Freelance graphics insurance issues
I've been doing motion graphics for many years, on-staff at different post houses, but for the last 5, I've been self-employed. I now work most of the time from home, on my own computers.
I'm trying to get a new client, a very big corporation. I think I have a good chance of getting significant work from them. They mostly want me to come work inside there video department occasionally. But first I must meet their insurance requirements. This is what they want all independent contractors to have, in brief:
1. Worker's Compensation (minimum limit $500,000 per occurrence )
2. Public/General Liability ($2 million single limit per occurrence )
3. Automotive Liability ($2 million)
4. Professional Liability - Errors and Omissions ($2 million)
I talked to 2 insurance agents, one from State Farm, where I have my house and car insured, and the other from a recommended Production Business Specialist. I also spent a couple days trying to research the issues, which can be complicated and expensive. Most information is geared towards production people, and I can't find much info for post-production freelancers like me.
Here's what I think I found out so far:
Item 1. Worker's Comp.
Both agents said I should not need this, since I am a sole-proprietor, with no employees.
So I asked the corporate guy about this, and he said he will check on waiving it for me. I have to be very cautious how I deal with their huge bureaucracy that does not want to change anything.
Does anyone out there think I do need this, and if so why?
Item 2. General Liability: This is to cover them, if I spill coffee on their Avid. I have some rough numbers I need to clarify, $520 to $900 plus. I definitely need this, but have to do more homework. Any advice?
Item 3. Automotive Liability: In case I crash into something in their vast parking lot network. My State Farm agent says he can add this on with a Commercial Umbrella for around $300. The other guy was $400 to $500.
Item 4. Professional Liability (E & O): This is usually for doctors, lawyers, agents of many kinds, especially real-estate, etc. Also software designers, product designers and many high-tech people, but not so much for graphic designers. State Farm does not offer it for people like me. The other agent said it would be minimum $3500, but I'd have to fill out a 20 page application, and it did not seem appropriate. They do it for producers.
I hope this is not the deal breaker, unless they can make an exception. Does anyone know more about this? Do you think I need it? Know anyone to talk to ?
Thanks for reading all this. It must be a wide spread issue for many motion graphic designers. If I'm going to grow my business I have to figure it out, and any help would be most appreciated.
Sometimes, outrageous insurance requirements are a way to weed out candidates that can't afford those costs. Are you willing to raise your rate you charge to this company to cover all this extra protection?
Mark may be correct that to some extent these clauses are designed to "weed out" the weaker candidates, but I believe another scenario, one which I have run into, is more likely.
As you yourself said:
[Richard DuCasse] "a huge bureaucracy that does not want to change anything."
Bingo. You've run into a "one size fits all" agreement designed primarily for bigger companies, not individuals and not "1099 contractors."
I believe that you are correct that the Worker's Comp makes little sense, but you still may need to get it, if only to have your company "hire" you as an employee to meet their requirement. (Not that you'd ever be able to file a claim because as the owner of the company you can't claim Worker's Comp from yourself.)
Fear not, it gets better.
Yes, you are correct with the General Liability. They want to be covered if you spill a pot of coffee into their equipment. Truth of the matter is that they are no doubt already covered themselves with their own policies, they just want somewhere to go first and your written agreement with them will spell out that these type of incidents are your problem.
The Automotive Liability is another of those sorts of things designed for bigger companies and, no doubt, different job descriptions. It's not to cover what you do on their parking lot, it's to cover what you could do out in the real world, say delivering masters to a dub house or some other activity, where the plaintiff would be claiming that even though it was your vehicle, you were acting on behalf of the company. It's 2 million of protection for them in this situation.
Errors and Omissions for a Motion Graphics artist?? This is more for people like ad agencies and PR firms who through their mistakes could bring about lawsuits and liability claims by generating incorrect information. Hard to see how motion graphics could create this kind of situation, but whatever.
Sorry to say that chances are they won't be willing to bend on much of anything because (say it with me) "This is what we require of ALL of our outside vendors."
Long and short of it is, see what you HAVE to do, determine what you CAN do and then make the decision based on that.
Nick writes -
"a huge bureaucracy that does not want to change anything"
this answers everything. When I first moved down to Orlando, I started to work for all the subcontractors at the Universal Studios Producers building. I eventually wound up working for Fox Sun Sports which was on the Universal backlot, and I even wound up working for Universal Creative- a division of Universal that creates the theme parks, AND I had a Universal vendor ID # for my company for that division.
But one day, a tiny division of Universal wanted to hire me, and this was Universal Studios directly - not a sub division or creative division. It was a tiny little AVID Mojo system that was having some minor issues. And the head of this department at the time said that I had to have ONE MILLION DOLLARS liability insurance to do any work for them ! I almost fainted. I insisted that I was already a universal vendor, and worked for SOME company at Universal on a weekly basis, but this was no excuse for this man. I had to have ONE MILLION DOLLARS liability insurance to work on their AVID Mojo edit system. So I wound up subcontracting thru a video dealer that worked with Universal.
Anyway, since that one time, I have been called back by another division of Universal becuase they had an emergency, and I INSISTED on getting an official NBC Universal vendor # before I come in. They gave it to me with no aggrivation. Now, when I go back to the other division (100 feet away in another trailer), I say "I have a Universal Vendor #", and there are no longer any issues.
