62 new york | august 5–18, 2019
time for the crew and editors working non-
stop—adding up to a quarter of the movie’s
original $40 million budget, according to
a report in Variety. And they would have to
reassemble it all a month before the film’s
release date.
This wasn’t the first time the loss of an
actor had resulted in cost overruns and
delays. It wasn’t even the first time for
Scott, who’d had to work around the death
of Oliver Reed on Gladiator. But death and
disability have been covered by standard
production insurance for decades with
payouts that can easily exceed $100 mil-
lion. Since Spacey wasn’t disabled or dead,
but disgraced, the production picked up
every penny of the tab.
Disgrace-insurance policies have
existed since the 1980s; they arose as a
category of contingency insurance (i.e.,
insurance against rare events) just as
celebrity endorsements were transition-
ing from cheery ads with congenial father
figures like Wilford Brimley to multiyear,
multimillion-dollar contracts with
megastars—Michael Jordan, Tiger Woods.
Lloyd’s of London, the powerful insurance
marketplace known for covering highly
specialized risks (Dolly Parton’s breasts, a
competition to find Bigfoot), put together
the occasional high-limit disgrace package
into the tens of millions. (In 2006, when
Hannah Montana premiered, a clothing
manufacturer took out a policy on its teen
star, Miley Cyrus, in case any misbehavior
affected sales.)
Most policies were much smaller,
though, with limits rarely exceeding $5
million, and were worded so broadly it
was almost impossible to get a payout. “I
can’t think of a claim that was paid,” says
Ringo Thompson, a London broker who
has been selling entertainment insurance
for three decades.
A standard Lloyd’s contract defined dis-
grace in vague terms—as “any criminal act,
or any offence against public taste or
decency ... which degrades or brings that
person into disrepute or provokes insult or
shock to the community.” Most effective
policies rely on precise terms and evidence
that both sides can agree on—the Richter
scale, a hospital bill. Subjective wording
leads to disputes. Insurance “has to involve
no litigation,” says Bill Hubbard, CEO of
the entertainment insurer HCC Specialty
Group. “Y ou know the Supreme Court jus-
tice who said, ‘I know pornography when
I see it’? You can’t settle claims that way.”
The contracts were much clearer on
the definition of what didn’t merit a
payout: Many of them exempted non-
felonious offenses and acts committed
prior to the policy’s start date. Even ifthe All the Money producers had bought
a policy, Spacey’s past transgressions
might have been excluded, treated as
preexisting conditions.
While these limitations kept the indus-
try small, the foibles of the rich and famous
only increased demand for a better prod-
uct. Tiger Woods’s 2009 car crash, fol-
lowed by re velations of his infidelities, cost
him $22 million in contracts with brands
like AT&T and Gatorade—which was
nothing compared to what they cost the
companies. A UC Davis study put the
brands’ shareholder losses somewhere
between $5 billion and $12 billion.
But it wasn’t Woods who made disgrace
insurance look viable; it was reality televi-
sion. A few months before the golfer’s car
crash came what one underwriter refers to
only as “that Viacom loss.” Ryan Jenkins,
then a contestant on the VH1 reality show
Megan Wants a Millionaire and the star of
an upcoming season of I Love Money,became the lead suspect in his wife’s mur-
der and killed himself a few days later.
Megan was canceled after three episodes
and the Money season shelved entirely,
costing Viacom seven figures in losses.
That’s when the company started buying
disgrace insurance.
Thousands of reality shows have been
insured in the ensuing decade, many of
them via two insurance brokers, Gallagher
Entertainment and HUB International.
HUB’s managing director, Bob Jellen, can
recall about half a dozen claims paying out
since the Jenkins murder. He wouldn’t
offer specifics, but others have given two
examples: P. I. Moms, which was canceled
in 2011 following fraud and drug charges,
and Spike TV’s Bar Rescue, after an owner
killed a country singer in his own rescued
bar. “It’s something we don’t advertise,”
says Jellen of disgrace insurance. “You
don’t have to sell people on disgrace.”
That seems true of unscripted shows, a
thriving corner of the disgrace business.
Their relatively low budgets and inter-changeable talent make them easier to
cover, and since reality contestants are
often hired because of their wild behavior,
the chance of a show-ending incident is
definitely nonzero. The risk is high enough
to boost demand, but the casts are large
enough—and predictable enough in the
aggregate—to entice insurers.
But for bona fide stars on scripted shows
(as well as tours and brand endorsements),
the underwriters and the financiers have
had a harder time finding terms they could
agree on, even as scandals have multiplied.
The stakes are higher, the casts smaller,
and the costs of a celebrity meltdown more
difficult to predict. It’s also an issue of
scale: When only a handful of shows and
movies are asking for disgrace insurance,
the few that aggressively seek it out make
insurers suspicious about what produc-
ers know. Weather insurers can rattle off
the chance of rain on any given date in
northern New England, actuaries calcu-
late life span down to the month, and car
insurers know red Corvettes cost lives.
