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Someone forgot to Tell Insurance Cos. about the Mainstream Crossover: Last Adult Insurer Drops Plan

The news might be a couple of weeks old, but I’m posting it for the record:

[San Fernando Valley Business Journal]- The adult film industry faces a serious problem after the only company offering policies to protect film production decided to drop that coverage.

One insurance agent working with the adult industry went as far as to predict a crisis if the issue is not resolved. Without insurance policies the production companies cannot receive film permits.

While some of the larger production companies may have other options available to them to insure their movies, it is the smaller ones that will suffer the most without available documentary, industrial, commercial and educational, or DICE, policies that adult falls under.

The insurance covers liability, availability of permits, rented equipment, and rented props.

“There is no insurance company out there that writes DICE policies that has agreed to insure adult producers,” said Greg Zeboray, of Zeboray Insurance Services in San Clemente. “At this point they have no insurance available.”

Mergers in the insurance agency set in motion the current situation.

For years Entertainment Brokers International had been the exclusive provider of policies to the adult industry with Praetorian Financial Group as the carrier. But then Praetorian was sold to an Australian company, and Entertainment Brokers was bought by One Beacon.

It was One Beacon that decided to drop the adult coverage, Zeboray said.

Companies renewing policies before Sept. 17 will have coverage through September 2009. But companies with policies expiring after that date may face having no replacement.

Axel Braun, an adult director based in the Valley, has little concern about his insurance as he remains covered because of the mainstream works he does. Larry Flynt Productions, a distributor of his adult content, solved the insurance dilemma by taking out a $3 million bond to cover productions, Braun said.

Reluctance on the part of other insurance carriers to step in to offer the necessary policies for adult has less to do with the stigma of association with the industry then it does with the amount of money the premiums bring in.

Premiums are based on the cost of production and that doesn’t tend to be very high for adult productions. There are no multi-million budgets that are found in the mainstream film industry.

For such a small amount of money insurance companies may not want to put up with any flack of working with the adult industry.

“It is not worth it to them,” Zeboray said.

If low-budget independent films can get coverage then certainly those coming from the adult world can do so as well, especially since adult companies pay their premiums on time and tend to have few claims, said Diane Duke, executive director of the Free Speech Coalition.

“I find it absurd that any insurance company would drop the legal vital industry that is adult entertainment,” Duke said. “I suspect that they will grow to regret that decision.”

The coalition is working with its carrier Lockton to provide production insurance and Zeboray is working with a contact in the insurance industry to see what can be done to keep coverage available.

A solution will present itself but does that solution appear in the next month or in a year and a half after so many companies lose their coverage?

“At this point there is no clue,” Zeboray said.

From Braun’s perspective, the insurance situation is just one symptom of the transition the adult industry is going through as digital distribution becomes more prominent over releasing films on physical discs.

When films are made available through downloads and online streaming the production costs drop and the returns become smaller.

“When something happens like this there is a period of adjustment and that freaks people out,” Braun said. “There are people who cannot adjust period.”

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