May 14, 2018
As the prevalence of loss of value insurance policies among NFL prospects who are preparing for a career as a professional athlete in the NCAA ranks grows, the current state of the industry appears to be trending upward while some issues are still lingering.
Two former college American football players, Nyeem Wartman-White and Kendell Beckwith, recently collected on loss of value insurance policies that they took out during their collegiate careers. Wartman-White received his full loss of value benefit of $500,000 due to going undrafted due to multiple knee injuries, the last of which forced him to miss most of his final season at Penn State University.
Beckwith was projected to be a second-round pick according to the threshold in his loss of value policy according to the man who helped him get the policy, Ronnie Kaymore. Due to an ACL tear, he fell to the third round before being selected by the Tampa Bay Buccaneers. Because of the rookie contract slotting system, the policy awarded him the difference of what he was projected to make and what he actually signed for, which was $25,000.
Both of these claims were paid out without the need for a trial, although on Wartman-White’s behalf a lawsuit was filed prior to the underwriter agreeing to pay the claim out. Wartman’s attorney, Bryan Fisher, spoke about how the ease of claims payment has increased over time.
“Whether this is a run-of-the-mill or not a run-of-the-mill case, three or four years ago, I would have told you that Nyeem Wartman and all of these kids having to go to a lawsuit, I would have said that is run-of-the-mill,” Fisher stated. “Now it’s not as common. Today, we’re having better opportunities, we’re talking to the kids earlier, we’re helping them out earlier, the policy language is getting better, a lot of things are happening so that there’s not as much litigation. If this was three years ago, run of the mill, today maybe not so much.”
The problems that athletes like Beckwith and Wartman-White used to face were the effect of two causes according to Fisher.
“The circumstance that usually creates a problem starts with the policy language and the athlete not having a good understanding of the policy language and what needs to happen and what they can and can’t do under the policy to recover,” Fisher continued. “Part of that is just the system. The kids generally don’t have representation or even advice or much advice when they are purchasing the policy and that’s primarily a function of the restrictions, I’m talking about college kids right now, the NFL is a different deal, but it’s primarily a function of the NCAA regulations. As I said earlier they take the policy as it’s written. They really need to understand what they need to do and what they can’t do when there is a claim or potential claim situation. When we end up in the litigation it is typically because we either have a problem in the application process that becomes apparent during the claims process, a problem in the claims process – meaning how the claim was prepared or submitted – or a problem in the NFL Draft or free agent market that affects the coverage. Those are kind of the general problems that result in me getting involved as a lawyer as opposed to just helping with the application.”
Fisher attributes the reduced frequency of the issues that have lead to litigation in the past to the work of people like Kaymore and reason of use.
“I think it has a lot to do with guys like Ronnie Kaymore, what Ronnie and what other people do is they educate the kids,” Fisher added. “They let people know what the circumstances will be when they have a claim so I think that kids, and the word spreads right, Ronnie’s been in this business for a long time and he’s had a lot of kids who have had claims, now a lot of them have paid, some with litigation and some without. I think it’s that the kids have a better understanding of what’s going on out there. I think also the market has matured. These are not products that have been around for 20 or 30 years. These are relatively new products and everyone was learning, and still are learning, both on the consumer side and on the insurer side. Predictability in the insurance game is everything and I think we are getting more predictability in the marketplace and that’s a good thing for everyone.”
Kaymore echoed Fisher’s outlook on the ease of taking out these policies and getting claims paid improving.
“Efficiency and time frame certainly has improved,” Kaymore noted. “When there is a legitimate claim I believe it’s smooth sailing. These kids are examples of what a clean claim looks like. There are certain scenarios in which material information gets withheld and it becomes an illegitimate claim because of information that wasn’t disclosed up front. I think that’s getting a lot better where guys are being very diligent on the application process and that’s sort of where universities have dropped the ball when they have handled the paperwork.”
While Beckwith and Wartman-White represent the progress the industry has made over the years, there are still issues to address. Former Arkansas running back Rawleigh Williams III has recently sued Lloyd’s of London over his unpaid loss of value insurance claim. The dispute is over whether Lloyd’s will cover the injury Williams sustained to his neck because of a spinal injury Williams sustained prior to taking out the policy.
It’s unclear whether or not Arkansas paid for Williams’ policy and how involved the Razorbacks were in the application and/or claims process, but in Fisher’s experience problems like this arise when universities meddle in these affairs.
