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LiLo and the insurance trap

By Jay MacDonald · Bankrate.com
Friday, November 26, 2010
Posted: 10 am ET

I'm not quite sure how Lindsay Lohan wound up as the poster child of auto insurance, life insurance and now entertainment insurance casualties. Perhaps Charlie Sheen was busy. And who's crazy enough to dial up Mel Gibson, am I right?

No matter: LiLo excels as the petulant role model for how to become uninsurable.

In case you don't follow Hollywood gossip, allow me: Director Matthew Wilder tells E! News that he decided to dump LiLo in favor of Malin Akerman ("The Heartbreak Kid") for the role of Linda Lovelace in the forthcoming biopic "Inferno" because of "the impossibility" of insuring Lohan.

Lindsay Lohan won't be playing Linda Lovelace in the forthcoming "Inferno" biopic after being deemed uninsurable.

As I previously chronicled, Lohan's detox-and-retox lifestyle and dual DUI convictions inspired the Insurance Information Network of California to calculate just how much this misbehavior might have cost her on her auto insurance and life insurance coverage.

Entertainment insurance is a different beast altogether, as I recently learned while researching reality TV insurance. The insurance that LiLo ran up against this time is a formidable and growing presence in today's Hollywood, where film budgets often exceed that of third world nations.

As Slate Hollywood economist Edward Jay Epstein recently explained to NPR, movies get the green light only when a completion bond is signed that guarantees that the film's backers will receive a full refund if the movie is not completed. These insurance bonds, which typically cost the film's producers 1 percent to 3 percent of their entire budget, are then augmented by other aspects of entertainment insurance, such as cast insurance, workers comp, wardrobe and media, etc.

Not surprisingly, the film's backers are keenly concerned that the movie's stars will go the distance. Epstein recounts how delays resulting from Nicole Kidman's knee problems would have cost the insurers on "The Panic Room" some $60 million. Instead, they opted to replace her with Jodi Foster. As a result, Kidman was labeled uninsurable in Tinsel Town until "Cold Mountain."

What do you think? Will Lindsay Lohan suffer a similar freeze-out?

The cautionary lesson here is, whether we're talking auto insurance, life insurance or something as exotic as completion bonds, don't take your insurability for granted. It's not automatic. If you ignore your responsibilities under an insurance contract, insurers may not consider you worth the risk.

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