(Bloomberg Businessweek) -- The Sony film All the Money in the World seemed to have everything going for it: a gripping story about the kidnapping of John Paul Getty III; an experienced director in Ridley Scott; and a bankable cast including Mark Wahlberg, Michelle Williams—and Kevin Spacey as Getty’s petrocrat grandfather.
Cue public-relations disaster. Accusations by actor Anthony Rapp of sexual misconduct by Spacey 31 years earlier, when Rapp was 14, prompted Sony Corp. and Scott to drop the Oscar winner from the cast in November, even though the film had already been shot and the trailer had been viewable for weeks online. Spacey said he didn’t remember the encounter and apologized for his behavior. Imperative Entertainment LLC, which produced the film, proceeded to spend $10 million—a quarter of the movie’s original budget—to hire Christopher Plummer as a replacement and reshoot Spacey’s scenes. Imperative declined to comment for this story.
“You can’t tolerate any kind of behavior like that,” Scott told Entertainment Weekly. “We cannot let one person’s action affect the good work of all these other people.”
Ever since the New York Times published an exposé on Oct. 5 about women charging Harvey Weinstein with sexual assault and harassment, Hollywood has seen a barrage of claims involving prominent actors, producers, and executives. While studios have always had to deal with talent on occasion overindulging or landing in some peccadillo, the number of incidents, along with risk that now goes back decades, is forcing some in Hollywood to reconsider how they do business.
“How do you insure for the whole of someone’s life?” asks Steve Ransohoff. His company, Film Finances Inc., originated the business of selling completion bonds, which kick in to pay for a movie that’s blown through its funding and is in danger of not being finished. He’s backed independent films and blockbusters such as La La Land and Slumdog Millionaire, a best picture Oscar winner.
Ransohoff says the industry is looking at a new insurance product that would cover producers and distributors if a scandal emerges, whether during production or after a film has wrapped. This would go beyond standard employment-practices liability insurance and cast insurance—the latter pays out when an actor dies or leaves a production over an injury or illness. Brian Kingman, who leads a team of entertainment specialists at insurance brokerage Arthur J. Gallagher & Co., says his phone has been ringing off the hook with TV and movie executives looking for a solution. What the industry needs, he says, is an insurance product akin to the “death and disgrace” policies in the advertising world, which cover the cost of removing billboards or pulling TV spots when a spokesman can’t keep his hands off the bottle or the interns.
Kingman says he’s talking to Lloyd’s of London and other underwriters about the product. Given the string of high-profile incidents, “the rates will be high, and carrier capacity will be limited,” he says. Lauren Bailey, global head of entertainment at insurer Allianz Global Corporate & Specialty, says the risks are daunting even for the insurers. “This area is very challenging to predict, as occurrences that happened over decades are now just coming to light.”
A contract term that’s getting a second look is the so-called morals clause, which was first used after a sex scandal in 1920s Hollywood. It’s commonly used in contracts for athletes making endorsements but hasn’t been used as widely in Hollywood. Such a clause would allow for a star to be instantly fired without pay if he or she engages in objectionable behavior, some entertainment lawyers and agents say. Additional provisions could be added to contracts to hold actors financially liable for their conduct.
“We anticipate new contracts will place added emphasis on morals clauses and the language on all nondisclosure agreements will be highly scrutinized,” says Chris Silbermann, a managing director at talent agency ICM Partners.
For now, studios and their financial partners will probably be stuck haggling over who pays when calamity strikes. The Orchard, an independent film distributor based in New York, paid as much as $5 million for the rights to distribute Louis C.K.’s film I Love You, Daddy earlier this year. That was before the comedian was accused of sexually harassing fellow performers. The distributor canceled a scheduled November release. Louis C.K. agreed to buy back the film and reimburse the Orchard for as much as $1 million already spent on marketing.
Says insurance specialist Kingman: “These are uncharted waters.”
To contact the authors of this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net, Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.
To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net.
©2017 Bloomberg L.P.
