by Ryan K. McComber
Insurance has long played a vital role in the entertainment and sports industries. We have all heard stories about superstars from Bruce Springsteen to Taylor Swift, who have reportedly purchased insurance policies on their vocal cords and other physical assets, which could pay millions in benefits in the event that they cannot continue their lucrative careers due to a covered event. The reality is that, unlike most professions, professional entertainers and athletes’ bodies are a tremendous source of income, which has resulted in the development of specialized insurance products to protect them. Most notably, professional athletes from Arnold Palmer to Cristiano Ronaldo have reportedly purchased insurance policies through the years in an attempt to protect their high incomes against career-ending injuries. While such policies are only a small part of the insurance market, the policies, and the coverage disputes that can follow, require specialized knowledge of this type of insurance. The following is some background on these types of policies, as well as the potential coverage disputes that may arise.
Catastrophic Injury Coverage
The most common type of insurance, and the type with which most insurance practitioners are generally familiar, is long-term disability insurance. While this insurance is available to most professionals, most policies contain exclusions from coverage for disabilities caused by inherently dangerous activities, such as the participation in sports. Moreover, these policies were traditionally only available to insureds with professional occupations, and would not be widely available to a struggling entertainer or collegiate athlete looking to insure their speculative future earning potential. These limitations led to the development of specialized policies that cover disabilities resulting from entertainment and sports activities or occupations, which can also be tailored to provide coverage for a specific sporting, music, or entertainment event.
These catastrophic disability policies are now widely available for a variety of insureds, and have been utilized for years to cover potential catastrophic injuries for many high school and college athletes. However, these policies typically only provide disability benefits if the insured becomes “totally disabled” and unable to perform certain activities of daily living or could no longer engage in substantially the same activities as prior to the occurrence of the covered injury. While these policies are effective in providing needed benefits to those who are severely injured, disputes regularly arise regarding the insured’s level of impairment due to a covered injury. Indeed, in the age of social media, it is not surprising for the seasoned disability attorney to find an insured claiming total disability tagged in a Facebook post participating in activities ranging from dancing competitions to American Ninja Warrior qualifiers. Additionally, while such policies provide needed coverage for the average student athlete, they do not provide the level of future benefits commensurate with a professional sports career.
Elite Athlete Coverage
The forgoing limitations have led to the development of even more specialized disability insurance for elite athletes. Indeed, the NCAA has been at the forefront of this movement through the development and implementation of the NCAA’s Exceptional Student-Athlete Disability Insurance program. Through this program, elite student athletes projected to be selected in early rounds of the NFL draft can apply for disability insurance coverage that not only provides catastrophic injury coverage while in school, but for future earning protection in the event the insured is drafted in a later round in the NFL draft due to a covered injury while in school. One recent example is Ifo Ekpre-Olomu, who reportedly collected $3 million in benefits under such a disability policy after falling to the seventh round of the NFL draft after sustaining an injury while at the University of Oregon. While these policies require larger premiums, and only pay out in the event of a covered injury, they have become readily available for elite athletes who qualify for such coverage through either the NCAA or through other insurers.
While elite athlete coverage is more specialized, and would seemingly be less prone to coverage disputes, that is not always the case. Importantly, insurers in many states can and will rescind an insurance policy if it is later discovered that the insured made material misrepresentations on the application for insurance. Therefore, it is important that insureds provide complete and accurate medical and health history information in connection with their applications for such coverage, especially as it relates to any prior sports injuries. Failure to do so could result in the loss of coverage following a covered injury, resulting in the loss of millions in benefits despite having an otherwise covered claim.
Ryan K. McComber is a partner at Figari + Davenport, LLP. He can be reached at firstname.lastname@example.org.