How loss-of-value insurance policies work
The two Fiesta Bowls were played in different stadiums, but for two star players, they ended with similar results. Miami tailback Willis McGahee tore ligaments in one knee as the Hurricanes lost to Ohio State on Jan. 3, 2003. Twelve years and 363 days later, Notre Dame linebacker Jaylon Smith tore ligaments in one knee as his team lost to the Buckeyes.
The good news for both is that they had insurance policies, but the difference in how they were insured illustrates how much has changed in that time. In fact, even four years ago, Smith might not have been protected the way he is now. In the hours before the Fiesta Bowl in 2003, McGahee purchased a $2.5 million policy that he would collect only if he suffered an injury that kept him from ever playing professional football. Smith, on the other hand, has a policy that not only will pay if he never plays again but also will pay a reported $5 million if he drops out of the first round of the NFL draft.
Keith Lerner, who wrote that policy for McGahee, said the industry has changed dramatically in the past three years as more players have opted for the loss-of-value insurance and more schools have been willing to cover the premiums. In the next few weeks, Lerner and his son David will leave the Gainesville, Fla., office of Total Planning Sports Services and visit schools to discuss insurance options with players entering a draft-eligible year. Because the world has changed in several ways, those players have more options then they used to.
Lerner did not write Smith's policy, but he did write policies for each of the past three Heisman Trophy winners (Jameis Winston, Marcus Mariota, Derrick Henry). He also wrote the policy for Oregon cornerback Ifo Ekpre-Olomu, who in October became the first football player to collect on a loss-of-value policy because he dropped in the draft after suffering an injury. Ekpre-Olumu was considered one of the best cornerbacks in college football when he tore his ACL and dislocated his knee in December 2014 as the Ducks practiced in Eugene prior to the Rose Bowl. He fell to the seventh round, where the Cleveland Browns selected him with the 241st overall pick. After it spent months examining the claim to determine the injury—and not some other factor—caused the draft drop, underwriter Lloyd's of London paid Ekpre-Olomu $3 million, tax free. If Ekpre-Olomu never plays another down, he stands to collect another $2 million. He told The Cleveland Plain Dealer last month that he hopes to return to the practice field in April.
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Had Ekpre-Olomu been selected with the final pick in the first round, he would have received something close to the $6.1 million in guaranteed money Texas defensive tackle Malcom Brown received for being the actual 32nd pick of the 2015 draft. Instead, Ekpre-Olomu received a signing bonus in the mid-five figures. The loss-of-value policy didn't recoup everything Ekpre-Olomu lost, including salary and endorsements.
Lerner said insurance companies won't offer policies that would pay, say, the full amount guaranteed to the first pick in the draft. That would incentivize collecting on the policy. If there is still much more money available to those who play, few would be satisfied collecting on the insurance money. Currently, the limit on total disability policies for draft-bound football players is about $10 million. The limit on loss-of-value policies is about $7.5 million. The policies work in combination, so an insured player who collected on an upper-limit policy because he suffered a career-ending injury would receive a total of $10 million.
A few years ago, Ekpre-Olomu might have had a policy that protected him only against a career-ending injury but not against a drop in the draft. When I visited Lerner for a story in 2009, Lerner said most players opted against paying extra for the loss-of-value insurance that protects against dropping in the draft. It was more expensive, and because of all the moving parts, there was no guarantee a claim would be paid. Today, almost every projected first- and second-rounder has it.
There are two reasons for this. The first is medical. "The chance these days with modern medical science of somebody having a career-ending injury is a lot less than someone having an injury, getting picked lower and coming back to play," Lerner said.
The second is financial. In 2014, the NCAA created a waiver that allows players to borrow against their future earnings to pay loss-of-value insurance premiums. (Previously, they could only borrow against future earnings to pay for total disability insurance.) Shortly before that, some schools began dipping into their NCAA-approved Student Assistance Funds to pay the premiums. Texas A&M paid the premium for offensive tackle Cedric Ogbuehi in 2014 after associate athletic director Justin Moore and assistant compliance director Brad Barnes thoroughly researched the policies and checked with the NCAA to ensure they were allowed to use the Student Assistance Funds. Ogbuehi was a projected first-rounder after his junior season in '13, but he was leaning toward coming back to College Station. He had just watched fellow tackle Jake Matthews return for his senior season, raise his draft stock and cash in. The insurance policy sealed Ogbuehi's decision to return. "Ced didn't want to leave. He liked school. He didn't want to go," Moore said. "This was the way to make his family feel at ease. Here's this policy, and now we can make you feel more comfortable." (Ogbuehi tore his ACL in Texas A&M's bowl game, but he was still selected 21st overall by the Bengals.)
