Kirk Douglas was well into his 80s and in a delicate state of health. Filmmakers wanted to cast the screen legend in a new starring role, but behind the scenes, Hollywood's business types simmered with questions and doubts: Would the actor have the energy to endure the physical rigors of filming?

No one wished to be disrespectful or morbid, but would the octogenarian—who already had suffered a debilitating stroke—live to the end of production? If he did not, the entire project might have to be scrapped, and all money spent to that point could be lost.

The biggest question of all: Would he be insurable? That is a prerequisite for an actor to work in a movie.

"He was half-paralyzed. He had a lot of issues," says Brian Kingman, a longtime insurance broker for film productions. "But if you have enough time, talent and money, anything is possible to insure."

Insurance is the talk of Hollywood these days. Ever since the very public meltdown of Lindsay Lohan last month—and now, the private struggles of Owen Wilson—speculation is spiraling over whether these talented actors have derailed their careers by jeopardizing their insurability.

But the issue may be more lip service than actual practice. In fact, the entertainment industry can be just as creative when formulating insurance for its actors as it is when writing screenplays and producing films.

Kingman, a director at Aon/Albert G. Ruben, ended up stitching together a policy for Douglas by persuading several insurance companies to each assume a small share of the total risk that the ailing actor could become disabled or die during production.

The production company, in turn, agreed to pay an additional premium "in the seven figures," Kingman says. As a result, the 2003 movie It Runs in the Family, starring the cleft-chinned actor alongside his real-life relatives, got made.

It surely helped in the insurance negotiations that one of the film's producers was Douglas's son, Michael. But as history shows, when there is a will, there's usually a way—even for the most out-of-favor actors.

"It always goes to the issue of budget," says producer Mike Medavoy, co-founder of Orion Pictures and former chairman of TriStar, who has been involved in the making of more than 300 features films. "The question is: Do you want to take the risk, or not?"

 

Filmmaking has always been a risky business. With costs per film sometimes exceeding $100 million nowadays, insurance—which is typically purchased by the production company—plays an important role in minimizing investors' exposure to catastrophic losses.

If a star actor fails to show up for a scheduled shoot because of illness, an accident or substance abuse, the delay could cost hundreds of thousands of dollars each day, as the rest of the cast, the production crew and location rental fees would still have to be paid.

Medavoy recalled how, decades ago, Spencer Tracy had been deemed "uninsurable" because he was so gravely ill. But the actor still starred in Guess Who's Coming to Dinner because other cast members, including Katharine Hepburn, assumed the risk of his nonperformance.

In a show of solidarity, they agreed to put their salaries into escrow to absorb production losses in the event Tracy would have to be replaced. The actor managed to complete the film a few weeks before he died. Tracy won a posthumous Oscar nomination in 1968 for his performance.

More recently, a bewitchingly beautiful A-list actress—who happens to have a history of untimely oral herpes flareups—also made insurance and movie executives nervous because of her potential to delay production.

But according to an insider who asked not to be identified, the actress eased concerns after she agreed, as a condition for her insurance, to adhere to a medical regimen that would prevent unsightly sores from breaking out around her mouth during filming.

On another occasion, a talented actress-writer was cast as the top-billing star for an action-comedy film. But because of her substance abuse problems, her professional reputation was in tatters.

"We found out she was not insurable, at least not on normal policy terms," the insider says. Nonetheless, the actress and the production company managed to work things out by having the latter withhold her salary until she completed the film without incident.

Writing insurance for a film can be more art than science. Before issuing a policy, underwriters will scrutinize every line in the screenplay to identify risk factors. They also assess the reputation, lifestyle, and work record of the marquee actors.

"There's not an absolute. It depends on every production," says Wendy Diaz, entertainment underwriting director for Fireman's Fund, a large provider of policies for movie and TV productions. There are rare occasions, she adds, when insurers will walk away from a project because the principals involved can't agree on terms.

"If you have someone who has an actual serious problem right now, going to a foreign country to film probably is not the best circumstance, away from any kind of support system they may have," she says. "And it's not always the artist. It could be the production itself is too risky. If you're filming in Iraq, you might have a little difficulty putting [an insurance deal] together."

Insurance companies typically require actors to undergo health screenings and fill out detailed affidavits. Women are queried if they are pregnant or suffer from any menstrual disorders. Aside from questions about allergies, asthma, diabetes, cancer, blood disorders and hernias, artists are asked whether they have any mental disorders, experienced recent changes in body weight, smoke or use drugs.

"If a show goes down for two weeks because someone got absolutely besotted and needed to dry out, insurance is not going to cover that," says insurance broker and risk adviser Peter Marshall, senior vice president at DeWitt Stern Group. "If you try to buy insurance for someone's inebriation ... you're getting into the area of very high premiums and high deductibles."

A standard insurance policy for a movie, which also covers supporting cast members, the director, equipment and general liability in case of slips and falls, usually costs between 1 to 2 percent of its production budget. But providing coverage to a high-risk candidate like Kirk Douglas can more than double premiums.

Policies often require actors to refrain from such dangerous activities as skydiving, skiing, or piloting their own plane while a movie is being filmed. Rates can jump for actors with chronic illnesses or a history of expensive claims, no matter what the cause.

Nicole Kidman, for example, became an insurance pariah after a knee injury caused her to miss work during the filming of Moulin Rouge, delay the shooting schedule of The Others and then drop out of Panic Room weeks into production, forcing a last-minute switch to Jodie Foster for the leading role. The interruptions to production schedules spurred millions of dollars in insurance claims to cover the added expenses.

Still, the popular actress was hired for a string of subsequent films, including the title role in Fur: An Imaginary Portrait of Diane Arbus. The 2006 movie co-starred a fellow actor who had been in the insurance doghouse, too—Robert Downey Jr., whose drug problems and arrest record had made headline news.

Downey regained insurer confidence by completing another stint in rehab and becoming a man-about-town accompanied by a crisis counselor—demonstrating his seriousness about staying sober.

For the 2003 movie Gothika, one of his first projects during his comeback, he also personally guaranteed his performance by financing his insurance. Out of jail, he began racking up a different kind of record: showing up on the set every day, on time and ready to work.

Downey "was somebody who was very willing to get back on track," Marshall says. "This is something that Ms. Lohan can do. She has a body of work that's very enviable. If she can put herself back into shape to work, I don't think anybody has much of a doubt that people will want to hire her."

As for Wilson—who dropped out from the upcoming comedy Tropic Thunder after his recent hospitalization over an apparent suicide attempt—film financiers will likely be just as forgiving once the actor is on his feet again.

"Owen Wilson is a really, really loved and respected person by a lot of people in the business," Marshall says. "You've got a lot of goodwill built up there. You have someone that everyone wants to see bounce back, whatever has transpired."

When the final edit is done, though, even the most comprehensive and well-meaning insurance policy could not guard against this peril: Death at the box office.

It Runs In the Family, Guess Who's Coming to Dinner, Moulin Rouge, The Others, Panic Room and Gothika all made money. But Fur, produced on a budget of $17 million, has raked in less than $3 million at theaters worldwide.

"There's so much big money tied up in production," says Mary Craig Calkins, a law partner at Howrey who specializes in entertainment insurance. "Insurance shifts the risk. But if you have the most awful script in the world ... if it's a box-office bomb, there's no insurance for that."