Athletes Are Making a Policy of Insurance

News item: Quarterback Robbie Bosco buys a $500,000 insurance policy, payable in case of a disabling injury during his senior season at BYU.

Creatively written sports insurance policies, some with unusual, almost bizarre wrinkles, are becoming commonplace these days. Mostly, they’re being bought by college and pro athletes, and those in transition.

Pete Eishelman, who works for Boston-based American Sports Underwriters, Inc., has written multimillion-dollar policies for some of America’s best-known pro athletes concerned about career-ending injuries. His company wrote 1,500 policies last year protecting athletes financially from a range of catastrophic accidents.

“Some of it is pretty creative underwriting,” he said. “We sold a policy last year with a life of one hour. It was for a big-name pro athlete--I’m not at liberty to say who--for coverage while he rode a motorcycle during the shooting of a TV commercial.”

Disability insurance was a factor in the stormy non-negotiations between Eric Dickerson and the Rams. Among the inducements that prompted Dickerson to agree to play while contract-extension talks continue was a $4 million disability policy bought for him by the Rams.

Here are recent examples of high-salaried pro athletes who have been protected from loss of earnings by such policies:

--Kellen Winslow, San Diego Charger tight end, is still out of football after suffering a knee injury last season. But a policy bought by the Chargers provides $3 million in guarantees to Winslow, should he be unable to play again.

--Billy Sims, Detroit Lion running back, was injured last year and hasn’t returned. The Lions have a policy protecting his five-year, $4.5 million contract.

--William Andrews, Atlanta Falcon running back, was playing under a long-term, $8 million contract last year when he was felled by a serious injury. His contract has an annuity feature that pays him $200,000 a year until he’s eligible for Medicare.

Agent Tony Attanasio, who represents the Dodgers’ Pedro Guerrero and other major league baseball players, says the variety of insurance policies available to players today has reduced the leverage once enjoyed by club owners during contract negotiations.

“It used to be that Lloyd’s of London offered the only policies you could get for an athlete, and they were quite expensive,” Attanasio said.

“A club used to be able to say: ‘You’d better have your guy sign this contract of ours, because if he’s injured while he’s between contracts, he won’t get anything.’

“The Dodgers tried that ploy during negotiations for Pedro’s present contract ($7 million for five years). As I expected, they strung out the negotiations to the nth degree (October, 1983, to February, 1984). What they didn’t know was that Pedro had a $2 million policy protecting him during that period. The premium was $13,000.”

Dick Moss, a Los Angeles agent who represents Nolan Ryan and Gary Carter, among other major leaguers, pointed out that the frequently used term guaranteed contract can mean many things.

“Most contracts are guaranteed, but there are levels of degree for what’s guaranteed in sports contracts,” he said.

“Some policies guarantee an entire contract. Others will guarantee parts of a contract. The policy will specify what moneys will be due to the player in the event of a career-ending injury.”

The Dodgers, Attanasio pointed out, and Dodger Vice President Fred Claire confirmed, are one of the few major league teams that “go naked” on guaranteed player contracts, meaning they buy no insurance.

“They didn’t even ask Pedro to take a physical when he signed his last contract,” Attanasio said.

Increasingly, college athletes also are buying insurance policies, Eishelman said.

“A lot of college football players who think they may be first-round NFL draft choices feel somewhat unprotected during their senior seasons, and also the period between bowl games and the NFL draft,” he said.

“I’ve insured 50 college athletes this year. I’ve sold policies covering one game. The Hula Bowl, to name one. That could be a $1-million policy for one game, and the premium might be around $1,000. But remember, this is all assuming the kid has no history of knee troubles and that we’ve decided we will issue a policy.

“There’re always juniors who want to buy a policy to cover their entire senior season.”

In the pros, two types of policies predominate, Eishelman said.

“One is the policy where a club has signed an athlete to a multiyear contract and they want to protect their financial liability if the player is hurt and can’t play anymore,” he said.

“The second most-common type is where a player is in the last year of his contract and wants to sign a much bigger one.

“We can write a policy to cover him only during games and practice, which would require a smaller premium than a 24-hour policy--the kind that covers a pitcher if someone slams a car door on his hand or he breaks an arm skiing.

“The premium for, say, a 25-year-old superstar-class baseball player who wants to insure himself for $2 million would be around $25,000.

“Each case is different. We look at each case very carefully. There are only something like 6,000 pro athletes in America, so there are very few actuarial tables to study. But you assume certain things. For example, Pete Rose would be a much better insurance risk, even at his age, than some young player who we have reason to believe doesn’t take good care of himself.”

Abuses by unscrupulous agents opened the athletes’ insurance market for collegians, Attanasio said.

“There were a few years where unethical agents were trying to get their hooks into promising amateur athletes by saying, ‘Hey, I can get you a million-dollar policy to protect yourself during your college days if you’ll let me represent you when you turn pro.’ They made it sound to some kids like they were the only ones who could obtain such a policy, when the truth was they didn’t even need an agent to get one.

“The NCAA got involved in some cases like that and later ruled that NCAA athletes could insure themselves.”

Besides Bosco, Ohio State running back Keith Byars and Iowa quarterback Chuck Long have recently bought substantial disability policies covering their senior seasons.

Few, if any, pro athletes are insured for the entire value of their contracts, Eishelman said.

“One fundamental truth in our business is that we never insure an athlete for more than he’s worth,” Eishelman said. “We don’t want a guy who’s maybe on the downside of his career thinking he’d be better off financially being disabled.

“We don’t want him thinking his knee hurts more than it really does. That’s why we’re very conservative on the amounts we’ll insure for.”