Also in 2014, Oregon paid portions of the premiums for Mariota, Ekpre-Olomu and center Hroniss Grasu. Splitting the cost between the school and the players and their families is becoming more common. Other schools have followed suit since, but schools with multiple potential first-rounders may not pay the full amount for each player. Since Student Assistance Fund money is designated to cover unplanned expenses—flying home because a family member died, for example—for every athlete in a program, it wouldn't be a good look politically for a school to use all its SAF fund money on insurance policy premiums. Moore said Texas A&M has placed a cap on how much SAF money the football program can use so that enough remains for the other sports. In 2015, the Aggies bought a policy for offensive tackle Germain Ifedi. Because Texas A&M has multiple early-rounders this season, the program has offered to pay for total disability policies and will help players arrange buying loss-of-value policies if they choose. Junior defensive end Myles Garrett, a potential top-10 pick in 2017, is a prime candidate for a hefty policy.
Lerner said ACC and SEC schools are ahead of the other conferences in this practice. This makes sense. Since 2011, the SEC and ACC rank No. 1 and No. 2, respectively, in first-rounders produced. So the schools have good reason to pay. It might convince a potential first-or second-rounder to come back to school for one more year. That can bring more wins. More football wins typically equal more season tickets sold and more donations secured. So it's a relatively minimal investment on the school's part that can pay big dividends.
It also might help lure a future first-rounder. "It comes back to recruiting," Lerner said. "Schools are saying, 'If your kid comes here and he qualifies when he's a redshirt sophomore or a junior, we've done other insurance policies.'" Said David Lerner: "It's just like the indoor practice facility. One got it. They all got it."
So how much does one of these policies cost? Lerner said a total disability premium costs about $10,000 per million of insurance. Loss-of-value is about $4,000 per million in addition. So a policy such as Ekpre-Olomu's—$5 million in total disability and $3 million in loss-of-value—would cost about $62,000. If a school doesn't pay for that, the player could take out a five-year bank loan against his future earnings to cover the premium. At six percent interest and with no down payment, such a loan would cost $1,155.87 per month. That's a hefty chunk of change for most college students, but a potential first-rounder would be able to pay off the loan not long after declaring for the draft by either getting an advance from his agent or by signing an endorsement deal.
Keith Lerner brought his son into the business to help discuss the policies with the athletes. David was a walk-on punter at Florida—he was a member of the Gators' 2008 national title team—and played alongside a host of future draft picks. David stresses to players that they need to secure their policies before spring practice begins because some of the hardest hitting takes place as their teammates try to secure starting jobs in March. "Sometimes [buying a policy] is getting pushed until Aug. 1," David Lerner said. "There are guys going without coverage through the spring."
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David also reminds players to behave because the underwriter might use an off-field issue as a reason not to pay on a loss-of-value claim. "Take a very high-profile guy who then gets hurt but also has an off-the-field issue," David Lerner said. "Did he drop because of the injury? Was it a character issue? How do we draw that line?" Moore said some policies explicitly state that they won't be paid if a player fails drug tests or encounters legal issues. This added pressure, Moore said, can help keep players from misbehaving.
Players also must make sure they disclose their entire injury history. Former USC receiver Marqise Lee sued Lloyd's of London last year when his loss-of-value claim from 2014 was denied. Lloyd's attorneys countered that Lee had not provided pertinent information about his injury. Lloyd's refunded Lee's $94,600 premium and claimed the policy was never applied. The loss-of-value policy remains a risk because the player will only receive his money in a cut-and-dried situation. Even then, it may take a while. That's why at Texas A&M, Moore gets a call every few weeks from Barnes asking about the medical status of the insured players. Barnes noticed how difficult it was to get a claim approved, so every few weeks he updates Aggies players' insurers with every piece of injury information. That way, the insurers can't claim they weren't informed in the event of a claim.
The Lerners also try to make clear at every school they visit that they will not sell a policy to a player who doesn't need one. To do so would be terrible for their business. Keith Lerner said he has had to tell parents convinced their son was a first-rounder to lower their expectations. Lloyd's of London won't underwrite a huge policy for a player who isn't projected to be a first-rounder. Plus, the Lerners don't want to falsely inflate anyone's expectations or sell them something they can't afford. "The last thing we want to do is write an insurance policy on a kid even if it's a $5,000 or $10,000 premium," David Lerner said. "If the kid is not going to get drafted, he might not be able to pay for it."
But for those who are legitimate first- and second-round prospects, the stacked policy that includes total disability and loss-of-value coverage has become the norm. Few injuries will end a player's career, but plenty could cause them to drop in the draft. Ekpre-Olomu collected on his policy last year. Former Georgia tailback Todd Gurley, who tore his ACL in November 2014, didn't need to file a claim because the Rams still chose him at No. 10. Notre Dame's Smith now must wait to find out whether the promise he showed during his college career will outweigh concerns about his knee injury. No matter what, he's covered.
