[e-drive][EQUIFLASH: URGENT NOTICE RE: INSURANCE DEFICIT]

[Patricia Joyce]

~~~~~~~~~ e-drive ~~~~~~~~~

May 8, 2002

Dear Members:

URGENT NOTIFICATION:  INSURANCE DEFICIT RULING
AND DEMAND FOR ARBITRATION

On Wednesday May 8th Equity notified PACT and Mirvish Productions as
producers of Lion King of its ruling to increase insurance premiums for
the Lion King and demanded arbitration as a result of the failure of
recent negotiations to resolve the accumulated debt in Equity's
insurance plan.

Revised year-end figures now forecast this year's deficit in the plan to
be in the neighbourhood of $85,000, leading to an accumulated debt of
$55,000, rather than the earlier reported $30,000 (see below for the
full-text article from the May issue of the News).

In the roughly twenty years that Equity's insurance plan has existed, we
have never faced a situation such as this. While we have routinely
experienced deficits in the main insurance plan due to natural cycles,
good years have always followed bad ones, making up for the shortfall
and allowing Equity to build a healthy plan. The surplus is now gone and
we are heading toward an unprecedented deficit and ongoing debt. This is
an exceptional and acute situation where the producer responsible for
the claims should pay for the overage.

We must state unequivocally that the artists themselves are not
responsible for the shortfall in the plan. Artists must have access to
basic and therapeutic care appropriate to the risks and occurrence of
injuries within each production. Never in our history have these needs
exceeded those of the group plan, however in a case where they do,
Equity has the ability to renegotiate the plan under the terms of the
Canadian Theatre Agreement (CTA). The Lion King's insurance requirements
are patently higher than those of all other productions covered by the
group insurance plan due to the physical demands of the show, which
include puppetry, dance, acrobatics, rigged flying, heavy costumes and
head-pieces.

Negotiations with PACT culminated with a final bargaining session on
Wednesday May 1st for changes to the insurance premiums. Pursuant to
Clause 47:03 satisfactory renegotiation of the insurance plan must be
achieved to ensure the long-term maintenance of benefits coverage. We
must now regretfully inform members that a satisfactory resolution was
not achieved. PACT's final offer to increase premiums was not sufficient
to restore the plan to even close to a zero balance. Further, the
increase would have been prorated across all PACT members. Equity's
position is that we must fund the plan sufficiently to cover ongoing
cash claims and climb out of deficit between now and the end of the
current CTA. Equity also believes that the source of this funding should
come from the production responsible for the drain.

As Mirvish Productions' Lion King is solely responsible for the current
deficit in the ACE/INA insurance plan and in the absence of a negotiated
resolution with PACT, Equity has ruled that the appropriate insurance
premium payable on behalf of artists engaged in Lion King is $87.50 per
week for the base plan (Clause 47:02 A) and $79.20 for the top-up plan
(Clause 58:31). This premium increase will prevent the further
accumulation of deficit and is projected to restore the plan to a zero
balance over the remaining term of the CTA. The increase will not,
however, recapture the previous surplus which existed prior to Lion
King. In addition, we have requested to proceed immediately to
arbitration pending which, Equity's interpretation shall prevail and the
ruling will be effective immediately.

Please note, this ruling only impacts Mirvish Prodcutions' Lion King.
The premium increase will not be implemented for other PACT members
until decided through negotiation or arbitration; nor will the premium
increase be imposed under the Independent Theatre Agreement, the Opera
Agreements, or other Equity contracts such as Co-op, Guest Artist or the
Indie.

We anticipate an expeditious arbitration and resolution of the situation
and will keep members informed of any new information as it becomes
available. Comments, questions or concerns should be directed to
executive director, Susan Wallace or Equity controller, Douglas Irons.

Yours truly,
CANADIAN ACTORS' EQUITY ASSOCIATION

Susan E. Wallace
EXECUTIVE DIRECTOR

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Insurance Plan Teeters, the News, May 2002
by Patricia Joyce, communications director

On March 28th representatives of Canadian Actors' Equity Association
(CAEA) and the Professional Association of Canadian Theatres (PACT) held
a meeting to resolve a serious and pressing issue facing the
association, a projected cumulative deficit of over $30,000 this year in
the Equity insurance plan. Equity executive director Susan Wallace
confirmed the gravity of the situation,

"The health of Equity's insurance plan is in jeopardy. Without a swift
and effective resolution, Equity's plan could face a dramatic
restructuring. The shortfall must be covered immediately to ensure its
ability to protect our members."
