SBJ/April 29-May 5, 2013/Law and Politics

Insurer: Lawsuit could cost NFL $2.5B

The NFL could pay $2.5 billion if it loses a federal class action lawsuit brought by retirees who say they were injured by concussions suffered from the sport, a league insurer recently told a New York state court. And that is on top of the hundreds of millions of dollars the NFL’s own lawyer told the same hearing the league might incur in legal costs, which would push the total outlay close to $3 billion.

While it’s generally been presumed the league’s potential liability, if it were to lose or settle the concussion case, could reach nine and perhaps 10 figures, the numbers suggested to the New York state judge last month represent the first time parties tied to the case have offered predictions.

NFL lawyer Paul Clement speaks outside federal court in Philadelphia, where the consolidated lawsuit over concussions is being heard.
Photo by: AP IMAGES
“If you take an average of $450,000 per claim, which is not an unreasonable amount when you’re talking about NFL players, many of whom are extremely well known, alleging severe and serious brain injuries, $450,000 is not the biggest amount in the world for those kind of damages,” Patton Boggs lawyer Larry Schiffer, an attorney for NFL insurer Alterra America, said during arguments last month in New York State Supreme Court over the insurers’ lawsuit seeking a ruling that the firm does not have to cover the NFL’s liability.

“And we’re not only talking about compensatory damages here,” Schiffer said. “We’re talking about … medical monitoring for the life of these people, plus punitive damages for intentional failures and things like that. So when you take $450,000 and you do the kind of math that we’ve been talking about, you get to about $2.5 billion.”

So far, more than 4,200 retirees have signed on to complaints, now consolidated in a single action in federal court in Philadelphia, alleging the NFL hid the risks of playing the sport. At $450,000 each, that comes to $1.89 billion, so the remaining $610 million would have to derive from punitive damages and medical monitoring costs. Schiffer did not respond to queries seeking further comment.

It is possible Alterra is motivated to offer a high figure. The insurer does not need to cover legal costs and is only responsible for excess liability, one source said. The NFL wanted Alterra’s case dismissed under the theory there is no actual controversy because the insurer at this point faced no such liability, but a high liability figure could ensnare Alterra and would save the case, a source said.

The NFL also is facing unprecedented legal costs. The NFL’s outside counsel, John Hall of Covington & Burling, told the court at the hearing that there could be “hundreds of millions of dollars in defense costs in this case.”
Hall declined to comment last week.

The NFL is already moving to get its insurers to pay defense costs, and they have done so to some degree, sources said, but not at the amount the league is seeking. The league also could look to the insurers to cover any liability assessed from the concussions litigation.

Lynda Bennett, chair of the insurance coverage practice at Lowenstein Sandler, said the figures proposed in court last month do not appear extreme.

“While the numbers are large, they are not particularly surprising to me given the fact that the underlying suits involve multiple players spanning a 45-year period,” she said. “In light of the $2.5 billion potential liability, coupled with the fact that this dispute is taking place on two coasts right now, the litigation expenses will certainly escalate.”

The NFL is seeking to move the insurance lawsuit to a California court, where the state’s laws are more amenable to policyholders.

The federal judge in Pennsylvania is expected to rule this summer whether to dismiss the concussion case, allow it to proceed, or let some of the lawsuit move forward. Under any scenario, appeals are expected.

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