A random ranking
I spent a few minutes on Twitter last week sparring with the too-many-bowls people. For those who've never had the pleasure, these are people who hate football and hate America. They want exactly eight bowl games, and they want them all broadcast at the same time on Jan. 1 just like when they were 13. (It was never like this, but let's not ruin their Leave It To Beaver fantasies.)
It occurred to me that these are the same people who complain that there are too many flavors of ice cream. There can never be too many flavors of ice cream, but here are the best 10 flavors.
You can pick your favorite brand. I'll take Breyer's or the store brand at Publix supermarkets. I'm aware that as many or more people will choose vanilla as their favorite. These people are wrong. Vanilla ice cream is the perfect accompaniment for pie or cake. But if it's your favorite flavor by itself in a bowl, you are what my former college roommate Chad Forbes called The Human Equivalent of Beige.
2. Cookies and cream
This tastes great on its own, goes wonderfully with certain kinds of cakes and pies and makes the best shakes.
3. Baskin Robbins Mississippi Mud
This one isn't always available, but it's chocolate fudge ice cream mixed with chocolate ice cream, brownie chunks and a dark chocolate ribbon. This was my favorite growing up.
4. Amy's Ice Cream Shiner Bock
The Lone Star State's best beer—in ice cream form.
5. Ben and Jerry's Rainforest Crunch (RIP)
Mrs. Foster, my geography teacher in seventh grade, brought this in for us to try when we were studying South America. Ben and Jerry's makes the best vanilla—just because it isn't my favorite flavor doesn't mean I can't appreciate a good one—and combining that vanilla with a cashew and Brazil nut brittle overloaded my adolescent taste buds.
6. Mackinac Island Fudge at Velvet in East Lansing, Mich.
They make the fudge in the store. Then they put the fudge in the ice cream.
7. Cold Stone Creamery cinnamon
I ate this for the first time the day after my wedding. I've been hooked ever since.
8. Mint chocolate chip
Because sometimes I want a flavor that feels even colder than frozen cream.
9. Haagen-Dazs white chocolate raspberry truffle
You're going to eat the entire pint. Just accept it.
10. Ben and Jerry's red velvet cake
You can put chocolate chip cookie dough or chunks of brownies in ice cream—Ben and Jerry do both—but why not use the world's finest variety of cake?
1. In my way-too-early 2016 top 10 in last week's edition of the magazine, I had Alabama at No. 6 because I worried the Crimson Tide would simply lose too much experience to the draft to return to playoff for a third consecutive season. Now that the go-or-stay decisions have been revealed, I'm probably going to need to revise that ranking.
Defensive end Jonathan Allen, who may have been a first-round pick had he left, was the most surprising returnee.
The decisions by quarterback hunters Tim Williams and Ryan Anderson weren't as surprising, but getting three excellent pass rushers back to bolster a defense that already will include an outstanding secondary will make Alabama about as difficult to score on as it was this year. So unless you've got Deshaun Watson on your team, prepare for pain.
2. Alabama tailback Derrick Henry and defensive tackle A'Shawn Robinson did decide to skip their senior seasons and turn pro. Robinson also decided to wear Capri pants to his announcement. You going to tell him? Nope? Me neither.
3. Oregon hired former Michigan coach Brady Hoke as its defensive coordinator on Saturday. Will this work out for the Ducks like the marriage of Lane Kiffin and Alabama? We'll see. Like Kiffin and Alabama coach Nick Saban, Hoke shares an agent with Ducks coach Mark Helfrich. (Jimmy Sexton for Kiffin and Saban; Sexton's Creative Artists Agency colleague Trace Armstrong for Hoke and Helfrich.) This helps explain why Helfrich reached outside the relatively narrow tree of coaches with experience in Oregon's system.
It may help for the typically insular Ducks to reach out for some new ideas. Defense wasn't the problem at the end for Hoke at Michigan. The problems were the administration of the team and the offense. As with Kiffin at Alabama, Hoke won't have to worry about anything except something at which he's already proven himself adept. Hoke, one of the more likable and down-to-earth coaches in college football, will put those traits to work on the recruiting trail.
Hoke's personality should eliminate any awkwardness as he replaces Don Pellum, who was demoted to linebackers coach. If the experiment works, it should help Hoke get back in position for another premium head-coaching job. After his tenure at Michigan, he probably wasn't going to get another crack at such a job unless he hit the reset button. That's what Kiffin has done in Tuscaloosa, and that's what Hoke will try to do in Eugene.
