From the NFL to rec leagues, football is facing a stark, new threat: an evaporating insurance market that is fundamentally altering the economics of the sport, squeezing and even killing off programs faced with higher costs and a scarcity of available coverage, an Outside the Lines investigation has found.
The NFL no longer has general liability insurance covering head trauma, according to multiple sources; just one carrier is willing to provide workers‘ compensation coverage for NFL teams. Before concussion litigation roiled the NFL beginning in 2011, at least a dozen carriers occupied the insurance market for pro football, according to industry experts.
The insurance choices for football helmet manufacturers are equally slim; one helmet company executive said he was aware of only one. Pop Warner Little Scholars, which oversees 225,000 youth players, was forced to switch insurers after its longtime carrier, a subsidiary of the insurance giant AIG, refused to provide coverage without an exclusion for any neurological injury.
“People say football will never go away, but if we can‘t get insurance, it will,” Jon Butler, Pop Warner‘s executive director, lamented to colleagues after discovering that just one carrier was willing to cover the organization for head trauma, according to a person who was present.
Dr. Julian Bailes, Pop Warner‘s medical director and a member of the NFL‘s Head, Neck and Spine Committee, told Outside the Lines “insurance coverage is arguably the biggest threat to the sport.”
With youth participation rates continuing to fall, the insurance crisis adds another layer of uncertainty to the future of America‘s No. 1 sport. Insurance companies, which earn billions of dollars each year by taking on risk, are increasingly reluctant to bet on football and other sports associated with traumatic brain injuries. Some insurance industry executives compare the issue to asbestos, an occupational hazard that has cost insurers at least $100 billion. Traumatic brain injury “is an emerging latent exposure the likes of which the insurance industry has not seen in decades,” Joe Cellura, president of North American casualty at Allied World, wrote in a blog post last year for the website Risk & Insurance. Cellura declined to comment for this story.
“Basically, the world has left the marketplace,” Alex Fairly, CEO of the Fairly Group, an Amarillo, Texas-based risk management firm whose clients include the NFL and Major League Baseball, told Outside the Lines. “If you‘re football, hockey or soccer, the insurance business doesn‘t want you.”
During the November convention of the Casualty Actuarial Society in Las Vegas, William Primps, an insurance lawyer and former Yale running back, told hundreds of actuaries, “Overall, I think that there is a real threat to the viability of sports.”
Outside the Lines interviewed insurance carriers and brokers, school administrators, lawyers, consultants, team and league officials, coaches and players and reviewed thousands of pages of court documents and insurance contracts for this story. The details shed light on an arcane but essential corner of the sports world reeling from a crisis that began in the NFL and continues to spin out in unexpected ways. The effects are being felt most acutely across football, but insurers increasingly view all sports associated with head trauma with caution, according to industry experts.
Organized sports, like most endeavors involving risk, can‘t exist without insurance. How deeply the crisis ultimately will be felt is a question that is being debated in trade publications and industry reports, at insurance conferences and among brokers who service the sports world. Scott Lunsford, a senior vice president with K&K Insurance, which finds coverage for amateur sports, acknowledged that several prominent carriers no longer cover head trauma but said numerous options remain available, though sometimes with restrictions that limit insurers‘ exposure.
“It‘s part of our business now, brain injury and concussions, and we‘ve adjusted,” Lunsford said.
“IF YOU‘RE FOOTBALL, HOCKEY OR SOCCER THE INSURANCE BUSINESS DOESN‘T WANT YOU.” ALEX FAIRLY, CEO OF THE FAIRLY GROUP
Butler said he believes carriers are “starting to get a handle on it, just as they have with other risk management situations.” In an effort to ease insurers‘ fears, Pop Warner‘s law firm has taken the unusual step of staging seminars in which some panelists raised doubts about the connection between football and neurodegenerative disease.
Still, insurance coverage is already having a material effect on programs throughout the country.
Last spring, the Maricopa County Community Colleges in Arizona, citing costs and potential liability, announced that they were eliminating football at four schools, including a three-time junior college national champion. A task force concluded that the teams, consisting of 358 players, accounted for nearly one-third of all insurance costs for the district‘s 200,000 students.
In Bakersfield, California, the North of the River Recreation and Park District terminated its tackle football program at the end of this season, citing plummeting participation and rising insurance costs.
Another recreation department, in Hawkins County, Tennessee, decided to keep tackle football this year, even though its longtime insurer refused to cover the sport. The department found a new carrier under a policy that drove up overall insurance costs 27 percent to more than $13,000. The department‘s director, Tim Wilson, citing falling participation and rising costs, predicted that youth football will disappear within a decade. “We have insurance now, but who knows for how long?” he said.
In the years before football‘s concussion crisis, dozens of insurers — including household names such as Fireman‘s Fund, The Hartford and Travelers — insured the NFL without restrictions for traumatic brain injury. Many of those companies are now embroiled in a six-year lawsuit with the NFL in New York Supreme Court over who will pay legal fees and claims associated with the 2013 settlement of a class-action lawsuit that is expected to cost more than $1 billion. The market for amateur sports was even larger, according to industry experts, with insurers competing to provide a range of coverages for youth, high schools and colleges.
