I have a question I hope someone can answer for me. If Rodriguez gets paid out by insurance does his salary still count in the luxury tax calculation for the remaining term of his contract?

Interesting. I was under the impression insuring player contracts had diminished greatly since Albert Belle's injury with the Orioles.

#2 Even before the Belle situation it was hard to insure major contracts. I guess new players have entered the market.

There wouldn't be much liquidity in a market like that - way too much vol.

Interesting topic, but the article provides practically zero info on "The calculations behind the insurance of athletes".

#5 Seconded. Disappointing to me. I was hoping for something as informative as the one in Forbes ~ a decade ago.

I am not an actuary, but from speaking with one frequently I understand that insurance is available for just about anything. I was surprised to learn that satellite launches are insured. If enough money is changing hands, insurance is probably available.
My understanding is that college juniors choosing against the NFL Draft for one more year of NCAA playing can get insurance against the loss of ability to play football, but not against the loss of ability to play NFL football. In other words, if they can still play at some level after an injury they don't have a claim.

A friend of mine hosts charity golf outings to raise money for Downs syndrome or something similar. One of the holes has a special prize: a hole in one nets you a brand new Chevy SUV.

He told me that the charity basically buys an insurance policy. The dealer loans the car out for display at the event. If someone gets the hole in one, s/he gets the car and the insurance pays the dealer.

I can only imagine the actuaries out there measuring the hole, checking the grade of the hills, etc., to figure out what the risk is.

[8] I wonder if I should sell insurance to the golfers, to cover the tax assessed for winning the SUV.

A friend of mine hosts charity golf outings to raise money for Downs syndrome or something similar. One of the holes has a special prize: a hole in one nets you a brand new Chevy SUV.

He told me that the charity basically buys an insurance policy. The dealer loans the car out for display at the event. If someone gets the hole in one, s/he gets the car and the insurance pays the dealer.

I can only imagine the actuaries out there measuring the hole, checking the grade of the hills, etc., to figure out what the risk is.

Kind of along those lines, TV dealers used to have sales that were along the lines of "if you buy this week and there is a shutout in the Super Bowl, its free!". They would also be insured against loss if there was indeed a shutout.

When the company i was working for was bought, there was a big incentive clause. If the company after being bought met x goals by a certain time, the former investors would get a big payout on top of the purchase price (the employees were included in this, though at a much, much, lower level). The head finance guy then went out looking for insurance on this... as most of us thought there was no way we were going to make it... he was not able to find a taker... it probably would have been easier for the parent company to buy insurance in case they had to pay... it was all a bit surreal.

FYI - the second quote isn't from the article, it's from me. I must have goofed up the submission.

Interesting topic, but the article provides practically zero info on "The calculations behind the insurance of athletes".

Agreed. I was hoping for an explanation of what might happen with ARod's contract, something that answered these basic questions, understanding that what is spelled out in the contract between the insurer and the Yankees (and the contract between the Yankees and ARod, and the CBA, and the joint drug testing program) is essential, and that we don't know what the contract between the insurer and the Yankees says or what ARod's player contract says. But I'm asking what's standard in the industry.

1. Let's say ARod thinks he can still play, and is still able to play, but no longer wants to deal with the negativity from everything and decides to voluntarily retire. He does not get paid out on the rest of the contract. I don't think there's a dispute here.

2. Let's say ARod's injury is career-ending and there is no dispute that it was a baseball injury and that, despite wanting to continue his career and trying to, he can no longer perform. I presume the Yankees would pay him and then the insurer would reiumburse the Yankees to the extent the insurer is obligated under the agreement. Correct? ARod's contract is between him and the Yankees and so it is the Yankees who are obligated to pay ARod, not the insurer.

3. Let's say ARod's injury is career-ending and despite wanting to continue his career and trying to, he can no longer perform. But now the Yankees want to void his contract because of either a morals clause (steroids) or because they argue that an off-field activity (steroids) is responsible for his injuries. Like getting hurt playing pickup basketball or skiing (presuming those are prohibited by his contract). I see no way the Yankees would be able to successfully void his contract, given the CBA and the joint drug program and the penalties already agreed to for steroids, none of which include voiding a contract.

