It's lonely being a Jacksonville Jaguar fan, even here in Jacksonville, Fla.
The team has been so bad for so long that fans probably wouldn't even know what to do if the River City "cats" actually found their way into the victory column.
Perhaps this is why every year the NFL draft gives us optimism. The consensus among the sports pundits this year was that Jacksonville's draft was a solid A. From my personally biased standpoint, I would agree. The icing on the cake wasn't picking Jalen Ramsey in the first round, but rather getting Ramsey and Myles Jack, as the latter had been projected a Top 5 pick but slid into the second round because of medical issues. So how do those medical issues affect Property and Casualty insurers?
One of the most fascinating aspects of insurance is that if there is a risk any risk there is likely an insurer willing to write a policy. That is exactly what happened to Jack, who had a policy in the event that the injury sustained his senior year at UCLA caused him to lose value in the draft. He is not alone, as other players such as Willis McGahee and Jaylon Smith obtained similar policies.
These policies provide insurance in the event of an injury that results in a player losing position in the NFL draft. Consider the situation where a college player has a fantastic junior season and announces he is going to finish his college career, only to get hurt during his senior season. Prior to his senior year, this All-American linebacker is projected to be a Top 10 prospect in the next NFL draft. Low and behold, he sustains a knee injury during a game that requires surgery.
While the prognosis is good, there are now risks. A team may take a chance on the player, but are they going to make him a first-round selection? This is precisely what happened to Jack and Smith.
In both of their cases, they had obtained a loss-of-value policy. But does that mean they will be compensated? This depends entirely on the coverages purchased, the catalyst for the injury and any potential exclusions.
Let's look at a couple of examples:
Determining what type of coverage is needed and who will pay for it are key considerations. (Photo: iStock)
Not all policies are created equal
In 2003, University of Miami tailback Willis McGahee tore knee ligaments in the Fiesta Bowl against Ohio State. He had purchased a $2.5 million dollar policy that he could collect only if he suffered an injury that kept him from ever playing professional football. This particular policy had no cash value for slipping in the draft. He went on to play professional football for 11 years, negating the value of the policy.
Compare this to University of Notre Dame linebacker Jaylon Smith who tore knee ligaments in the Fiesta Bowl against Ohio State this year. His $5 million dollar policy specified that it would pay not only if Smith could never play professional football, but also if he dropped out of the first round. As you can see, not all insurance policies are created equal.
According to Keith Lerner, head of Gainsville, Fla.-based Total Planning Sports Services, a typical policy costs about $8,000 for $1 million dollars in coverage. He says that while these policies have been around for 25 years, they have only increased in volume over the past two to three years. He has some familiarity with this coverage as he underwrote the policy on University of Oregon cornerback Ifo Ekpre-Olomu, who was injured in a college game and slipped to 241st pick in the 2015 NFL draft.
From an insurance standpoint, this type of coverage has proven to be very profitable, as Ekpre-Olomu's claim was one of the first claims ever filed. Whether that profitability is sustainable remains to be seen. As discussed earlier, at least two players in this year's draft, Myles Jack and Jaylon Smith have valid claims. In addition, other players who have slipped in prior drafts, such as ex-University of Southern California football stars Morgan Breslin and Marquise Lee, have also filed claims.
These types of policies will typically list out with some specificity what is a covered loss, and it often requires the injury to be sustained on the gridiron. There are a variety of exclusions, such as off-field behavior, pre-existing conditions or injuries sustained while taking unnecessary risks. As discussed in "Re-Adjusted: 20 Essential Rules To Take Your Claims Organization from Ordinary to Extraordinary," carriers will have to do significant due diligence to ascertain both the causation of the injury, as well as identifying any mitigating factors that could potentially limit exposure under a loss of value policy.
In the case of Marquise Lee, his policy limit is up to $5 million. This is in excess of the NCAA disability policy, which is also $5 million. The caveat here is that the NCAA policy won't pay because it requires a complete disability and does not provide coverage for loss of value.
Another challenge facing players is not only the type of policy to purchase, but how the policy will be paid for. While the NCAA does allow players to purchase these types of policies, they don't allow players to consult with agents who actually have expertise in the world of professional sports finances. This creates a massive headache for twenty-somethings who probably can't make heads or tails of what they are signing.
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Players must show they lost value or failed to secure endorsements because of an injury. (Photo: iStock)
Proving damages
Another area of potential contention is provability. Is there evidence that shows a player lost value in the draft because of the injury or are there other intervening causes? Consider the many off-field issues that plague some players. Would that have an affect on the value of potential claims? In the event of both an off-field incident and an on-field injury, how did each affect the player's draft position?
Calculating this loss can be somewhat challenging as well. As far as simply playing football, there are fairly straightforward formulas as to what players will receive. The higher in the draft, the higher the compensation. If a player falls from 10th to 50th, he has fallen 40 slots, and there is a mathematical equation that can calculate that loss.
But, what about outside compensation, such as endorsements? A Top 10 player might get a very lucrative endorsement, which is unlikely for a player drafted 50th. This is likely going to be a challenge unless the value is specified in the contract. But, it is very difficult to create a policy that covers something so speculative.
Let's take a look at how this will play out for Myles Jack, who is covered with a $5 million loss-of-value policy. According to ESPN, a source familiar with his policy indicated that he would collect if he fell to the 45th pick in the draft and would get approximately $60,000 per pick after that. To collect on his entire policy, he would have to have fallen into the sixth round. Jack was selected as the 36th pick in the draft, and therefore won't collect anything.
As for Jaylon Smith, the other defender that slipped in this year's draft, he will fare a bit better. According to NBC Sports, Smith will receive about $900,000, as his policy kicked in if the player fell out of the first round. He was selected in the second round as the 34 pick. However, he is still out a substantial sum of money. Had he been selected as the third pick, where many draft boards placed him, he would have gotten a contract with a value of $26 million. As the 34th pick, he will get about $6.5 million.
The good news is that there is such coverage available to protect players from career-limiting injuries. The bad news is that these policies vary widely in terms of coverage and exclusions. As is the case with any insurance policy, it is important to understand what you are purchasing as well as taking the time to read the fine print.
Chris Tidball is a casualty consultant with Mitchell International and the author of several insurance-based books, including "Re-Adjusted," "Blocking & Tackling" and the recently released thriller "Swoop & Squat." To learn more, visit www.christidball.com.
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