Insurers worry that concern over traumatic brain injury, like in the case of asbestos, will play out for decades, with carriers potentially on the hook for billions of dollars in legal and medical costs.
For this story, Outside the Lines hired legal researchers to document the growing universe of concussion litigation — the primary reason behind the insurance industry‘s fears. Since 2005, when the first case of brain disease was reported in a former NFL player, thousands of concussion-related lawsuits have been filed in the United States, including class-action suits against the NFL, the NHL and the NCAA. Since the NFL settlement, concussion-related lawsuits involving at least 18 sports and activities have been filed in at least 29 states, Outside the Lines‘ research shows. They target not only professional sports but also youth leagues, school districts, athletic associations, equipment manufacturers, medical providers, coaches and athletic trainers.
The result is potentially catastrophic for organizations such as rec departments, youth leagues and school districts, as insurers seek to transfer risk back to those entities, which can least afford a major financial blow. In 2016, Pop Warner, which is registered with the Internal Revenue Service as a nonprofit organization, settled a lawsuit with the family of a former player who died of suicide and was found to have had CTE. In Washington state, the family of a high school football player who suffered a catastrophic brain injury won a $5 million settlement after arguing that coaches violated the Lystedt Law, which prescribes protocols for handling head injuries. The law has been replicated in all 50 states.
Richard Adler, a Seattle attorney who specializes in brain injuries and wrote the Lystedt Law, said insurers “should use their considerable power, influence and resources to promote player safety. Blaming the threat of litigation as a reason to withdraw from providing insurance to youth sports is shortsighted and does little to advance the need to prevent preventable brain injuries in youth sports.”
Fred Langer, a personal injury lawyer who works with Adler on brain injury cases, said insurers “ought to be going out there and insisting that the law is followed, training the coaches, training people to do what is right. The question I would have for them is what is the solution for this? Do you want to eliminate sports? Because that‘s what it would be, right?”
In fact, pressure from litigation has already led to numerous improvements in player safety at all levels. The NFL has spent tens of millions of dollars on concussion research, sponsored a nationwide program called Heads Up to promote player safety and enacted dozens of rule changes designed to reduce head injuries. One of those rules for this season, an effort to curb targeting, generated intense preseason scrutiny and discussion among players, fans and coaches, even as commissioner Roger Goodell said, “Our focus is on how to take the head out of the game and make sure we‘re using the helmet as protection, and it‘s not being used as a weapon.”
The NFL declined a request to interview executive vice president and chief financial officer Joseph Siclare for this story. NFL spokesman Brian McCarthy asked Outside the Lines for written questions but did not answer any of them.
Lee Gaby, an insurance consultant and former risk manager for hundreds of public school districts, said some insurance companies have begun to require concussion management plans and technology such as neuropsychological testing kits as “hammers” to encourage behavior that reduces claims.
But Gaby said he fears it won‘t be enough for some companies wary of huge potential losses.
“I‘m tending to be on the side that this is going to be a lot bigger than we think. I don‘t know if I‘d compare it to asbestos. I‘m somewhere in the middle,” he said. “But I just have a foreboding sense that there‘s so much more we don‘t know. No one wants to be the last to find out and be the one that‘s writing all the risk.”
As claims mount, Gaby, who played high school football in Georgia, said he fears that an increasing number of school administrators will decide: “No more risk, no more football.”
Alex Fairly, CEO of the Fairly Group, an Amarillo, Texas-based risk management firm whose clients include the NFL and Major League Baseball, says, “If you‘re football, hockey or soccer, the insurance business doesn‘t want you.” Bill Roach for ESPN
ON MARCH 14, 2016, Jeff Miller, the NFL‘s executive vice president of health and safety initiatives, acknowledged the link between football and chronic traumatic encephalopathy in remarks to a congressional committee. Miller‘s statement was shocking: It was the first time a senior NFL official had publicly connected football and the disease that has been found in at least 110 deceased former players.
His statement set off alarms inside the offices of the NFL‘s insurer, Berkley Entertainment & Sports. In the concussion era, Berkley has become the lone carrier willing to cover pro football for head trauma. Miller‘s admission was a gift to plaintiff attorneys, who could cite it in lawsuits against the NFL. The stakes were enormous: Berkley, along with its clients, was potentially exposed to millions of dollars in future claims.
Within hours, top executives pressed Cindy Broschart, Berkley Entertainment‘s president, on whether the time had come to cut the NFL loose. Broschart held firm. She explained that Berkley had protected itself by raising deductibles to unprecedented levels and, after Miller‘s comments, would have the opportunity to push them up further.
Broschart ended up doing just that: When the NFL‘s policy expired last year, Berkley doubled the per-claim deductible to $1 million and significantly increased the “aggregate” — the total amount teams are required to cover before Berkley spends a dime. The NFL, represented by Fairly, accepted the terms.
