NFL, insurers battle over defense

It costs too much, and it's a nuisance, but liability insurance comes in handy when someone thinks you've hurt them.

There are more than 3,000 former NFL players who think the league's policies on concussions have hurt them and hurt them seriously, and NFL owners are working hard to force their liability insurance carriers to do what insurance companies are supposed to do -- pay lawyers to defend the league against the players' claims and then pay whatever the players may be entitled to collect.

The insurance companies, facing the certainty of enormous legal fees and the possibility of hundreds of millions of dollars in payments to players, are doing what insurance companies usually do -- delaying payments and claiming that they are not responsible.

The dispute has just begun, and there are already four lawsuits in New York and Los Angeles involving 37 insurance companies and 187 separate policies covering 44 seasons. And the dispute will grow both in size and in complexity. In one of the lawsuits, NFL officials admit that they have "identified most, but not all" of the liability insurance policies they have purchased over the years. They're still looking for more policies, more coverage and more money to pay the lawyers who are fighting the players.

(It's reassuring, isn't it, that the NFL, the most successful enterprise in the history of sports, has difficulty finding its insurance records and deciphering its insurance coverage? Where are your auto and homeowners policies?)

Anyone who has ever tried to read and understand a liability insurance policy knows how mind-numbing and difficult the language can be. The provisions in the insurance policies are not as interesting or as exciting as television contracts or salary cap clauses, but they are now an important factor in the future profitability of the NFL.

Although none of the lawyers involved in the burgeoning dispute would speak on the record (a sure sign of its significance), all agreed that the costs of defending the league against the players' claims will be enormous. In each of the more than 3,000 claims, for example, the league's attorneys must investigate the player's narrative of what happened to him in retirement, must analyze his medical records and must take a deposition from the player (an hourslong, in-person interrogation under oath). These tasks are just the beginning of what must be done if there is to be a settlement or a trial on the players' claims, but they are compulsory in every one of the cases.

The NFL hires only the finest and most expensive of attorneys. At a minimum, the initial work on a player's claim would consume 40 hours at a rate of at least $350 per hour. For the first 3,000 claims, the bill for legal fees would be $42 million and probably more.

"It's a billing bonanza," said one lawyer who specializes in insurance disputes.

Although there are limits in liability insurance policies in the amounts that can be paid to someone who is injured (you'll find them in your auto or homeowners insurance policies), there is no limit on what the insurance companies must pay in legal fees to defend against the claims.

With unlimited exposure to legal fees, it is easy to see why the league's 37 insurance companies are arguing about their duties to defend the concussion cases. One company, Fireman's Fund, has flatly refused to pay anything in defense of the claims. Fireman's sold four polices to the NFL for the 1977, 1982 and 1983 seasons.

Although the NFL asserted in the lawsuit it filed against its 37 known insurance carriers that the companies had "expressly repudiated [their] duty to defend the NFL," some NFL carriers, according to a league source, are paying some of the bills but are fighting with each other over their share of the costs. It's the kind of dispute that lawyers love. They can argue (and bill) endlessly over questions like, Do the companies pay the league's fees based on the number of NFL seasons covered in their policies? Do they pay based on the liability limits offered in the policies? Entire law firms have been built successfully on these issues.

Even as the companies pay some of the bills from the league's lawyers, they will resist any settlements or damage awards to players. League officials say that the companies are following a procedure known as a "reservation of rights" that allows them to pay defense costs while preserving their right to contest any payments to players.

Although the insurance companies will offer numerous arguments against paying the players, many of them highly technical, there will be two important and possibly conclusive issues.

The first argument the insurers will raise is that the injury to the player is not the result of an "occurrence," the insurance industry word for a specific accident. According to insurance coverage expert John Hackett of the law firm Cassiday Schade in Chicago, they will suggest that concussions are an "intended or expected" result of the game. Blows to the head are a known and expected part of football and do not qualify as an occurrence or an accident.

The second, and more important, argument the companies will raise will be based on the players' oft-repeated assertion that the league deliberately and fraudulently concealed from the players the consequences of multiple blows to the head. If the league's conduct was, as the players say, a deliberate conspiracy to conceal important information, then the insurance companies will say that they are not permitted to insure against deliberately harmful conduct. American public policy does not permit the sale of insurance to pay damages that result from deliberate misconduct.

The complexity of the issues, together with the enormous resources of the NFL and its many insurance companies, will produce courthouse battles of epic proportions. Both sides can afford to fight, and the outcomes are far from certain.

There's an insurance axiom that is repeated regularly in courthouses throughout the nation that describes what the insurers are doing in their fights with the NFL. If there is an accident and someone is injured, the first thing the insurer does is to deny that is policyholder was at fault. If the policyholder is at fault, then the company denies that the victim was actually injured. If the policyholder is at fault and there was significant injury, then the insurance company denies that its coverage applies to the case.

The axiom is supposed to be a bit of a joke. It's as close to humor as you will find in an insurance dispute. But, in the case of the battle between the NFL and its insurance companies, it seems to apply. It will take a while, but when it's all over, the dispute will show clearly that liability insurance is too expensive, and it is a nuisance, but it does come in handy.