All of them know more than their clients.
But what does an underwriter know
about Mel Gibson’s history that Mel Gib-
son’s agent doesn’t?
Nearly every insurer I spoke to
reported increased interest in disgrace
after Weinstein’s fall, and every single
one explained why they couldn’t convert
that interest into a market. The newly
heightened risk of a cancellation, the rea-
son more companies are looking into dis-
grace insurance, has made underwriters
wary of crafting the kinds of policies—
low premiums, clear terms, high pay-
outs—that producers would actually
want. “There’s all this demand,” says
HCC’s Hubbard, “but there hasn’t been a
viable product.” SpottedRisk thinks it has
found the solution, which happens to be
a popular one among start-ups: data.spotted knows about Mel Gibson’s
history, and it claims to know exactly how
risky that makes him. “The highest pre-
dictor of future disgrace is occurrences of
past disgrace,” said Nicholas Hanes, Spot-
ted’s first underwriter. Before taking the
job in April, Hanes had worked for the
insurance company Beazley, where his
specialty was weather insurance, which
he considers oddly apropos. Spotted’s
deep analytics, he said, “are the rain data;
they’re the flood maps.”
When we met in the Spotted office, I was
the one who made a comparison between
climate change and the social-media mael-
strom of our lives, but Hanes picked it up
with enthusiasm. “Y ou go back to the earli-
est of HollywoodThe CULTURE PAGESPHOTOGRAPHS: PATRICK MCMULLAN“Something
like the college-
admissions
scandal: That
is a snowstorm
in California
in June.”(Continued on page 74)ADVANCED FORMTRANSMITTED
________ COPY ___ DD ___ AD ___ PD ___ EICAD1619CR_disgrace_insurance_lay [Print]_35557129.indd 62 8/1/19 4:03 PM62 newyork| august5–18, 2019
timeforthecrew andeditorsworkingnon-
stop—addinguptoa quarterofthemovie’s
original$40millionbudget, accordingto
a report inVariety.Andthey wouldhaveto
reassembleit alla monthbeforethefilm’s
releasedate.
Thiswasn’t thefirsttimethelossofan
actorhadresultedincost overrunsand
delays.It wasn’t eventhefirsttimefor
Scott, who’d hadtoworkaroundthedeath
ofOliverReedonGladiator.Butdeathand
disabilityhavebeencoveredbystandard
productioninsurancefordecadeswith
payoutsthat caneasilyexceed$100mil-
lion.SinceSpaceywasn’t disabledordead,
butdisgraced,theproductionpickedup
every penny ofthetab.
Disgrace-insurance policies have
existedsincethe1980s;they aroseasa
categoryofcontingencyinsurance(i.e.,
insuranceagainst rareevents)just as
celebrityendorsementswere transition-
ingfromcheeryadswithcongenialfather
figureslike Wilford Brimley tomultiyear,
multimillion-dollar contracts with
megastars—MichaelJordan,TigerWoods.
Lloyd’s ofLondon,thepowerfulinsurance
marketplaceknownforcoveringhighly
specializedrisks(DollyParton’sbreasts,a
competitiontofindBigfoot),puttogether
theoccasionalhigh-limitdisgracepackage
intothetensofmillions.(In2006,when
HannahMontanapremiered,a clothing
manufacturertookouta policy onitsteen
star, MileyCyrus,incaseany misbehavior
affectedsales.)
Most policies were much smaller,
though,withlimitsrarelyexceeding$5
million,andwerewordedsobroadlyit
wasalmostimpossibletogeta payout.“I
can’t thinkofa claimthat waspaid,” says
RingoThompson,a Londonbrokerwho
hasbeensellingentertainmentinsurance
forthreedecades.
A standard Lloyd’s contractdefineddis-
graceinvagueterms—as“any criminalact,
oranyoffenceagainst publictaste or
decency...whichdegradesorbringsthat
personintodisreputeorprovokesinsultor
shocktothecommunity.” Mosteffective
policiesrelyonprecisetermsandevidence
thatbothsidescanagreeon—theRichter
scale,a hospitalbill.Subjectivewording
leadstodisputes.Insurance“hastoinvolve
nolitigation,” saysBillHubbard,CEOof
theentertainmentinsurerHCCSpecialty
Group.“Y ouknowtheSupremeCourt jus-
ticewhosaid,‘I knowpornography when
I seeit’?Youcan’t settleclaimsthat way.”
Thecontractswere muchcleareron
thedefinitionofwhatdidn’tmerita
payout:Manyofthemexemptednon-
feloniousoffensesandactscommitted
priortothepolicy’s startdate.Evenif
theAlltheMoneyproducershadbought
a policy, Spacey’spast transgressions
mighthavebeenexcluded,treatedas
preexistingconditions.
