Hard times: The NFL’s insurance struggles
Insurers are less willing than ever to write coverage for U.S. football. Will the market soften any time soon?
The last decade has seen an influx of data on the possible long-term effects of traumatic brain injuries in all contact sports, with the biggest buzz surrounding football, thanks to a litany of costly, headline-stealing litigation.
In 2016, the National Football League was given the all-clear to move forward with a $765 million settlement to compensate more than 20,000 retired players for head injuries over the next 65 years.
In the same year on the youth side, Pop Warner Little Scholars, which oversees 225,000 youth players, settled for less than $2 million with the family of a former player who claimed his suicide was the result of injuries from four years of playing youth football.
The momentum has been building since the earliest correlations between football and concussions began emerging roughly a decade ago. Many feel these large suits are just the first strikes rattling the leagues, and that a tsunami of years and years of claims payouts — similar to asbestos cases — are building.
Taking cover
According to an investigative report from ESPN, there is presently only one insurer willing to write workers’ compensation that covers head trauma for the NFL. None will offer the league general liability that covers head trauma.
Similarly, Pop Warner can only find one insurer to write coverage for head injuries, says the report. Many youth leagues can’t get any head injury-inclusive coverage — or can’t afford the premiums they are offered — and as a result, programs across the country are shutting down.
The report by Steve Fainaru and Mark Fainaru-Wada for ESPN’s Outside the Lines claims at least a dozen carriers occupied the NFL marketplace before the boom of head trauma litigation that began in 2011. Since then, the market has hardened considerably.
Related: NFL risks on and off the field
The article emphasizes that limited available data and vast uncertainty on the long-term effects of sports-related head trauma is forcing insurers to be more cautious. At the center of the storm is chronic traumatic encephalopathy (CTE), a degenerative brain disease that can only be diagnosed after death and has been found in several former NFL players. For an industry still dealing with hefty asbestos claims payouts, the current climate surrounding head trauma litigation related to contact sports is prompting insurers to pull out of the space.
“Asbestos claims involve a long period between exposure to asbestos and the emergence of symptoms. The same is true for CTE,” James Lynch, chief actuary for the Insurance Information Institute (I.I.I.) tells PropertyCasualty360.
“CTE has the same potential to engage the plaintiff’s bar that asbestos has had,” Lynch explains, “with insurers being portrayed as the bad actor denying help to a sympathetic victim.”
Related: Asbestos, environmental claims continue to rise
Crumbling foundation?
The sole insurer of the NFL, Berkley Entertainment & Sports, raised the league’s per-claim deductible to $1 million and significantly increased the aggregate when renewing its workers’ comp policy last year, reports ESPN.
While the increased cost and limitations on insurance for contact sports is affecting programs from the bottom up throughout the country, the report says effects are hitting youth sports programs the hardest.
“The youth market is in perhaps a more difficult situation than the NFL,” says Lynch.
According to the ESPN report, programs are being eliminated each year due to decreased participation, rising insurance costs, the price of potential future litigation, and less infrastructure in place to enforce rules and protocols to minimize concussions.
“The NFL is a large organization that can take large retentions and self-insure,” explains Lynch. “Youth leagues don’t have the same financial strength, and their size and looser organization structure make it harder to enforce anti-concussion protocols.”
Related: Students and concussion risks
Managing the risks
The Outside the Lines report suggests that the evaporating insurance market for football is a threat to America’s number one sport. According to the report, insurers are trying to adapt to the current climate, offering numerous coverage options — though they may come with restrictions that limit insurers’ exposure.
As the panic bells sound, what can insurers do to ensure their bottom lines — and athletes — stay safe?
Related: Invisible killer
“It’s part of our business now, brain injury and concussions, and we’ve adjusted,” Scott Lunsford, a senior vice president with K&K Insurance, tells ESPN.
Jon Butler, executive director of youth sports organization Pop Warner, tells ESPN he believes insurers are “starting to get a handle on it, just as they have with other risk management situations.”
“Exposure specific coverages will need to be developed,” writes Joe Cellura, president of North American Casualty at Allied World, in a blog post last year. “Long-term monitoring costs could also be considered along with policy conditions for notification and liability waiver warranties.”
“Insurers have already adapted to the situation, with the overwhelming majority concluding that the exposure is too great,” says Lynch. “However, as time passes, more lawsuits on the issue will be settled, and more research will shed light on the issue.
“All football leagues are rewriting their rules to acknowledge the risk from concussions. If those efforts reduce concussions, or bring them to a manageable level, insurers will doubtless reconsider,” Lynch continues. “But a return to the market may be slow because of the latency issue.”
Aubrey Gene writes regularly on the topic of property & casualty insurance. You can reach Aubrey at aubreycgene@gmail.com.