The Legal & Business Aspects of Disability Insurance in Professional and College Sports
Glenn M Wong
University of Massachusetts Amherst - Isenberg School of Management
Harvard University - Football Players Health Study
June 7, 2010
Villanova Sports and Entertainment Law Journal, Vol. 17, p. 473, Spring 2010
Elite athletic competition carries with it an unavoidably high risk of injury and disability. As a result it has become commonplace and good business practice that the participating athletes and/or their contracts be covered by disability insurance policies. Although the professional sports industry still pales in comparison to that of other non-sports businesses, combined revenues for the NFL, MLB, NBA and the NHL were almost $20 billion in 2009. Roughly 50% of all those revenues end up as player salaries. Consequently many of the interested parties, including teams, athletes, leagues, unions, agents and more have a vested interest in obtaining different types of disability insurance policies on or for the athlete. In college athletics, disability insurance policies provide a valuable peace of mind to student-athletes with professional potential. In part to help keep student-athletes in college, the NCAA and its member-institutions administer an Exceptional Student-Athlete Disability Insurance (ESDI) program.
Insurance policies have three main components: the coverage amount, the term of the contract and the premium amount. The components of an insurance policy depend in large part on statistical analysis to help determine the insurer’s level of risk and the necessary premiums to offset that risk. The relatively high risk of injury and the often millions of dollars at stake have made disability insurance policies in sports more complex and riskier. In particular, payout of athlete disability insurance policies often depends on whether the athlete suffered a career-ending injury, a term open for debate. As a result, the sports insurance industry has some particularly unique policies, including those based on loss of value and loss of draft position.
Almost all disability insurance policies direct any disputes to confidential arbitration. As a result, there has been minimal litigation and minimal public information available about athlete disability insurance policies. Some of the issues that due arise in athlete disability insurance disputes include misrepresentation by the athlete, pre-existing conditions, statutes of limitations, the definition of a career-ending injury and returning after a career-ending injury.
It is important for anyone working in the sports industry to have a good, overall understanding on how insurance works, the process and the options. Insurance in the sports industry is relatively new, and has changed and evolved considerably throughout its short history. It is important for people in the industry to keep up with developments as changes will be made to address market conditions, to address the needs of athletes, teams and leagues, to address changes in medical issues and rehabilitation and return from injuries and litigation decisions.
Number of Pages in PDF File: 55
Keywords: Disability Insurance, ESDI, NCAA, CBA, NFL, MLB, NBA, NHL
Date posted: June 8, 2010 ; Last revised: December 4, 2010