EXCLUSIVE: Force Majeure to come to Bollywood's rescue as films get postponed amid Coronavirus Outbreak?

Multiple films have been postponed and shoots have been stalled due to Coronavirus scare, and now, the question arises if the Force Majeure will come to their rescue.
EXCLUSIVE: Force Majeure to come to Bollywood's rescue as films get postponed amid Coronavirus Outbreak?
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Cinema business as it stands today is at a standstill, due to the coronavirus threat to mass gatherings, forcing theatres & shootings to shut down. Today, for many of the affected Bollywood bigwigs, it seems to be a scene straight out of the Akshay Kumar-Paresh Rawal blockbuster caper "Oh My God", where an atheist challenges God in court for ruining his business due to an earthquake, which the lawbooks term as "an act of God". So will the same yardstick apply & the insurance companies cough up their losses? Or will our Bollywood brothers be left high & dry, having no option at the end but to exclaim, "Oh my God."? To gauge the gravity of the situation, we tapped certain touchpoints that have earlier had first-person encounters with risk management in the entertainment trade. With the outbreak of Coronavirus, most of the film production, distribution and exhibition companies are looking to insure or claim insurance for losing revenue under the insurance clause of Force Majeure.

Rohit Shetty’s film Sooryavanshi was just a couple of weeks away from release when Coronavirus was declared a pandemic by the World Health Organisation.  The release of the film has been put on hold until further notice. The distribution risk cover of a film begins just a week before the film’s release. Unfortunately, there won’t be any kind of insurance claim against the stoppage of release due to Corona. Nikhil Gupta of Insta Policy insurance company informs that Reliance Entertainment did come to him to check if they will get revenue loss against corona as their film’s release did get a hit because of Corona. He said, “I did check with the insurance companies. They turned it down as epidemic is not covered in any policy and does not fall under Force Majeure.”

Adding further Gupta said, “Epidemic is not covered under any policy; also if shooting is getting canceled due to the fear of corona is also not covered under Force Majeure.” Describing Force Majeure, Gupta said, “Events such as rioting, bomb scare, roadblock due to protest, natural calamity like flood, typhoon and inundation are covered by the insurance company.”

It may be recalled here that Sanjay Leela Bhansali had a production cover of Rs 160cr and also something similar as distribution risk cover as he was facing protest against the release of his film. Traditionally, it is only the distribution and exhibitors who take insurance cover as they face risk and there have been cases that have saved them from losses. A source informs, “Distributors generally take a loss of revenue insurance for covering their share of the revenue.”

With cinema halls suddenly shutting down, shooting schedules put on hold and events canceled (that include live events and IPL), Shaista Valji of Alliance insurance said, “With regards to live events and sports, insurance policies which were availed prior to the outbreak of COVID-19, and if the communicable disease cover was opted for, any losses arising out of cancellations because of the outbreak will be well covered. However, any event cancellation covers availed now excludes losses arising out of COVID-19 as it has become a pre-existing condition.’’

So, the film producers who had to postpone the release due to theatres closure will not be able to make a claim. When asked about the IPL and other live events that were supposed to take place, Shaista said, “Events being insured now don’t have this cover, so interests involved with IPL will not get insurance for this. Postponement of events is usually covered in event cancellation policies. However, due to COVID-19 being already a prevailing condition, it doesn’t get picked up in any policy.”

Adding further, Sumant Salian said, “As mentioned by Shaista, all the prevailing conditions get excluded, so any policy obtained now will not cover Covid-19 related losses. The exhibitors and the distributors who have taken respective loss of revenue insurance in advance would get covered for the losses arising out of an epidemic situation. W.r.t production, the standard policy covers shoot cancellation losses due to illness to key members, bandh, strike, riots, state & national mourning, etc. The non-appearance of the cast due to illness including Covid-19 would be covered but now every insurer is issuing the policy with the absolute exclusion of Covid-19 since it is a prevailing condition.”

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