Everything is politics. You eventually learn how to play the game.
In 25 years in this business I've never heard of anything like this. In the early to mid 90s I worked for huge corporations as a freelancer and never encountered a single request to provide my own insurance.
I think this is a case where some department head has corporate policy mixed up and thinks these insurance requirments apply to ALL vendors. A motion graphics designer should not be subject to these.
The one about spilling coffee on the Avid is the silliest one. They'd be covered by their own insurance if that happened. It doesn't matter if a freelancer spills it or if an employee spills it. We've actually had this happen...where a freelancer who is our main jib-arm operator has had accidents (not his fault) on location two different times and the jib needed repair. Our insurance company doesn't ask "who was operating the jib." It doesn't matter as long as he was hired by us to do so.
Magnetic Image, Inc.
I agree that it is silly, but I've had this happen to our little video production company too. In my case it was working for a Fortune 500 firm on an in-house HD video project, and I ended up having to get proof of $2M liability.
And yes, most bigger companies expect you to up your rates if they make you jump through a ton of hoops. So hopefully your client will be like that, too.
Web and Video Design
I totally agree with you. I know this is an extreme example of corporate bureaucracy run amok. But if there is a chance I can get a new client, I will try almost anything to do it. And if that means spending $1000 for insurance, to end up getting 5 or 10 or 20 thousand in business from them, it is worth it. Remember, I have to be very careful what I tell these people, or they will stop talking to me. Expressing my opinion on their rules is not a good idea. But if I don't get some feedback on my questions to them about at least exempting me from Worker's Comp, and hopefully Professional Liability, then I may have to give up, and stop wasting my time.
Thanks Bob, for the interesting story. I did a slightly similar thing a few years ago with another giant corporation, here in the Chicago area. I started working for them through independent production companies, and eventually they started sometimes hiring me directly, and finally gave me a vendor number, which makes getting payed easier for them and me.
It sounds like your friendly "Video Dealer", who let you work through his company for Universal Studios, was doing you a big favor. Did he mark up your fees? Did you buy him a few bottles of fine wine? I don't understand why your first vendor number was not good enough. Was your second vendor number a "universal" Universal number?
I also have worked through a friend's company many times in the past, for this big corporation, but if I continue to do that, I would have to get payed through that friend's company, and he would deserve to mark-up my pay. I'm trying to get away from that, by selling myself to them with no unnecessary middle men, and they really liked the idea of saving money that way. Then they dropped the insurance bomb on me. They just have too many MBAs clogging up their system. This is the real reason many American companies cannot compete, but don't get me started.
Thanks Nick for your thoughtful response. It confirms all my suspicions, and I agree with everything you said. However, I am not giving up yet. Before I started this post, I had worked my way up to a face-to-face meeting with 5 of their employees, where I showed my work, and it went well. I will continue to diplomatically probe their level of potential cooperation, after I talk to more insurance agents next week.
I will also try to set up my insurance options, but not pull the trigger until they actually book me the first job.
My alternate plan is to try to show them how easy it can be for me to work with them totally on the internet, thereby eliminating any insurance issues. But this company's bureaucracy is byzantine.
Yes, I am planning on charging them at least 15 to 20% higher than my normal rate to make up for my extra cost (if I buy item 2 and 3). I have worked for this company before, but always through other contractors, like independent producers who hired me to do the graphics. I know this company sometimes just wants graphics and I'm trying to establish a direct relationship with them. If I get 2 or 3 small jobs out of them, per year, it would cover the cost. But item 4 (Professional Liability) is the tough one. It may be the deal breaker, unless they grant me an exemption. I doubt if they would give me enough work to justify my buying it.
I'm wondering just what kind of situation would end up filing a claim for errors and omissions for the artist. Say you made graphics for a retail spot and you posted the wrong price in your ad, and *nobody* along the entire production, marketing/billing or broadcast chains caught the misplaced decimal place on the ad for a new Mercedes. Far-fetched, I know, but play along for a minute...
I wonder if the the dealers would be honor-bound to the broadcast wrong price; would they be liable to being sued by some trouble-making consumerist type if they did not honor it. Seems quite a stretch. Especially trying to make the graphics guy take the fall for it. I'm very skeptical.
OTOH, when a local radio station did a contest with the announced prize being (read this fast and out loud) "A free toy Yoda", they got in trouble when the winner sued them for not giving her a car, but a stuffed toy Star Wars Character instead. The court awarded her a car, IIRR, saying the radio station was deliberate in pulling a fast one on the listeners.
What else would/could E and O do for the graphics guy? Cover the cost of a blown broadcast airdate, when the time's already bought and can't be re-sold? Hm, perhaps slightly more plausible, but then what the production company is asking for is for the graphics guy to have enough coverage to make it worth suing him to recover the blown ad costs. Or am I looking at this the wrong way? What's the chain of who-sues-whom?
I think there's a marvelous potential in this for a money-making scam a la "The Producers" in setting up some graphics designer to deliberately fail under deadline pressure, for the express purpose of suing or settling with his E&O insurance coverage for the cost of the unused air time. Literally "Money for Nothing".
Then again, that could just be my dark, paranoid, and suspicious side popping up for a look around.
...or IS it!?!?!?!? Bwahahahaha!