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Loss-Of-Value Insurance Takes Center Stage After NFL Draft
Law360, New York (May 01, 2015, 10:10 AM ET) -As the dust settles on the first round of the 2015 NFL draft, the torn
anterior cruciate ligaments of three high-profile draftees, and the
insurance policies purchased to cover the lost income resulting from
those injuries, may well take center stage. Before the ACL injuries
sustained by University of Georgia running back Todd Gurley and
Texas A&M offensive lineman Cedric Ogbuehi, they were projected
to be a top five and top 10 NFL draft pick, respectively. Although
University of Oregon All-American cornerback Ifo Ekpre-Olomu was
not touted quite as highly as the other two, he was still considered by
many to be the best cover corner in college football and a certain
first round draft pick before he also tore his ACL. Despite these preACL-injury projections, Gurley and Ogbuehi were both selected
during Thursday’s first round of the 2015 NFL draft, going 10th
overall and the 21st pick.
Richard Giller
Gurley, Ogbuehi and Ekpre-Olomu share a number of other traits in common. For instance, they all tore
the ACL in their left knees during their final college football season; each player required surgery to
repair their torn ligaments; and they were all drafted below their pre-injury draft projections. Ogbuehi
and Ekpre-Olomu also share the distinction of having passed on the chance to declare themselves
eligible for the 2014 NFL draft in order to return for their senior seasons and both did so, in part,
because their schools purchased disability insurance policies as a hedge against the potential loss of
professional income resulting from a career-ending injury suffered while still in college.
Those insurance policies also included between $3 and $5 million worth of loss-of-value coverage that
protects the players from a drop in their draft position as a direct result of an injury. The University of
Georgia also purchased a disability policy with LOV coverage for Gurley, who declared for the draft as
soon as he could under NFL rules; i.e., following his third year after high school.
The question that arises is whether these players can successfully collect on those disability policies.
Unfortunately, if recent history is any barometer regarding the ability of injured players to collect under
LOV coverage, it does not bode well for Gurley, Ogbuehi or Ekpre-Olomu. As this author correctly
predicted a year ago in a Law360 article titled "Insuring Against A Drop In An Athlete’s Draft Position,"
“the diminished value of a rookie contract because of a drop in draft position is likely to evoke a
negative reaction from the insurance company [and] these types of claims could and likely will generate
an inevitable battle with the insurers that could result in litigation.”
Those predictions recently came true when it was reported that the insurance market commonly known
as Lloyd’s of London denied the LOV claims of former USC football stars Marqise Lee and Morgan Breslin
following last year’s NFL draft. Several lawsuits were subsequently filed both by and against Lloyds
arising out of those claims.
Georgia running back Todd Gurley (selected 10th overall pick in this year’s draft) was a highly touted
Heisman Trophy candidate entering his junior season in 2014. However, late in the fourth quarter of
Georgia’s Nov. 15, 2014, blowout win against rival Auburn, Gurley tore the ACL in his left knee after a
six-yard carry, with just over five minutes left in the game. It would be the last carry of Gurley’s college
football career.
A torn ACL is a significant injury. According to several medical sources, the ACL runs diagonally through
the middle of the knee and provides rotational stability to the knee as well as helping to prevent the
tibia from sliding out in front of the femur. Gurley had surgery in November 2014 to repair his torn ACL
and his recovery has reportedly gone quite well. Before tearing his ACL, Gurley was projected to be a top
five pick in this year’s draft. Some people described Gurley as the best running back draft prospect since
Adrian Peterson was selected seventh overall in the 2007 draft and Peterson has been a perennial Pro
Bowler ever since.
Prior to Gurley’s junior season, the University of Georgia purchased a disability insurance policy under
the NCAA’s Exceptional Student-Athlete Disability Insurance program for their star running back. The
premiums for the policy were paid using money the school received from the NCAA Student Assistance
Fund. The original coverage for Gurley included $5 million in permanent total disability protection and
$2.5 million in LOV coverage. It has been widely reported that, just two weeks before Gurley’s seasonending ACL injury, the University of Georgia doubled the LOV policy limits from $2.5 million to $5
million, making the total policy worth $10 million. This timely increase in policy limits could make a very
big difference for Gurley.
Cedric Ogbuehi, who played the highly coveted NFL position of left tackle at Texas A&M, opted to forego
the 2014 NFL draft to instead play his senior season for the Aggies. He made this decision, in large part
because of the LOV insurance protection purchased on his behalf by the school. Ogbuehi told Fox Sports
that he would not have been able to afford to buy a disability policy on his own and that he “probably
would have turned pro had A&M not offered the financial assistance.” Texas A&M purchased the $10
million disability policy for Ogbuehi, including $5 million worth of LOV coverage, using NCAA Student
Assistance Fund money. After his junior year, Ogbuehi was a consensus first round draft pick, slated to
be selected among the first ten players in the draft, and he was listed by most pundits as one of the top
two offensive linemen in the country. However, like Gurley, he tore the ACL in his left knee during the
third quarter of the Aggies’ 45-37 win against West Virginia during the Dec. 29, 2014, Liberty Bowl game.
