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The NFL's Latest Headache

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The Raiders are coming to Las Vegas and the excitement is palpable. Three-quarters of a billion dollars of taxpayer money used as Raider bait seemingly hasn’t upset anyone. The arrival of the NFL after the Golden Knights’ first NHL season has local real estate salespeople, developers, casino owners and business folk dreaming of cashing in on a local professional sports bonanza.

Pro sports is seen as the next step in Sin City’s evolution. I’m told Raider Stadium construction is on schedule despite a major concrete malfunction. The eventual parking scheme is, shall we say, untested. But, tickets are selling like hotcakes and the town has gone collectively coocoo for the Raiders as it did with the Golden Knights.

What could go wrong?

Insurance? Or, lack of it? Insurers are leaving the football market fearing Chronic Traumatic Encephalopathy (CTE) is the new asbestos.

Steve Fainaru and Mark Fainaru-Wada wrote in a spectacular ‘outside the lines’ piece for ESPN+,

To an increasing number of carriers, football is a dam built atop an earthquake fault. A disaster might never occur, but the specter of huge potential losses is scaring many companies away.

"Thirty years from now, you could be on the hook, and that's a very difficult situation for an insurance company to be in," James Lynch, chief actuary for the Insurance Information Institute in New York told Fainaru and Fainaru-Wada. "This is why the industry is concerned about it. You want to be able to box up that risk."

Having played high school and college football, and now dealing with a variety of neurological issues, the following paragraph resonated with me.

It's not just CTE. CTE isn't going to be the expensive part," said one insurance executive who spoke to Outside the Lines on the condition of anonymity. "Dementia and every case of Parkinson's and Alzheimer's are going to be blamed on football. There will be a bevy of doctors in California and other states, and they're going to say, 'I'm sure it was because you played football.'”

There was a time when insurers lined up to provide the NFL with General Liability and Workman’s Compensation coverage. Now there is only one carrier writing this business, without an exclusion for head trauma, Berkeley Entertainment & Sports. Not exactly a household name.

"I don't want to use the word 'meltdown,' but there's a panic in the market," said insurance consultant Lee Gaby.

Insurers are still paying $1.8 billion a year in asbestos claims decades after the link was established between the construction material and lung cancer in the mid-60’s.

Like asbestos-related diseases, CTE can take years to develop, increasing the possibility of decades of litigation. The pool of potential claimants is in the millions — theoretically, any athlete — with a variety of potential legal targets.

"There are parallels, and they are very real parallels," Lynch told ESPN.

High School and Pop Warner football players engage in more full contact scrimmages than college and pro players. In 2016, Real Sports reported that 17 players had died during the previous three years due to head injuries from playing football.

It is not just NFL, college, high school and Pop Warner football participants at risk. HBO’s Real Sports highlighted the risks NHL hockey players are taking. NHL brass has denied any connection between CTE and hockey. NFL owners engaged in the same denials for years.

A number of former players have sued the NFL. The class action was settled, but since then, write Fainaru and Fainaru-Wada,

concussion-related lawsuits involving at least 18 sports and activities have been filed in at least 29 states, Outside the Lines' research shows. They target not only professional sports but also youth leagues, school districts, athletic associations, equipment manufacturers, medical providers, coaches and athletic trainers.

Over 100 lawsuits have been filed against the NCAA during the past five years. In a case, “Last June, the first trial involving football and CTE ended after three days. The NCAA abruptly settled with the widow of a former University of Texas linebacker and defensive tackle who was diagnosed with the disease after his death in 2015 — 44 years after he last played.”

That’s called tail risk, and insurance companies hate it. There are a reported 300,000 football-related concussions a year, and likely thousands which go unreported. Those hundreds of thousands of concussions may well lead to millions of claims totaling billions of dollars. No wonder the insurance industry has run away.

Las Vegas may see little of the NFL’s magic.


Doug French

Douglas French is President Emeritus of the Mises Institute, author of Early Speculative Bubbles & Increases in the Money Supply, and author of Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master's degree in economics from UNLV, studying under both Professor Murray Rothbard and Professor Hans-Hermann Hoppe.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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