“It’s how these programs are regulated by the NCAA,” Fisher said. “It’s not so much the involvement as the restriction on guys like Ronnie Kaymore from talking to the kids directly and giving them the appropriate options. That’s the real problem. There are a lot of schools out there that don’t open them up to direct contact or restrict the contact or say hey this is the only underwriter we use and this is the only policy we are going to use. It doesn’t give the kid fair access to the complete market. It’s very unfortunate and the result is a lot more litigation because of that. We have brought cases against universities on that front and been successful. It’s very difficult to get a policy placed or paid for if the athletic department black balls you or says you cannot deal with the student-athlete. That’s the problem Ronnie has to navigate. He has to keep everyone happy in order to reach out to these kids directly and efficiently. The second part of that is their families, their guardians, absolutely you can speak to them directly and I suspect that’s how Ronnie does a lot of talking to kids at schools where they want all of this to go through the athletic department. My experience is they run most of it through compliance and compliance has no clue what they are doing with these policies and brokers and agents. It’s not really a compliance issue. It’s not as if Ronnie is out there trying to give the kids some kind of benefit. He’s trying to give them protection and they pay for it.”
Fisher says that athletic departments have begun to recognize the correlation between their involvement and the increased frequency of litigation, however.
“I welcome athletic departments reaching out to me for advice on how to avoid these problems and I have consulted with several university athletic departments,” said Fisher. “I have spoken to groups of athletes and I do it free of charge. Several SEC schools have reached out to me and it’s always resulted in good things. The problem for the schools is they don’t understand the rules, they don’t understand the insurance markets and they for sure don’t understand the policies. When you give them the information they are willing to do the right thing. The only time we run into a problem is the issue of payment of the premiums. Of course we have to advise the kids that the schools can pay for the premiums on these policies through the student assistance fund. The schools are not always receptive to that information being in the head of a young student-athlete.”
On the front of the student assistance fund, that’s where Kaymore sees the most room for potential problems and the best opportunity for reforms to still be made.
“The most important thing to a university is their student-athlete assistance fund,” Kaymore explained. “I kind of look at it the same way as an NFL team looks at a salary cap. Take a school like Alabama who may have 10 or 11 kids at one time who may be eligible, what realistically does Alabama want to spend on all of those policies? I think the biggest issue is that student-athlete fund which is treated almost like a salary cap for the NFL. I believe that Penn State was only willing to pay for $2 million of coverage for Saquon Barkley, with just one million of that being loss of value. What would Saquon’s economic loss have been had he sustained a career-ending injury based on where he was drafted? He certainly would have lost more than $1 million. First and foremost, from a school’s perspective, is looking at that salary cap. If you have 10 or 11 kids who qualify, they don’t necessarily look at the amount of coverage these kids should have, they are more focused on what budget they have to protect these student-athletes.”
Athletic departments’ attempts to balance those financial concerns with the football programs’ need for the greatest and latest talent out of the high school ranks can lead to real harm to athletes if things go awry at the wrong time.
“It is consistent that if the university is going to pay, the kid has to go through their process, whether it’s good or bad for the kid,” Kaymore reported. “I have experienced universities saying well if the kid doesn’t go through our process we’re not going to pay, whatever that process may be, which can absolutely delay coverage for a kid. If a kid wants to be bound for coverage right before fall camp starts and the school says well we have to take the kid through our process there can be a delay and if the kid is injured in the interim that can result in a delay in coverage. I would say that with most universities if they are paying there is some sort of process the kid has to go through which may in fact impact the claim if the kid gets injured at some point during that process.”
One such high-profile athletic department has found a creative way to balance its concerns, and Kaymore hopes that others will replicate it.
“UCLA has a reimbursement method which I think is most effective,” Kaymore commented. “If the kid wants a policy, he can take out a premium loan and UCLA reimburses the loan that the kid took out. Therefore there is no interruption to the process. The bank that grants the premium loan understands the university is going to pay it back so there’s no loan risk. I think that sort of process enables the player to enroll from A to Z. It’s when you have a university that wants to control everything, they can cause detriment to the kid because he can get injured between them doing their due diligence. Out of working with over 40 first-round picks and with every major college program out there, I would say that approach is one-of-a-kind. I’ve never seen any other university have that sort of approach.”
With the passage of time and the work of people like Fisher and Kaymore, the adjudication of loss of value insurance policies for NFL prospects has improved. Problems still arise when the financial concerns of universities come alongside the best interests of athletes, but universities like UCLA are learning that just like the athletes and their families, the situation improves for them when they let experienced, qualified individuals do what they are trained to do on their behalf. With the miasma of negative news in American football regarding labor concussion litigation, collusion grievances and NIL rights, some positive news is a welcome sight.