CAEA first learned of the deficit when insurance auditors reported a
$67,000 shortfall to Equity's national council in 2001 due to a high
ratio of claims to premiums. CAEA had fortunately accumulated a surplus
of $97,000, so the plan was still solvent. This year auditors have
projected another operating deficit of over $60,000.

Investigations have revealed that the mounting deficit can be attributed
to a single show - Mirvish Productions' The Lion King. While claims from
The Lion King account for approximately 28 per cent of total claims,
premiums from the show account for only five per cent of the total
collected from all producers. This huge disparity is singularly
responsible for the shortfall. By comparison, Mirvish Productions' Mamma
Mia, with two shows running, jointly representing roughly the same
work-weeks as Lion King, has a balance of claims and contributions at
six per cent.

Under the Canadian Theatre Agreement negotiated in 2000, engagers are
required to pay a $12 or $10 weekly insurance premium for all Equity
artists depending on the theatre's company category. During negotiations
Equity also proposed to expand the basic insurance coverage; however
PACT agreed to only increase premiums as necessary to maintain the
existing level of benefits. In anticipation that The Lion King would
require additional coverage because of its long-term physical demands,
Equity negotiated a separate top-up premium. 

The top-up plan provides optional coverage to A-2 productions and the
Stratford Festival where at least 75 per cent of the cast is willing to
participate. Additional premium is required, which is shared by the
producer and the Equity artists. The benefits are roughly double the
basic plan amounts. Top-up insurance is particularly beneficial for
income replacement because it provides an income of up to 75 per cent of
the artists' pre-disability earnings to a maximum of $1000 per week. The
top-up plan, which is currently offered at Lion King, Mamma Mia and
Stratford, posted a $30,000 deficit last year, its first year in
existence, and this year it is projected to lose another $50,000.

Susan Wallace explained,

"In the roughly twenty years that the plan has existed, we have never
faced a problem like this. Although we routinely experience deficits in
the main insurance plan due to natural cycles, good years have always
followed bad ones, making up for the shortfall. This is an exceptional
and acute situation where the producer responsible for the claims should
pay for the overage."

The Equity insurance plan is specifically for members of Canadian
Actors' Equity Association. Unlike other forms of insurance, there is no
larger pool of insured parties to share the risk. Therefore, premiums to
the Equity insurance plan must cover all claims and administrative
costs. However, premium increases have always been part of the
renegotiation of Equity's agreements. Equity negotiated the ability to
revisit the insurance premiums mid-agreement to protect the plan in case
a severe shortfall occurred.

In June 2001, Equity informally advanced to Mirvish Productions and PACT
that there were problems with the insurance for The Lion King that might
require a review of the premiums. By the time the September (2nd
quarter) numbers were available, earlier suspicions were confirmed - the
plan was definitely headed into an unheard of cumulative deficit. Equity
then requested a meeting of the Joint Standing Committee (JSC) with PACT
to discuss the situation with the insurance policy.

Full details from the insurance company were presented to the PACT
representatives at a meeting held January 2002. Potential increases in
the premiums necessary to rectify the situation were outlined, both the
cost to spread over the entire PACT membership or what The Lion King
would pay to cover its own claims. PACT identified that the next step
would be to arrange a meeting with the principles of Mirvish
Productions. However, with no resolution forthcoming, Equity further
requested a meeting under Clause 47:03 of the CTA, which provides for
the renegotiation of the insurance plan to ensure the long-term
maintenance of benefits coverage.

At the March 28th meeting Equity presented up-to-date figures showing a
continuation of the deficit with the expectation to renegotiate the
insurance premiums. PACT however, was only prepared to take away the
numbers for further examination, suggesting that a roll-back of Equity
members' insurance benefits be considered as among the possible remedies
and stating that they would attempt to arrange a meeting of their
executive as soon as possible.

Satisfactory resolution of this situation must be achieved with PACT
under the provisions of the CTA to ensure the long-term maintenance of
benefits coverage under the plan. The alternatives before PACT and
Equity are to require The Lion King to pay for an increase in insurance
premiums or prorate an increase across all PACT engagers. Equity
reiterated the severity of the current situation underscoring, however,
that it would not see member benefits curtailed. Equity will distribute
updates as further information becomes available.