SBD/Issue 55/Franchises

Insurance Coverage Of MLB Contracts Bringing 3-Year Offers

Insurance companies have made disability coverage for baseball players "a costlier and riskier business" in recent years, and contract coverage "may be the most significant element of signing players that clubs don't talk about publicly," according to Murray Chass of the N.Y. TIMES, who noted, "As an industry, [MLB] spent $55[M] in premiums the past year." John Scotti, Founder of Pittsburgh-based Team Scotti, the largest broker for disability insurance in MLB, said that premiums have risen over 300% in the past 30 months, coverage has been reduced from five years of a player's contract to three years, and the amount of coverage a broker can issue immediately is $18-20M, down from $42-50M two years ago. Scotti: "Losses in the business have been substantial, but reinsurers also have had a lot to deal with, including 9/11." Cardinals GM Walt Jocketty said, "It's become so expensive that it's a cost item we really have to look at when you put your payroll together. If you're going to insure players, you almost have to include that as part of your payroll." Orioles COO Joe Foss said initial coverage now being restricted to the first three years of a player's contract "is going to have an impact on clubs' appetite for the length of contracts." Chass: "The Tom Glavine negotiations could be a case in point." Expos GM Omar Minaya added, "When you're negotiating a contract, the insurance issue comes up more and more, especially now that it's three years. When you take on a guy in a trade, you always ask what's the insurance situation." D'Backs GM Joe Garagiola Jr.: "The companies are more aggressive in trying to exclude conditions from policies. We don't do a lot of policies. Mostly our insuring is confined to pitchers. But our experience is you can have a policy effectively excluded out from under you. You can have a disability policy on a pitcher, and exclusions can cover injuries to his shoulder and elbow" (N.Y. TIMES, 12/1).

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