NCAA v. Alston Ruling Refuels Athlete Insurance Market
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While the practical consequences of the Supreme Court’s decision in NCAA v. Alston will likely remain unsettled for months, those involved in the business of insuring college athletes with pro potential are already licking their chops.
“The brokers are seeing this an opportunity to write a tremendous amount of business,” said David Brookbank, a consultant who advises a number of universities and power conferences on disability insurance for athletes.
Up until now, the NCAA has allowed schools to pay the premiums of players’ disability policies and loss-of-value riders—coverage that is triggered if an athlete suffers an injury that directly and substantially impacts their future earnings as a rookie—but only out of the limited pots of money provided to each institution’s Special Assistance Fund or Student Athlete Opportunity Fund. Those monies, provided by the NCAA through a portion of its basketball tournament proceeds, are also meant to cover a host of other expenses related to athlete welfare and academic support.
For certain schools with large athletic budgets, and which annually produce multiple NFL or NBA draft prospects, the requirement to only use SAF and SAOF money likely means they are spending less, and perhaps significantly less, on athlete injury insurance coverage than they otherwise would if allowed to tap into their general sports budgets.
The Alston ruling’s impact on disability premiums is complex, but Richard Giller, a Los Angeles-based attorney who represents athletes in injury insurance-related matters, views it as an eminently logical extension of the litigation.
“As I see [the Alston] ruling,” Giller asserts, “schools no longer have a cap on what they can spend on insurance policy premiums for their top student athletes.”
In siding with former athletes who sued the NCAA on antitrust grounds, the U.S. Supreme Court emphatically declared that member institutions can no longer conspire to create an automatic cap on “education-related benefits.” For now, that expenditure category is largely undefined, other than it having to be “tethered” to education and exclusive of “athletics-related benefits.”
Justice Neil Gorsuch, who authored the Court’s unanimous opinion, advised the NCAA that it can seek clarification from Claudia Wilken, the district court judge who issued the 2018 injunction that the NCAA unsuccessfully challenged before the U.S. Court of Appeals for the Ninth Circuit and the Supreme Court.
In Giller’s mind, the key to Alston was how the Supreme Court affirmed Wilken’s earlier commentary about the NCAA already permitting, albeit with restrictions, schools to pay for LOV insurance premiums. Those costs, like others incidental to an athlete’s collegiate experience, belie a “consistent definition” for amateurism, as Gorsuch wrote in the opinion.
Giller also draws attention to remarks raised by Chief Justice John Roberts during the oral argument in March.
“You’re paying the insurance premium so that they will play at college and not in the pros?” Roberts bluntly asked NCAA counsel Seth Waxman. “Doesn’t that undermine the amateur status theory you have?”
Roberts described this seeming contradiction as “the most troublesome.”
In response, Waxman explained that loss-of-value coverage is “a cost of participating in athletics that permits athletes who want to receive an education, instead of pay, for their play can continue to do so.” In other words: It appears to be an “educational-related benefit” by virtue of it encouraging athletes to stay in school.
By that logic, conceivably, anything that might encourage an athlete to stay in school, such as a new car, could be defined as an “educational-related benefit.” The NCAA has repeatedly signaled, including throughout the debate over NIL, that it will vigorously attempt to hold the line against what it deems “improper recruiting inducements.”
While this dichotomy may face the ultimate reconciliation in due course, Giller says, for now, the “language and underlying rationale” of the opinions in Alston, in conjunction with the NCAA’s newfound acceptance of NIL, should open the gates for schools to spend as much as they can on insuring their athletes’ future careers against injuries.
A spokesperson for the NCAA did not respond to a request for comment.
Eric Chenowith, the former Kansas basketball player who now sells insurance policies to athletes, theorizes that Alston will lead to the same kind of boom the business experienced in the mid-2010s, when a few big schools, notably Florida State and Texas A&M, publicized their novel use of SAF funds to pay for LOV coverage. It has since become a common practice, at least among Power Five institutions.
“It made my budget [grow] 10x, [and] it is going to go 10x again,” said Chenowith. “I am going to have a school that was spending $300,000 on insurance [premiums] that will spend a million or 2 million [dollars]. It is going to be another expansion of my industry.”
Earlier this year, Sportico published a four-part series that looked at why the college athlete LOV market had more recently contracted, with the fingers of blame pointing in many directions. In recent months, the market has “almost been sleepy, with people waiting to see” how the NCAA sea change will play out, said Chris Lack, a partner with Exceptional Risk Advisors. ERA is one of the handful of Lloyd’s of London’s American cover holders that currently writes LOV coverage.
In interviews, three compliance directors at Power Five schools said they would not advise their athletic departments to use general funds toward disability insurance premiums until given explicit indication that this was permissible. In 2014, the NCAA granted autonomy to the Power Five conferences to create new rules dealing with athlete welfare, which specifically include how institutions provide “insurance-related expenses” to athletes.
“That is the million-dollar question—the timeline on this,” said Chenowith. “I think it is eventually going to happen. It is just a matter of when.”
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