By Dan Aznoff
Insurance policies to cover the multi-year, multi-million dollar salaries of injured professional baseball players might soon be as hard to pick up as a split-fingered fastball.
The hardening insurance market coupled with skyrocketing salaries of premier players has created a double play combination that may threaten the financial future of more than two-thirds of the 30 major league teams, baseball officials warn.
A total disability claim can be costly for a baseball insurer. For example, when a degenerative left hip injury forced Albert Belle into retirement before the start of the 2001 season, the Baltimore Orioles filed a $27 million claim to cover the final two years of the guaranteed $65 million contract the former all-star had signed three years earlier.
“Getting insurance has never been more difficult than it is right now,” says Bill Stecka, an Orioles representative. “Players do not care where the money comes from as long as they get paid. But if the team is ultimately responsible for paying millions of dollars to a player who is unable to help your team this year, it makes it virtually impossible to pay the players on the current roster.”
ESPN baseball commentator Peter Gammons reported earlier this year that the first and last years of Kevin Browns seven-year, $105 million salary with the Los Angeles Dodgers were not protected by insurance. Gammons’ report inspired a denial and a laugh from John Scotti, owner of the Team Scotti insurance brokerage in Pittsburgh.
Scotti, who says he has written insurance for 29 of the 30 major league teams, says that besides increasing rates, insurance companies have put a limit of five years on policies covering most professional athletes. In Kevin Browns case, Scotti says the insurance company simply issued a policy for 60 months, with a standard renewal clause contingent on the players health history.
Kevin Brown just ended the third year of his contract. He has spent time on the disabled list three times this season because of injuries to his pitching arm. His season ended on Sept. 28 when he underwent surgery to repair a torn muscle in his pitching elbow.
“The insurance is available; it just costs a lot more these days,” says Scotti. “The result is that many of these new, smaller companies that got into insuring professional athletes because of the glamour of the industry might not be around when spring training begins again in February.”
He adds that “baseball teams are owned by successful business owners who do not want to do business with newcomers. We are talking about powerful individuals.” He cites the likes of Ted Turner (of the Atlanta Braves), Tom Hicks (the Texas Rangers) and Rupert Murdock (head of Fox, which owns the Dodgers). “There is no room in this league for rookies,” he says.
Scotti says the premium to guarantee the largest contract thus far in baseball history–the $252 million, 10-year contract that Alex Rodriguez signed with the Texas Rangers–would be doubled in todays market compared to the rate the Rangers received last December.
He should know. Scotti says he was forced to piece together a creative insurance package–including help from billionaire Warren Buffet–to protect Hicks quarter-billion dollar investment.