Athletic prowess is a valuable asset in the United States. So much so, that it’s worth protecting with rather expensive insurance policies covering career-threatening injuries. But, as Richard C. Giller, writing for the legal blog Law360 explains, a recent spate of lawsuits filed by elite athletes against insurance companies that promised but denied coverage should serve as a warning for athletes and their handlers.
First, there are specialized policies that deal with athletes. The basic coverage is for a permanent total disability, or PTD, which would prevent the athlete from playing a designated sport professionally. These policies have an optional rider or loss of value, “LOV”, covering injuries that would cause the athlete to sign a contract to play for considerably less money than contemplated.
Given the high costs of premiums, it’s important to structure a policy with the right balance of PTD and LOV coverage. This is a sophisticated task, requiring specific industry knowledge that the athletes and the people closest to them generally do not have.
Obtaining one of these policies requires an athlete to go through certain specific channels: a local retail broker contacts a wholesale broker, who contacts a London underwriter to “request a quote, bind coverage and issue a policy.”
Thus, the entity ultimately responsible for paying an athlete’s claim is two degrees and one ocean removed. This pipeline creates problems in communication which have led to questionable denials of coverage, and it also creates a scenario where the person/entity the athlete depends on most is the furthest removed.
Consider these four cases:
- Rawleigh Williams III — Lloyd’s of London denied $1 million worth of coverage to the University of Arkansas running back who suffered a career-ending neck injury on the basis of “an endorsement issued by the wholesale insurance broker, International Specialty Insurance Inc. (“ISI”), which was dated three days after Williams sustained his debilitating neck injury and more than six weeks after the insurance policy incepted.” Williams filed suit in May 2018 charging “breach of contract, insurance bad faith, deceit and civil conspiracy.”
- Mitch Moreland — Boston Red Sox first baseman filed suit on Sept. 26, 2016, in federal court in Los Angeles alleging that, during the procurement process of his PTD/LOV policy, ISI “fraudulently misrepresented his MLB contract status to the insurance company,” which “caused Moreland’s valid insurance claim to be wrongfully denied.” Moreland presents evidence that ISI told the insurance company that Moreland would be a “free agent after the season” and was “looking at a 4 yr $30m deal” when Moreland was only eligible for salary arbitration, “unlikely to sign a multi-year deal, and was not eligible to become a free agent for another two and a half years.”
- Nyeem Wartman-White — The former Penn State linebacker filed suit on May 17, 2017 in federal court in Pittsburgh, alleging bad faith in the handling of his injury claim. A recent report quoted Wartman-White’s retail insurance broker as publicizing the fact that the athlete settled with Lloyd’s for the full amount of his LOV policy limits and that Wartman-White would be receiving a $500,000 payout.
- Deatrich Wise, Jr. — The former University of Arkansas defensive standout filed suit on March 9, 2018 in state court in Dallas alleging “that Lloyd’s and ISI, ‘misrepresented the terms, benefits or advantages of the insurance in violation’ of Texas law.” After various injuries, Wise, who had been projected to be an early round NFL draft pick, dropped to the fourth round, finally selected by New England as the 131st overall pick. He seeks LOV benefits worth more than $600,000, and at the time he filed his lawsuit his claim had not been affirmed or denied.
Given that the four cases name the same wholesale insurance broker — International Specialty
Insurance Inc. — as a defendant, we might conclude that one lesson to be gleaned is not to do business with ISI. That’s not necessarily so, however, it is important to make sure that the wholesale insurance broker involved is acting diligently. As Giller points out, due diligence in the purchase of insurance is extremely important. If the athletes or their families are not up to the task, hiring a professional who understands the policies and the procurement process is a step in the right direction.
Unfortunately, the NCAA’s bar against professional representation prevents non-professional athletes from talking to agents, who are often a reliable source for guidance on these issues.
When an insurance company denies a valid claim, policyholders may have to assume crushing losses. If your insurance company has wrongly denied coverage to your business, contact our firm for immediate assistance.