Who Is Looking Out for Student-athletes When Schools Purchase Disability Insurance for Them: a Case Study
| Publication year | 2019 |
| Author | Richard C. Giller |
Richard C. Giller
Richard is a partner in the Insurance Recovery practice group in the Southern California offices of Reed Smith, LLP, with over thirty-three years of experience crafting litigation strategies for complex insurance and commercial disputes. He has a significant breadth of experience in analyzing coverage and handling claims arising under permanent total disability and loss-of-value insurance coverages for athletes and teams. He can be reached at rgiller@reedsmith.com.
There is an emerging trend in college sports where schools use money received from the NCAA Student Assistance Fund to purchase permanent total disability (PTD) insurance policies, some of which include a loss-of-value rider, for high-profile student-athletes to help protect their future earnings. As an outspoken proponent of any student-athlete who is projected to be a top draft pick taking full advantage of school-purchased insurance, this author has become increasingly concerned about who is—and who should be—helping student-athletes understand the intricacies of disability insurance and navigate the inevitable hurdles insurance companies will construct if the athlete ever needs to file a claim for benefits.
Because the NCAA prohibits student-athletes from hiring a financial advisor or a sports agent while still in school, the question that arises is who is charged with looking out for the athlete and his or her best interests when it comes to disability insurance coverage and claims. Recent developments in a lawsuit filed in May 2018 by one such high-profile student-athlete have brought these concerns and questions into sharp focus. This article will examine these issues through the lens of that lawsuit.
Imagine being a twenty-year-old sophomore running back at a well-known football powerhouse and the reigning rushing leader in the Southeastern Conference. After your breakout sophomore season, everywhere you look pundits are predicting that you will be a first or second round NFL draft pick if you choose to leave school early after your junior season, so you can live out your dream of playing in the League and sign a multi-million dollar contract to play the game you love professionally. You are competing in spring practice when someone associated with your school's athletic department pulls you aside and suggests that, to protect against the adverse impact a significant injury might have on your future in the NFL, the school will pay the cost of buying a PTD insurance policy for you. How can you pass that up?
Like most twenty-year-olds, you have never purchased insurance before, you have never seen or read an insurance policy in your life, and you have no idea how your school is going to pay for your insurance policy. Before leaving home for college you were covered under your parent's health and auto insurance policies, and they took care of all the details for you. Unbeknownst to you, the school's offer to pay the premium for your disability policy involves using money the school received from the NCAA as part of what is known as the Student Assistance Fund (SAF). You probably had no idea that such a fund existed, and you most likely didn't care from where the school finds the money to pay for your policy.1
The SAF arose out of a settlement reached years ago in the Jason White v. NCAA2 antitrust lawsuit, and, according to the NCAA's 2018 Division I Revenue Distribution Plan, the association meted out $66.3 million in SAF money to member institutions during the previous academic year. Under the NCAA SAF Guidelines, the fund is "intended to provide direct benefits to student-athletes or their families as determined by conference offices," including insurance policy premium payments.3
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Outside the student-athlete setting, a person seeking to secure a disability insurance policy has the option of choosing the insurance broker he would like to work with. However, schools that exclusively work with the same broker again and again do not give the student-athlete the option to choose another broker even if they wanted to. You meet with the broker the school selects, and he helps you fill out an application for the insurance policy, which you sign, and that broker sends it off to someone else. You are told that the policy will pay you $1 million if you suffer an injury that precludes you from ever again playing the game that you love. Neither the school's insurance broker nor anyone at the school ever asks you to do anything else in connection with your insurance policy. Because of this, you reasonably assume that everything has been taken care of concerning the insurance policy, so you turn your attention back to preparing for your junior, and probably your last, college football season, feeling secure in the knowledge that there is a $1 million insurance policy in place protecting you against a career-ending injury.
During the annual spring football game against your teammates, you take a handoff from the quarterback, as you have thousands of times before. You run to the left, see a hole open up in front of you, cut up field, and run into a defensive lineman after a four-yard gain. The defender hits you as you have been hit thousands of times before, but this time you fall flat on your back, and, even though the hit was not a big collision, for some reason you can't move. Paramedics rush onto the field, and, when they reach you and ask what's wrong, you tell them that you can't feel your arms or legs, so they take all the necessary precautions, including placing you on a stretcher and carting you off the field.
That evening, while you are lying in your hospital bed, the school's insurance broker you had worked with weeks earlier calls your dad and leaves a voicemail message reassuring him that there is no need to worry about insurance coverage, because...
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