peril coverage $1,000,000 for Ingress/Egress coverage and $1,000,000 in Civil Authority coverage. According to the complaint, the policy did not include an industry standard-form virus or bacteria loss exclusion.
ViacomCBS alleges that over 100 of its productions were affected by the pandemic and submitted claims for losses on each of them under all of its coverages. Great Divide acknowledged only that productions were cut short by government shutdown orders and agreed to Civil Authority coverage—the one with the lowest limit—but refused any other coverage.
The complaint recites the discussions that took place between the parties in which ViacomCBS provided a detailed explication of the policy language in order to establish that Great Divide’s denial of coverage relied on an “overly narrow and wrongful” interpretation of its terms. For example, Great Divide’s position was that the invisible and inchoate threat posed by the virus did not present “certain, immediate and impending danger” that would trigger the Imminent Peril coverage. This, ViacomCBS claims, constitutes a breach of its obligations under the policy.
A second claim arose out of Great Divide’s behavior in renewing the policy. The policy was written for three annual policy periods beginning in December 2018. When the final renewal came up in December, 2020, Great Divide allegedly insisted on including a COVID-19 exclusion and a substantial premium increase. According to ViacomCBS, this ran contrary to insurance industry custom and its own reasonable expectations, which were that the policy would renew on the same material terms as before and would not be subject to cancellation or non-renewal before December 2021.
Finally, ViacomCBS raised a cause of action specifically relating to its program the Kids’ Choice Awards. This was scheduled to be aired as a live show on Nickelodeon on March 22, 2020 from the Forum in Inglewood, CA. After the first wave of state shutdown orders beginning on March 11, Nickelodeon gave up on the live show and aired a virtual show Kids’ Choice Awards: Celebrate Together on May 22. It submitted an insurance claim to Great Divide under its Abandonment coverage for the additional production cost of the second show as well as its sunk cost from preparing for the live show. Great Divide agreed to recognize the extra expense to complete the virtual show but not the sunk cost. It took the position that the live show had not been abandoned at all but merely postponed, so that the virtual show on May 22 was in fact the same show as had been originally scheduled for March 22. To counter this, ViacomCBS pointed out that the production company, crew size (10 rather than 1,000) host, lack of performances and stunts, format and lower budget of the virtual show all distinguished it from the Kids’ Choice Awards.