Texas A&M quarterback Johnny Manziel and South Carolina defensive end Jadeveon Clowney are among a number of high-profile underclassmen to purchase “exceptional student-athlete disability insurance” (or ESDI) which would pay them benefits in the event of a career-ending injury while still playing college football. Manziel and Clowney separately confirmed to reporters this week that they were in the process of purchasing ESDI coverage for the NCAA maximum benefit of $5 million.
The NCAA does not consider insurance a violation of amateurism rules and in fact has offered ESDI policies since 1990. According to a 2010 article in the Villanova Sports & Entertainment Law Journal, about 75% of first round picks in the NFL Draft have purchased ESDI policies through the NCAA program. The same article said between 75% and 80% of all ESDI policies were issued to football players. ESDI policies are only available to players who have demonstrated high draft potential, in the case of football within the first three rounds of the NFL Draft. ESDI policies are also available to potential first-round Major League Baseball, NBA and WNBA draft picks, as well as any men’s hockey player projected to go in the first three rounds of the NHL Draft.
HCC Specialty Underwriters is the exclusive underwriter of the NCAA’s ESDI policies, which are administered by ASU International, Inc. As noted above, the maximum benefit for football players is $5 million, although the specific amount of a player’s coverage may be lower depending on his projected draft status. The policy only applies to “permanent total disability,” meaning he suffers an illness or injury (while insured) that prevents him from ever signing an NFL contract. “Total disability” does not imply the player must be a paraplegic in order to collect; the policy defines disability to include the “irrecoverable loss” of a hand or foot or sight in either eye.
By restricting ESDI coverage to “total” disability, however, college players receive no protection from a potential drop in projected draft status. So if South Carolina’s Clowney–who many believe would be a top-three pick in this year’s NFL Draft–suffers a major knee injury that requires a year or more of rehabilitation, and as a result he falls to the late first or even second round of the 2014 Draft, then ESDI coverage is useless.
Furthermore it’s the players, not the NCAA or member schools, who must pay all ESDI premiums. For every million dollars in coverage, ESDI premiums can run $10,000-$12,000. So Clowney and Manziel may be on the hook for upwards of $60,000 for their respective $5 million policies. Perhaps not surprisingly, the NCAA has an arrangement with U.S. Bank, N.A., to offer athletes loans at “competitive” rates (reportedly 1.5% over prime) to help them pay ESDI premiums. The loans are repayable when the player signs a professional contract, receives a payout following total disability or simply stops playing college football.
Athletes are not restricted to the NCAA’s ESDI program. Non-NCAA insurers also offer coverage, usually at much higher premiums. Since the NCAA program is restricted to projected first-three-round picks, the majority of future NFL rookies are forced to look elsewhere for insurance. Even athletes like Manziel and Clowney who are covered by the NCAA program may seek supplemental coverage from a second insurer if their projected career earnings–which can include endorsements–exceed the $5 million cap.