As the National Football League confronts a raft of lawsuits brought by thousands of former players who accuse the league of hiding information about the dangers of concussions, a less visible battle that may have a greater effect is unfolding between the league and 32 of its current and former insurers.
The dispute revolves around how much money, if any, the insurers are obligated to pay for the league’s mounting legal bills and the hundreds of millions of dollars in potential damages that might stem from the cases brought by the retired players.
Regardless of how it is resolved, the dispute could hurt teams, leagues and schools at all levels if insurers raise premiums to compensate for the increased risk of lawsuits from players and their parents who play hockey, lacrosse and other contact sports.
The NFL, which generates about $9 billion a year, may be equipped to survive these legal challenges. But colleges, high schools and club teams may be forced to consider severe measures in the face of liability issues, from raising fees to offset higher premiums to capping potential damages, or requiring players to sign away their right to sue coaches and schools. Some schools and leagues may even shut down teams because the expense and legal risk are too high.
“Insurers will be tightening up their own coverage and make sports more expensive," said Robert Boland, who teaches sports law at New York University. “It could make the sustainability of certain sports a real issue."
The NFL contends that the insurers, some of whom wrote policies as far back as the 1960s, have a duty to defend the league, which has paid them millions of dollars in premiums. The question for the NFL is not whether the insurers are required to help the league, but rather what percent of the league’s expenses each insurer is obliged to cover.
Determining how to allocate those costs, though, is complicated because the insurers are so diverse. Some of them wrote policies for one year, while others did so for a decade or more. A few went bankrupt or merged with rivals, or insured only NFL Properties, the league’s merchandising arm that the retired players also sued.
Some insurers wrote primary policies that covered up to the first $1 million of claims; the rest insured obligations in excess of that amount.
Creating a formula for how to apportion liability will in some cases depend on the broader case between the league and its players now in federal court in Pennsylvania. If the NFL persuades the judge to dismiss the case, it will be left trying to recoup its legal costs from the insurers. If the judge allows the players’ case to proceed, the definitions of when, how and whether a player’s concussions led to his illness will become critical in shaping the insurers’ exposure, a process that could take years to sort out.
“This is baby step 1 in the process for everyone figuring how deep in the soup they are," said Christopher Fusco, a lawyer who has worked on similar insurance cases but is not involved in the NFL litigation. “Baby step 2 will be to figure out the facts."
The facts, Fusco and other lawyers said, will largely come from the underlying suit between the league and the retired players, including determining when the players sustained the head trauma and their injuries. This will most likely be a long process because many of the thousands of retired players in the underlying suit, some of whom are now experiencing memory loss, played decades ago, when concussions were often undiagnosed or not recorded.
Many of the insurance companies named in the suits declined to comment, citing the continuing litigation. As of early Monday afternoon, the NFL had not commented.
The two-tiered battle between the league and its former players and insurers echoes the litigation stemming from asbestos claims because both cases center on so-called long tail claims, or injuries that take years to manifest themselves.
One of the critical points of contention in those cases was how to define an occurrence to determine an insurers’ liability. In the context of the NFL case, the question will be whether a player’s injuries should be treated as a single claim or a series of claims based on the number of concussions he received or the number of seasons he played.
“This is an issue that gets to the crux of asbestos and environmental litigation," said William M. Wilt, the president of Assured Research, an insurance advisory firm. “If an occurrence is defined as each player and each season he played, you could hit the policy limits multiple times."
The current case, though, is far smaller than the asbestos cases because the potential plaintiffs are limited to the number of former pro football players. The effects of the legal wrangling, though, may reverberate throughout the sports world regardless of how the retired players do in court.
Fearful of future lawsuits, insurers may start raising premiums or excluding concussions and other injuries from their policies not just for the NFL, but also for hockey and lacrosse and other contact sports. As information about the link between head trauma and long-term injuries grows, coaches, athletic directors and others will have a harder time claiming they did not know of the connection if they are named in lawsuits.
“A common misconception is that no one’s going to sue their youth league or nonprofit, but that’s not the case," said Dan Pullen, who runs an insurance brokerage in Fort Worth, Texas, that specializes in policies for teams, players and leagues. “Maybe the league isn’t negligent, but there might be $50,000 in legal claims" for a lawyer to chase.
The cases against the NFL are likely to be the most explosive because of the media spotlight and because so much money is at stake. The players are also more organized than, say, collegiate players, who lack a union. Nevertheless, there is no shortage of plaintiffs’ lawyers willing to represent former players.
“The handwriting is on the wall, there’s no question," said John Kircher, a law professor at Marquette University who specializes in the insurance industry. “Insurers will look at the dangers and might look at increasing premiums, and the insurers and the insured will ask whether the game is worth a candle."
Kircher and other experts say they expect the courts to force the league’s primary insurers to at a minimum pick up the NFL’s legal fees, which are already in the millions of dollars.
The larger issue for the courts will be to decide whether the primary insurers will have to carry more of the burden than the insurers who wrote the excess policies. Because insurance laws vary from state to state, the answer may depend on where the cases are tried, and here, the insurers may have the upper hand.
New York law is thought to be more favorable to insurers, which may be why in August, Alterra America Insurance, which wrote an excess liability policy for the NFL, sued the league in a state court in New York. In its complaint, Alterra said it chose New York because the NFL has its headquarters there.
The league shot back by suing 32 insurers, including Chartis Specialty Insurance, Fireman’s Fund Insurance and several subsidiaries of Travelers, in state Superior Court in Los Angeles, arguing that it was the right venue because, among other things, California has three NFL teams and has hosted 11 Super Bowls and NFL Properties was incorporated there.
California law is also considered friendlier to policyholders, insurance specialists said.
But in late November, the court said that the NFL was “selective and tactical" in choosing California and ruled that New York was the better venue for the case. The judge, John Wiley, did not dismiss the case but said he wanted to see what happened in New York first.
“The superfluous effort is not simply wasteful: It also poses the added threats of confusion and inconsistent results," Wiley wrote in his decision. “It is better to streamline and to simplify."