Oregon cornerback Ifo Ekpre-Olomu also opted to stay at Oregon to play out his senior season and did
so in part because of LOV insurance protection purchased on his behalf by the University. He was a
finalist for the Jim Thorpe Award, given annually to the best defensive back in college football, and was
once considered to be a late first round to early second round draft pick. However, while practicing in
December 2014 in advance of the first ever College Football Playoff semifinal game against Florida State,
Ekpre-Olomu tore the ACL in his left knee and missed both the semifinal and championship games of the
inaugural playoffs. He underwent successful surgery on Christmas Eve 2014 to repair his torn ACL.
Ekpre-Olomu has a $3 million loss of value insurance policy, which was also paid for by the university
using NCAA Student Assistant Fund money. After Ekpre-Olomu’s injury, several pundits predicted he
could slip out of the first round and fall into the second or possibly the third round of the draft.
The intricacies of “rookie compensation” and the “rookie compensation pool,” under the 300-page 2011
collective bargaining agreement (CBA) between the NFL’s Management Council and the NFL Players
Association, are mind-numbing as they relate to a team’s overall salary cap. Under the NFL CBA, the
salary to be paid to rookies for their initial four-year contract is essentially pre-established based upon
the player’s draft position. For example, the first pick in the 2014 NFL draft signed a four-year deal worth
just over $22.2 million. In contrast, the 10th pick last year signed a deal worth approximately $10 million
less than that, and the final pick of the first round (the 32nd overall pick) signed a deal worth just over
$6.8 million.
The salary difference between being drafted by even a single spot ahead of another player in the first
round could also have a major impact, as evidenced by the $2.2 million difference between the contract
signed by the fifth and sixth overall picks last year. Accordingly, draft position is important not only
within the same round but between rounds as well. The first pick in the second round last year signed a
$5.5 million contract as compared with a $3.2 million contract given to the first pick of the third round.
The graduating scale continues to decrease with each draft position and with each draft round.
LOV coverage protects against the difference between the value of the player’s initial professional
contract and a pre-established insured threshold amount listed in the disability policy. LOV coverage is
not directly tied to a particular draft position. For example, the LOV policy purchased by Marqise Lee
covered him for the difference between the four-year contract he signed with the Jacksonville
Jaguars last year (a four-year deal estimated to be $5,175,016) and the insured amount listed in the
Lloyd’s policy ($9.6 million for a four-year contract). In light of the preset slotting of rookie contracts in
2014, the insured amount is approximately the contract signed by the fourteenth overall pick last year.
Lee was selected 39th overall. As a result, Lee submitted an insurance claim to Lloyd’s for $4,424,984,
which represents the difference between the insured amount and the amount of his Jaguars contract.
However, as noted above, Lloyd’s denied the insurance claim submitted by Lee and filed a lawsuit
against him in federal court in New Jersey seeking to confirm the denial of coverage. On the same day,
Lee instituted his own lawsuit against Lloyd’s in U.S. district court in Los Angeles claiming that the denial
was both incorrect and in bad faith. The dueling insurance coverage litigations are currently active and
ongoing. In denying coverage, Lloyd’s also rescinded Lee’s policy, alleging that he made material
misrepresentations in his application and voided coverage entirely, and returning to Lee the $90,000 in
premiums paid by the former USC star.
Based on a comparison of the contracts signed by those selections last year, Todd Gurley may have lost
over $6.4 million by being selected as the 10th overall pick this year instead of the fifth player taken. The
difference between where Obguehi was selected (21st) and where he was projected to be selected
before his injury (No. 10), is nearly $4 million. If Gurley, Ogbuehi or Ekpre-Olomu sign initial NFL
contracts that are less than the insured contract amount listed in their respective disability policies, they
should file claims with their respective insurers seeking to recover the difference between the insured
amount and the contract amounts.
Once those claims have been properly documented and submitted, the players should also be prepared
for the long haul because it is far more likely than not that the insurers will place significant hurdles in
the way of these players before receiving the payouts they are entitled to recover. Gurley, Ogbuehi and
Ekpre-Olomu should all be ready to vigorously respond to possible denials of coverage from the carriers.
Additionally, professional assistance from an insurance recovery attorney will likely be necessary to fight
those battles and to either defend against or initiate coverage litigation on behalf of the players as they
closely monitor the Marqise Lee litigation.
—By Richard C. Giller, Polsinelli PC
Richard Giller is an insurance recovery attorney shareholder in Polsinelli LLP's Los Angeles office.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its
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information purposes and is not intended to be and should not be taken as legal advice.
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