Errors and omissions insurance (E&O insurance) is something every movie producer needs if they want to sign a movie distribution deal.

I’m not an entertainment attorney or an insurance salesperson, but errors and omissions insurance protects you and the movie distributor you settle with from a variety of lawsuits common in the entertainment business.

These include accusations of breach of contract, copyright infringement, libel or demeaning of products (showing trademarks on camera), invasion of privacy, infringement of title, slogan, and many other nasty legal salvos.

It is an insurance policy that protects the butt of a movie producer and distributor in the course of doing business in the entertainment industry.

Errors and omissions insurance doesn’t address the creative side of making movies, which is why some independent movie producers often don’t factor it into their movie budgets.

But if you want to sell your show to a movie distributor, you’re going to have to learn what it’s all about at some point.

That is unless your movie distribution plan is using your own blog to sell digital downloads or DVDs online or hitting the streets with copies in the trunk of your hybrid vehicle.

I know of more than one independent filmmaker who makes decent money selling movies that way without having to worry about the cost of errors and omissions insurance.

I respect your energy and push to go out and sell your films directly online or in person through all kinds of ways. That’s a post on self-distribution for another day.

The Catch-22 with errors and omissions insurance has to do with dealing with movie distributors.

Every distribution deal that co-producer Tim “Timbo” Beachum and I have been involved in, from independent movie sales to reality shows, has involved E&O Insurance.

After the movie is over, you’ll probably want to get significant distribution for it.

That means working with a film distributor to get it released in major national and international outlets in every medium possible.

Film distribution deals for independent cinema typically occur in one of two ways. A film is screened at different film festivals, catches the attention of the distributor, and a film distribution deal is offered to acquire the rights, or an offer is made to purchase the rights to the film outright.

Or you skip the film festival circuit and contact film distributors directly with an evaluator and their other marketing materials like artwork etc. If they like what they see, a distribution agreement is sent to them for their consideration.

At this point the euphoria of making a film has worn off. Now you’re dealing with the business of making movies. You have film investors that you have to pay back with interest.

Even if it was your own hard-earned money put into producing your film, you’ll want to be able to pay it back with interest.

All independent filmmakers make films from different financial backgrounds, personal motivations, and creative needs. None of the reasons you make movies really matter to a movie distributor.

When it comes to movie distribution deals, it’s all business. So, once your movie sales rep, entertainment attorney, or you represent your own movie to settle and sign a movie distribution agreement, you’ll be immediately met with the list of movie deliveries.

The list of movie deliverables can stun an unprepared filmmaker. Once again, the list of deliverables for the movie is a topic for another post.

In this movie making post, we focus on errors and omissions insurance, which is one of the key deliverables that a movie distributor needs to deliver on immediately.

As in a Hitchcock movie I mentioned Catch-22 with Errors and Omissions Insurance in the post, now you have to use it.

It’s always much cheaper to buy your own errors and omissions insurance from a reputable company than it is to rely on a movie distributor to cover the cost.

The Catch-22 is that some, not all, but some film distributors who cater to the release of independent films use E&O Insurance to gouge the eyes of independent filmmakers with an inflated cost.

The film distribution company will tell an independent filmmaker who doesn’t have errors and omissions insurance not to worry. They will set up a policy with an insurance broker they know, pay for it, and only deduct the cost of any advance or future movie royalties.

Sounds good if you don’t have the money to buy an E&O insurance policy yourself, considering there’s no money out of pocket up front. But it doesn’t feel good when the initial advance or subsequent royalty payments are greatly affected by E & O Insurance.

You may end up paying between 200% and 400% markup on cost. Like I said, not all movie distributors that are into releasing independent movies do this kind of BS, but there are a few that do.

Every business has people willing to hassle you. Dealing directly with an agent to purchase your own errors and omissions insurance policy WILL ALWAYS SAVE YOU MONEY.

But I fully understand what it’s like to finally finish a movie and end up not having a hundred dollars in your budget to deal with the really difficult costs of completing the movie deliverables.

It’s a smart move in pre-production to contact companies that specialize in producer errors and omissions insurance to compare quotes. Once you have those prices, you can include them in your budget.

I like to include it as part of the post budget as a line item. It helps me remember, as an independent film producer working on a budget, that after finishing a film, there is still a long way to go to get through post-production and film deliverables.

Even if you know you won’t have the money for E&O insurance after signing a movie distribution deal, at least knowing the cost of the policies, you can negotiate the cost the distributor will charge you.

This is the part I call Catch-44. Be careful when dealing with movie distributors who do not accept your errors and omissions insurance policy.

They may have special requirements, such as your policy not being from a company licensed in your state or some other reason for declining your E&O insurance.

If you’ve already signed an agreement with them before asking if your own errors and omissions insurance policy meets their requirements, you could be in for a fight.

You’ve followed the rules and saved money by buying your own E&O insurance policy, but now you’re butting heads over it. If you haven’t signed an agreement, move to another dealer.

As long as your E&O insurance policy is from a reputable company, another movie distributor will accept it if they want your movie.

If you’re signed on the dotted line, you may have to suck it up and bite the bullet and go with a movie distributor-recommended broker who will usually charge you a little more than you would have paid on your own.

The insurance company does not add the margin. It’s the movie distributor adding their juice for doing you a favor by covering the cost.

The truth about errors and omissions insurance in the world of independent film distribution isn’t always fair or pretty, but neither is life.