4. Let's say ARod's injury is career-ending and despite wanting to continue his career and trying to, he can no longer perform. The Yankees are ready to pay him out and expect reimbursement from the insurer. But the insurer balks, saying that his injury was steroids-related and not baseball-related. I understand that in this case, the Yankees would be obligated to pay ARod, and then the Yankees would have to sue the insurer for breach of contract. But Mike Francesa on WFAN (god help me) claimed over and over again to a caller that in this case the Yankees would pay ARod, the insurer would pay the Yankees, and then the insurer would go after *AROD* for the money. Does this make sense to anyone? Would this be the normal process?

(In my view, in this scenario 4 the Yankees would argue to the insurer that steroids=baseball-related.)

5. Let's say ARod and the Yankees both agree that his injury is career-ending. The Yankees pay ARod under the contract. But the insurer balks, saying his injury is not career-ending and therefore they won't pay the Yankees. Same question as above, I guess. In my understanding the Yankees would then have to sue the insurer for breach of contract. In any event nobody is suing ARod.

6. Let's say now that the Yankees fail to honor ARod's contract, saying that his injury was not career-ending and that instead he in effect retired voluntarily. Now ARod would sue the Yankees for breach of contract.

I am not seeing why anyone would end up suing ARod for anything, as a practical matter, contra Mike Francesa. ARod's contract is guaranteed and either ARod ends up suing the Yankees for breach of contract if the Yankees don't pay him, or the Yankees end up suing the insurer for breach of contract if the insurer doesn't pay him.

I was hoping the article might touch on some of this, the mechanics of how this all works, but from a quick read it doesn't.

The only way I could see someone suing Rodriguez would be if the Yankees pay him, the insurer fails to pay because the injury was steroid-related, the Yankees sue the insurer and lose then the Yankees sue him.

4. Let's say ARod's injury is career-ending and despite wanting to continue his career and trying to, he can no longer perform. The Yankees are ready to pay him out and expect reimbursement from the insurer. But the insurer balks, saying that his injury was steroids-related and not baseball-related. I understand that in this case, the Yankees would be obligated to pay ARod, and then the Yankees would have to sue the insurer for breach of contract. But Mike Francesa on WFAN (god help me) claimed over and over again to a caller that in this case the Yankees would pay ARod, the insurer would pay the Yankees, and then the insurer would go after *AROD* for the money. Does this make sense to anyone? Would this be the normal process?

Unless ARod is a party to the contract, I don't see where he owes them any duty at all. I suppose they would inherit any claims the Yankees might have against ARod but that's probably worthless here.

As an ex-lawyer who was never good at it and hasn't even lived in the States, and who has no medical training whatsoever (so, you know, an expert):

I think Ray has laid everything out correctly except that I don't think #4 is feasible. There is no little black box in A-Rod's hip that will clearly explain the injury. One can probably make a solid argument that it is LIKELY steroids CONTRIBUTED to the injury, but not much more and I expect you would need more than that to void the insurance or the contract. Unless this is dealt with in the specific contract language (either A-Rod's or the policy itself) I think that scenario is just noise. I think quoting Mike Francesca speaks for itself on this front.

I think we are looking at Scenario 1 or 2, with probably lots of speculation about Scenario 3 but Ray has probably called this right.

Of course the most likely scenario is the one that was left out. Let's say ARod comes back, either in 2013 or 2014, the team is better for it but the contract still hurts them a great deal as his decline continues, and he somehow continues to be the most disproportionally hated figure in sports in spite of really only being a selfish jerk, a condition that is actually quite common.

Let's say ARod comes back, either in 2013 or 2014, the team is better for it but the contract still hurts them a great deal as his decline continues,

This seems the most likely to me. I recall him playing major league baseball at the end of the 2012 season. He wasn't playing well, but he was still better than some other major league ballplayers. I don't think there is any medical "out" for the Yankees if he is playing at a mediocre but still MLB level, say .240/.320/.390. This may be the Holy Mountain of Terrible Contracts. In the same range as Mt. Hampton.

Re: Ray's scenario #4 - who's the insured party here? Is it ARod, or is it the Yankees? If ARod is the insured party, then Francesa would be correct that the insurance company would go after ARod to recover a payout on a (potentially) fraudulent claim - but the contract then would also specify that it's the insurance company who pays ARod in the event of a career-ending injury, not the Yankees. It's not really clear to me how the mechanics of this work.

