The National Football League's financial settlement of former players' concussion-related litigation likely will be paid with a combination of insurer funds and higher prices for game tickets and media rights.
The uncapped settlement, which U.S. District Judge Anita B. Brody in Philadelphia preliminarily approved in July, would pay varying amounts to retired players with conditions such as Alzheimer's disease, Parkinson's disease and Lou Gehrig's disease over the next 65 years.
The July hearing followed the judge's ruling in January that a $765 million settlement proposed by the NFL would be inadequate to cover claims from more than 20,000 ex-NFL players.
Who pays is a question that has yet to be resolved.
“My guess is that either there's going to be an agreement among the insurers about how much each is going to pay, or they will have some sort of separate proceeding (outside of) the court system — a mediation, an arbitration — to decide who pays what,” said Christopher Fusco, managing partner and insurance attorney at Callahan & Fusco L.L.P. law firm in New York.
Two pending lawsuits in New York and California state courts could determine insurers' roles in defending and indemnifying the NFL in the concussion litigation.
They also could set the tone for separate litigation Travelers Cos. Inc. filed in July to void its duty to defend and indemnify the NFL in former players' litigation alleging injuries and addiction from improper use of prescription drugs.
Travelers and Alterra America Insurance Co. had sued the NFL and dozens of other liability insurers in August 2012, seeking to void their obligation to defend and indemnify the NFL in the concussion litigation.
Those cases, filed in New York Supreme Court, remain open. Attorneys for the NFL asked that they be adjourned until settlement proceedings had taken place.
Experts say insurers likely filed those cases in New York because the state is seen as favorable to strict contract interpretation.
“Some of the industry's legal position is maybe … normal posturing ahead of what everybody understands is going to be a highly complex and drawn out legal process,” said William Wilt, president of insurance research and advisory firm Assured Research L.L.C. in Madison, New Jersey.
Meanwhile, the NFL sued dozens of insurers in Los Angeles Superior Court earlier in August 2012 for alleged breach of duty to defend it in the concussion litigation and to obligate the insurers to pay damages from a judgment or settlement in the case. That lawsuit has been stayed pending the outcome of the New York cases.
Although the NFL concussion settlement could approach $1 billion in payments to former NFL players, the deal's terms — particularly the ability to spread payments over 65 years — are “very favorable to the NFL” said Robert Boland, professor of sports management at New York University and a former NFL agent.
The settlement's favorable terms and certainty that the concussion lawsuits will be settled could prompt insurers to drop their lawsuits and participate in the settlement, some sources say.
Insurers “can pool their money,” Mr. Fusco said. “It's almost like they really have created a settlement fund that may not be so distasteful for the insurers.”
Alan Zimmermann, managing director of Assured Research, said insurers likely will decide their specific roles in the concussion settlement among themselves.
“The insurance companies have to agree what part they're going to pay and the timing of how they contribute, because the settlement is a 65-year structure,” Mr. Zimmermann said. “Then once the total amount that the insurance companies contribute gets settled, there's going to be a battle among the insurers about what policy years are covered.”
Mr. Zimmermann said liabilities from concussion-related traumas could decline after the NFL lawsuit concludes.
“The big losses have already been incurred,” he said. “Going forward, we actually don't think concussions are going to be that serious of a problem because societal behavior is going to change and is already changing.”
Insurance cost likely to rise
Sources say there's a chance the NFL may have to pay some costs for the concussion settlement, and they don't expect insurers to walk away from covering the sports behemoth's various risks.
“The NFL, with all of its resources, still is going to have plenty of insurance companies that want to write its policies ... but I suspect that their insurance costs are going to go up,” Mr. Fusco said.
Should the NFL have to pay some concussion-related settlement costs itself, sources said they expect the league to pass the costs on to fans and media outlets, such as through increased ticket prices as well as higher costs for media rights.
“Their revenue growth, particularly media rights, has been significant enough that (money's) not an issue,” NYU's Mr. Boland said.
Travelers and Alterra declined to comment for this story, as did The Hartford Financial Services Group Inc., Chubb Corp., Fireman's Fund Insurance Co. and Munich Reinsurance America Inc.
The NFL did not respond to requests seeking comment.