4. Shoe and apparel deals for college athletic departments used to be a barter of sorts. In return for showcasing a company's goods, the school got free gear. Some cash might have changed hands, but not much. In recent years, apparel companies have driven up the market considerably because they realize the value in having the players as walking billboards. Last week, Ohio State agreed to a 15-year, $252 million deal with Nike that will include at least $7.75 million per year average in cash for the Buckeyes.
So the next time someone from an athletic department tries to say the school makes barely any money from the sale of a jersey baring a star player's number, remember that while after-the-fact royalties remain quite small, the biggest programs are making a pile of money up front for that player to wear a swoosh or three stripes or an interlocking U and A.
5. Arkansas athletic director Jeff Long stepped down from the most thankless unpaid job in college football when he ceded the chair of the College Football Playoff selection committee last week. Your new punching bag is Texas Tech athletic director Kirby Hocutt, who will be tasked with answering questions about rankings that have no true correct answers and are bound to anger some—if not all—fanbases.
6. One of the best coaches in college football announced this week that the 2016 season will be his last. You may not have heard about it because this particular coach works in the FCS. Villanova coach Andy Talley, who leads active Division I coaches with 221 wins, will step down after the 2016 season. Wildcats assistant Mark Ferrante will succeed Talley, who has coached at Villanova for 31 years. Talley will move to an administrative role within the athletic department.
7. If you spent millions on a giant video board, what do you do with it in January? Let recruits play Madden on it and hope they decide to come to your school.
8. What do you do if your neighbor's kid is a great kicker being recruited by your school's rival? Make a sign to remind the coach of the score of the last meeting.
9. It's entirely possible that, until National Signing Day, this space will be devoted to photos or videos of coaches doing whatever they can to lure recruits. Here's SMU coach Chad Morris busting a move.
What's eating Andy?
I'm taking a little time off this week, so Punt, Pass and Pork will return on Feb. 1 to preview National Signing Day.
What's Andy eating?
Not long after I landed in Phoenix to cover the run-up to the national title game, a text popped in from co-worker Lindsay Schnell. Lindsay commanded that those of us in the Valley of the Sun for the game go forth and try Taco Guild, a two-year-old restaurant that began life as a church. We assumed that the flat screens over the altar bar and the jukebox—which ate a member of our party's credit card—were added after the place became a taco temple.
There is some mumbo-jumbo on Taco Guild's website about master craftsmen and plate harmony. It's nonsense. All that really matters is that you'll need one order of Fundido for every two people at your table. You'll be spooning this mixture of melted menonita cheese, longaniza sausage, roasted-jalapeño mushrooms, caramelized onion and Mexican tea into tortillas and then inhaling them. This is the best item on the menu, and it comes before the main course. If you choose to order it as your main course, so be it. You'll go home full and happy.
This isn't to say the tacos aren't worthy. Some of them are quite good. Skip the duck confit, which is a daring idea that doesn't quite work, and double down on the crackling lamb. This is barbacoa lamb, roasted-jalapeño hummus, mint chimichurri, avocado, Cotija cheese and cilantro swaddled in a corn tortilla. The spicy hummus accentuates the burst of lamb flavor, and then the chimichurri and avocado cool things down. For the third taco on your combo plate, get the al pastor. It may be an old standby compared to the more adventurous creations on the other side of the menu page, but the grilled pineapple and jalapeño bacon ensure it never gets boring.
A few nights later, I'd already eaten dinner when I ventured out to a bar in Scottsdale that some co-workers had recommended. Unfortunately, that bar was in the middle of last call at 11:30 p.m. It was suggested that we visit another place nearby. This place, we were told, would be serving drinks until 2 a.m. We were not told what else the place would be serving until 2 a.m.
From the entrance, Chop and Wok looks like a larger-than-usual Chinese restaurant. Only after passing the counter does it become obvious that the real feature is the Wok Star Bar, which has an excellent beer selection and serves the full Chop and Wok menu into the wee hours. Sure, every town has a Chinese takeout place that stays open late. But how many of those places have a full bar?
And that is how, on a night when I had already eaten a bone-in ribeye, I found myself looking down at a plate of spicy beef lo mein that I probably wouldn't have ordered at 5 p.m. but absolutely had to have at 12:30 a.m. The lo mein was pretty good, too. But what made the place amazing was the fact that in the middle of one of America's most plastic suburbs, we found a bar/Chinese restaurant populated by real people who just wanted to drink beer, eat lo mein and listen to a mid-90s hip-hop soundtrack that sounded as if it was programmed by the DJ who worked the Homecoming dance my senior year of high school. As random finds go, this one was damn near perfect.