Whiletheselimitationskepttheindus-
try small,thefoiblesoftherichandfamous
onlyincreaseddemandfora betterprod-
uct. TigerWoods’s 2009 carcrash,fol-
lowedbyre velationsofhisinfidelities,cost
him$22millionincontractswithbrands
likeAT&T and Gatorade—which was
nothingcomparedtowhat they cost the
companies.AUCDavisstudyputthe
brands’shareholderlossessomewhere
between$5billionand$12billion.
Butit wasn’t Woodswhomadedisgrace
insurancelookviable;it wasrealitytelevi-
sion.A fewmonthsbeforethegolfer’scar
crashcamewhat oneunderwriterrefersto
onlyas“that Viacomloss.” RyanJenkins,
thena contestantontheVH1realityshow
MeganWantsa Millionaireandthestarof
anupcomingseasonofI LoveMoney,becametheleadsuspectinhiswife’s mur-
derandkilledhimselfa fewdayslater.
Meganwascanceledafterthreeepisodes
andtheMoneyseasonshelvedentirely,
costingViacomsevenfiguresinlosses.
That’swhenthecompany startedbuying
disgraceinsurance.
Thousandsofrealityshowshavebeen
insuredintheensuingdecade,many of
themviatwoinsurancebrokers,Gallagher
EntertainmentandHUBInternational.
HUB’smanagingdirector,BobJellen,can
recallabouthalfa dozenclaimspayingout
sincetheJenkinsmurder.He wouldn’t
offerspecifics,butothershavegiventwo
examples:P. I. Moms,whichwascanceled
in 2011 followingfraudanddrugcharges,
andSpikeTV’sBarRescue,afteranowner
killeda countrysingerinhisownrescued
bar.“It’ssomethingwedon’t advertise,”
saysJellenofdisgraceinsurance.“You
don’t havetosellpeopleondisgrace.”
Thatseemstrueofunscriptedshows,a
thrivingcornerofthedisgracebusiness.
Theirrelativelylowbudgetsandinter-changeabletalentmake themeasierto
cover,andsincerealitycontestantsare
oftenhiredbecauseoftheirwildbehavior,
thechanceofa show-endingincidentis
definitelynonzero.Theriskis highenough
toboostdemand,butthecastsare large
enough—andpredictableenoughinthe
aggregate—toenticeinsurers.
Butforbonafidestarsonscriptedshows
(aswellastoursandbrandendorsements),
theunderwritersandthefinanciershave
hada hardertimefindingtermsthey could
agreeon,evenasscandalshavemultiplied.
Thestakesare higher, thecastssmaller,
andthecostsofa celebrity meltdownmore
difficulttopredict.It’salsoanissueof
scale:Whenonlya handfulofshowsand
moviesareaskingfordisgraceinsurance,
thefewthat aggressivelyseekit outmake
insurerssuspiciousaboutwhat produc-
ersknow.Weatherinsurerscanrattleoff
thechanceofrainonany givendatein
northernNewEngland,actuariescalcu-
latelifespandowntothemonth,andcar
insurersknowredCorvettescost lives.
Allofthemknowmorethantheirclients.
Butwhatdoesanunderwriterknow
aboutMelGibson’s historythat Mel Gib-
son’s agentdoesn’t?
Nearly every insurer I spoke to
reportedincreasedinterestindisgrace
afterWeinstein’sfall,andeverysingle
oneexplainedwhy they couldn’t convert
thatinterestintoa market.Thenewly
heightenedriskofa cancellation,therea-
sonmorecompaniesare lookingintodis-
graceinsurance,hasmadeunderwriters
waryofcraftingthekindsofpolicies—
lowpremiums,clearterms,highpay-
outs—thatproducers wouldactually
want.“There’sall thisdemand,” says
HCC’s Hubbard,“butthere hasn’t beena
viableproduct.” SpottedRiskthinksit has
foundthesolution,whichhappenstobe
a popularoneamongstart-ups:data.spottedknowsaboutMelGibson’s
history, andit claimstoknowexactlyhow
riskythat makeshim.“Thehighest pre-
dictoroffuture disgraceis occurrencesof
pastdisgrace,”saidNicholasHanes,Spot-
ted’s firstunderwriter.Beforetakingthe
jobinApril,Haneshadworkedforthe
insurancecompany Beazley,where his
specialtywasweatherinsurance,which
heconsidersoddlyapropos.Spotted’s
deepanalytics,hesaid,“aretheraindata;
they’rethefloodmaps.”
WhenwemetintheSpottedoffice,I was
theonewhomadea comparisonbetween
climatechange andthesocial-mediamael-
stromofourlives,butHanespickedit up
withenthusiasm.“Y ougo backtotheearli-
est ofHollywoodThe CULTURE PAGES
“Something
like the college-
admissions
scandal: That
is a snowstorm
in California
in June.”(Continued on page 74)