Disability insurance policies are frequently secured by college football players, especially those who expect to be selected in the early rounds of the NFL draft. These policies are typically secured by the player in one or two forms. One option allows players to secure coverage to protect against “total permanent disability”. Such coverage would only pay the athlete in the event of a catastrophic, career ending injury. Alternative policies can protect the athlete against the potential “loss of value” tied to the player’s projected draft position. This type of insurance coverage provides a player protection in the event his projected draft position drops because of injury. Typically, the policy would make up the difference the projected bonus money and the actual contract amount secured by the player. Unfortunately, ‘loss of value’ insurance policies, may not be as easy to collect on as initially thought.

High-profile players, including 2015 NFL Draft’s No. 1 pick Jameis Winston, have secured the insurance expecting that if an injury causes their draft stock to fall, thus resulting in a lesser contract, they can collect on the policy to recoup some of the lost earnings. Jameis Winston’s premium for “loss of value” insurance was reportedly paid out of the Florida State University’s Student Assistance Fund (SAF). The SAF allows schools to “assist student-athletes in meeting financial needs that arise in conjunction with participation in intercollegiate athletics, enrollment in an academic curriculum or that recognize academic achievement.”

In addition to schools using the NCAA authorized Student Assistance Fund to pay insurance premiums for star athletes, the NCAA issued a waiver after the start of the 2014 football season creating a new avenue for college football players to secure loss of value insurance. While student-athletes had previously been able to secure the loss of value insurance only with their own funds or the use of SAF, purchasing the insurance became easier in October, when the NCAA began granting waivers to student-athletes, allowing them to purchase the insurance by borrowing against their future earnings to secure a loan from an established, accredited commercial lending institution, for the purpose of purchasing loss-of-value insurance. However, despite the increasing popularity of the loss of value insurance, no collegiate student-athlete has been able to collect on a policy, according to ESPN’s Darren Rovell. Former University of Southern California wide receiver Marqise Lee is currently experiencing the challenges of trying to collect on his policy.

Lee, once projected as a first round pick, purchased loss of value insurance in August 2013. He paid a $94,600 premium for $9.6 million in coverage. Lee believed that the coverage protected him if his draft position dropped and he signed a rookie contract worth significantly less than that the projected $9.6 million amount. Lee injured his left knee just two games into the 2013 season. As a result of the injury, Lee’s draft position dropped to the 39th overall pick in the 2014 NFL draft. Ultimately, he signed a contract with the Jacksonville Jaguars for $5.17 million. Lee filed an insurance claim and attempted to collect on the policy, but was unable to do as the insurance company raised a defense that Lee had misled with regard to pertinent medical information. In March 2015, Lee, along with a former USC teammate facing a similar issue, sued the insurance company over their failure to honor the policy.

Lee’s lawsuit highlights the potential challenges of collecting on loss of value policies. While the securing of insurance policies for student-athletes has indeed become a tool for universities to help keep star players remain in school and to temporarily forego the NFL, the possible issues related to collection are apparent. The University of Oregon utilized its SAF to purchase policies for its players, including cornerback Ifo Ekpre-Olomu. Ekpre-Olomu, once projected as a first round pick, likely will attempt to collect on his policy after an ACL injury in December 2014 caused him to fall to the seventh round of the 2015 Draft. The cornerback’s policy, which cost the University of Oregon $40,000, calls for a $3 million payout since Ekpre-Olomu late round selection was well after the coverage threshold of the first picks of the third round of the 2015 Draft.

All athletes that utilize the NCAA waiver to purchase insurance or universities that allocate SAF to purchase loss of value insurance will need to monitor Lee’s lawsuit and Ekpre-Olomu’s attempt to collect on his policy. If student-athletes continue to face difficulties collecting on their policies, both student-athletes and their universities will need to reconsider whether such policies are worth the cost.

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Photo of Gregg E. Clifton Gregg E. Clifton

Gregg E. Clifton is a Principal in the Phoenix, Arizona, office of Jackson Lewis P.C. He is Co-Leader of the Collegiate and Professional Sports Practice Group and serves as the editor of the firm’s sports law blog.

Mr. Clifton has extensive experience in…

Gregg E. Clifton is a Principal in the Phoenix, Arizona, office of Jackson Lewis P.C. He is Co-Leader of the Collegiate and Professional Sports Practice Group and serves as the editor of the firm’s sports law blog.

Mr. Clifton has extensive experience in the collegiate and professional sports world. He has advised numerous professional franchises on general labor and employment issues, including Title III ADA regulatory compliance and wage and hour issues. He serves as lead counsel for several Major League Baseball teams in their salary arbitration matters and has represented NCAA and NAIA collegiate clients regarding rules compliance, investigatory matters and in disciplinary hearings. In addition, he has handled Title IX investigations and compliance issues for NCAA and NAIA member institutions. Mr. Clifton has also worked extensively in the area of agent regulation and enforcement in professional and college sports and regularly provides counsel on issues relating to NCAA and NAIA amateurism issues and athlete eligibility questions. He has also served as an expert witness in matters involving sports agents’ work and responsibilities, as well as athlete compensation issues.

Prior to joining Jackson Lewis, he spent six years as Chief Operating Officer and Vice President of Team Sports for Gaylord Sports Management. He also served as President of the Athlete and Entertainment Division for famed sports attorney Bob Woolf’s firm, Woolf Associates, in Boston.

Mr. Clifton began his career as an Associate at Jackson Lewis where he focused his practice on traditional labor law. He continues to counsel clients in the areas of collective bargaining negotiations, representation cases, arbitrations and National Labor Relations Board matters.

Mr. Clifton frequently serves as an expert speaker to law schools, including Harvard University, Boston College, Hofstra University and Arizona State University, and bar associations regarding sports law issues, including agent regulation and salary arbitration. He is also often cited as an expert source in national news media for his commentary and opinion on legal issues in sports.