Fairly, one of the most prominent risk management experts in sports, declined to discuss the specifics of the deal. But he said the NFL‘s limited options reveal “how tenuous it is to buy insurance in professional sports. It literally rests in the hands of a single person in the world.”
Over the past several years, the concussion crisis has brought about dozens of rule changes, innovations in protective equipment and a relentless public relations campaign to convince parents and athletes that the game has never been safer.
But the insurance industry isn‘t buying it. To an increasing number of carriers, football is a dam built atop an earthquake fault. A disaster might never occur, but the specter of huge potential losses is scaring many companies away.
“I don‘t want to use the word ‘meltdown,‘ but there‘s a panic in the market,” said Gaby.
To understand why requires some basic information about the $1.2 trillion insurance industry. Insurance customers, of course, are buying peace of mind: the knowledge that their financial needs will be met if a costly event takes place. Companies profit by betting that they will take in more in premiums and investment income than they pay out in claims. To price that risk, the carriers — much like casinos and sports books — calculate the odds that a loss will occur, mining mountains of data about everything from traffic accidents to mortality rates. Auto and life insurance are the craps tables and roulette wheels of the industry: The data set is so large that companies have a high probability of making money.
What scares the industry about football is the limited available data and the vast uncertainty. There are roughly 300,000 football-related concussions each year, according to an estimate by the University of Pittsburgh Medical Center‘s sports concussion program. But the prevalence of CTE, and the likelihood that current players will develop dementia or other disorders, is unknown. The “trigger” — how and when the disease starts — has not been established. CTE can be diagnosed only after death, and the symptoms, which range from depression to delusional behavior, might not surface for decades.
“THIRTY YEARS FROM NOW YOU COULD BE ON THE HOOK, AND THAT‘S A VERY DIFFICULT SITUATION FOR AN INSURANCE COMPANY TO BE IN.” JAMES LYNCH, CHIEF ACTUARY FOR THE INSURANCE INFORMATION INSTITUTE
In 2005, when the first CTE case was reported in a former NFL player, 25 scholarly papers that included the words “football” and “concussion” were published. Last year, there were 139, according to PubMed, a database of scientific research. Some of the studies have been ominous: Last April, researchers at the Veterans Administration Boston Healthcare System and Boston University reported that participating in tackle football before age 12 “appears to increase vulnerability to the effects of CTE and other brain disease or conditions.”
In insurance parlance, traumatic brain injury is a “long-tail claim” that might take years to develop, then pay out indefinitely in the form of costly legal fees (to defend lawsuits and pay off settlements and judgments) and medical bills (to support disabled former players).
“Thirty years from now, you could be on the hook, and that‘s a very difficult situation for an insurance company to be in,” said James Lynch, chief actuary for the Insurance Information Institute in New York. “This is why the industry is concerned about it. You want to be able to box up that risk.”
The potential exposure for insurers is incalculable. After listening to a presentation on brain injuries and insurance at the annual Casualty Actuarial Society convention in Las Vegas, William Morrissey, a vice president and actuary for CNA Insurance, told the panel, “I‘m wondering how big of a sleeping giant this is.”
Morrissey noted that there are millions of former athletes exposed to repetitive head trauma who could file lawsuits against numerous targets, including schools, teams, leagues, coaches, athletic trainers and doctors. Insurers could be required to cover those legal costs.
“That‘s what scares me. I hope it scares everyone else,” Morrissey told the panel.
Moderator Barbara Murray, director of the financial services sector at PricewaterhouseCoopers, agreed that insurers could be exposed to a “free-for-all nightmare.”
The ultimate long-tail claim is asbestos. The link between the high-strength fiber, which was widely used in the construction industry, and the lung disease asbestosis was discovered in the mid-1960s. After more than 50 years of litigation, the industry still pays out $1.8 billion annually in asbestos-related claims.
Like asbestos-related diseases, CTE can take years to develop, increasing the possibility of decades of litigation. The pool of potential claimants is in the millions — theoretically, any athlete — with a variety of potential legal targets.
“There are parallels, and they are very real parallels,” Lynch said.
But there‘s a vast difference between asbestosis, which still claims 12,000 to 15,000 lives annually in the United States, and CTE, which has far fewer documented cases and a much smaller pool of potential victims. One broker called asbestos “a tidal wave” and sports-related brain injury “a ripple.”
Insurers have also “learned from their experience” from asbestos and are devising myriad strategies to limit costs, according to a 2016 report by S&P Global, a ratings agency. Many carriers are employing “exclusions” — which immunize the company from head trauma claims — or simply refusing to provide coverage.
Football and other sports are learning this the hard way.
When wrestling entrepreneur Vince McMahon decided to bring back the XFL, his first order of business was to look for insurance; without it, he knew, the league couldn‘t exist. Professional football requires two types of insurance: general liability and workers‘ compensation, which is mandatory under state laws. Pro sports teams need workers‘ compensation because the players — unlike amateur athletes — are employees.
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