-- MWE

For what it's worth, part of Francesa's argument was that the insurer would not want to balk on paying the Yankees, because the insurer would never land another contract with a team again. I don't see it. There are contract disputes all the time. They are resolved (forgotten about, litigated, settled, etc.). People stay in business. It is not a practical condition of staying in business that you pay out millions of dollars even though you don't think you're obligated to.

Of course, Francesa is also a moron. So listening to anything he says is ill-advised.

Mike, I would be shocked if ARod's contract said anything other than "the parties are ARod and the Yankees, and the Yankees owe ARod this money." His representatives (I guess Boras) would have to have been insane to agree to payment from any entity other than the New York Yankees.

Thus, I understand that it's the Yankees who contract with ARod, and then the Yankees who contract entirely separately with the insurer to insure some/all of his contract. I don't think ARod is involved with the insurer at all - as far as he is concerned it has nothing to do with his contract with the Yankees - and so no way for ARod to commit "fraud" on the insurance company. He did not contract with the insurance company.

If the Yankees think he did something wrong, they could refuse to honor the contract, claiming he breached, but that as I said is likely to go absolutely nowhere.

A-Rod is the insured party in the same way my car is an insured party. The insurance policy is between the Yankees and the insurance company and the Yankees would make a claim seeking payment under the specific terms of that policy. I agree with Pops that A-Rod has no duty of care to the insurance company at all. His deal is with the Yankees and all that matters to him is what is specified in his contract and whether he deserves payment per the terms of that contract.

(And, as per my last post, I don't think there would be case to link steroids as a cause of the injury to the extent that is affects either of the contracts unless there is specific language that includes it)



Edit - Coke to Ray

The only way I could see someone suing Rodriguez would be if the Yankees pay him, the insurer fails to pay because the injury was steroid-related, the Yankees sue the insurer and lose then the Yankees sue him.

If the Yankees sue the insurer, then they have to argue that his injury is baseball related. If they lose and then sue ARod, they then have to argue the opposite. Can their first position be held against them in the second suit?

If the Yankees sue the insurer, then they have to argue that his injury is baseball related. If they lose and then sue ARod, they then have to argue the opposite. Can their first position be held against them in the second suit?

They could sue them both and plead in the alternative. Conflicting allegations are not an issue at the complaint stage (under the federal rules and states which use similar pleading standards) but they have to pick one theory by dispositive motion time.

My memory may be wring here. It's been years since I've done litigation on a regular basis.

If they lose and then sue ARod, they then have to argue the opposite. Can their first position be held against them in the second suit?

If you argue "A" in the first suit and win you cannot then argue "Not A" in a later suit.

If you argue "A" in the first suit and lose, you are then allowed to argue "Not A" in a later suit.


edit: In the first scenario your complaint would likely be dismissed on a motion early in the case- in the second case the other side won't be able to do that, they can argue that you are being inconsistent, the retort to that is, "Yes we used to argue A, and we lost, the court ruled that it was not A. "

Here's a look at a similar situation - Jeff Bagwell, 2005-06:

http://www.astroscounty.com/2013/01/jeff-bagwell-and-insurance-fiasco-of.html

Of course, Francesa is also a moron. So listening to anything he says is ill-advised.

Generally agreed, but in fairness he understands more about labor issues than the typical media figure.

Granted it's not a high bar.

http://espn.go.com/new-york/mlb/story/_/id/8902336/alex-rodriguez-new-york-yankees-no-plans-retire-source

Some clarity:

A-Rod does not intend to retire.
His doctor has stated the injury is congenital and not related to the hip.
Yankees are prohibited from punishing players for steroid use under the CBA -that power falls on the Commissioner.

ARod is obviously not walking away from 100+ million. So he will try to come back. And the Yankees can then either sit silently as he does, or deem him unfit to play and start the legal battle with the insurance company. But he will be paid. And I don't see them trading him for pennies on the dollar.

I don't know where this notion started that he would retire rather than face the music being played by the morons, anyway. Is there the slightest whiff of evidence from anyone close to ARod, anonymously or otherwise, that he has said he is thinking of retiring? This appears to be all simply a media creation.

Is there the slightest whiff of evidence from anyone close to ARod, anonymously or otherwise, that he has said he is thinking of retiring?

I haven't heard this either. Rather, at the end of last year his comment was that he intends to get healthy in the off season and come back strong. I think that was before the hip surgery news, but that was his sentiment.