The recent $2.78 billion proposed settlement in the antitrust class-action lawsuits against the NCAA and other defendants — encompassing cases such as House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA — has significant implications for NCAA member institutions and athletic conferences.

While certain aspects of the settlement will only impact member institutions if they elect to opt in (revenue sharing, new roster and scholarship limits, enhanced Title IX compliance, etc.), the $2.78 billion settlement for former student-athletes will be borne by Division I schools even if they do not elect to opt-in.

The House settlement leaves many conferences and athletic programs working to find room in already-tight budgets to fund their allocated share of this settlement over the next 10 years. In addition to exploring potential sources of cost savings and revenue enhancement, conferences and member institutions should look to assets they already have: insurance policies.

Assessing Insurance Coverage for Settlement Obligations

Given the financial impact of the House settlement, member institutions and conferences should evaluate their insurance policies to determine potential coverage for their share of the $2.78 billion of back damages to former student-athletes.

In addition to insurance policies issued to the conference, potentially responsive policies are typically issued to the university as a whole (not specifically to the athletic department). Athletic Directors can coordinate with the university’s Risk Management, CFO, or General Counsel’s offices to inquire about university policies and coverages.

Key considerations include:

1. Management Liability (Directors and Officers) Policies:

Coverage for Antitrust Claims: Many D&O policies explicitly provide coverage for antitrust claims on a claims-made basis. These policies cover “Loss” resulting from claims alleging wrongful acts, which can include antitrust violations. However, the definition of “Loss” and the insured’s “legally obligated to pay” status are critical factors.

Notice of Claim Provisions: D&O policies typically require timely notification of claims. Institutions must assess when the claim effectively arose — whether at the time of the alleged antitrust violations, upon filing of the class actions, when NCAA collects via revenue withholding, or some other date in between. Potential “late notice” issues must be carefully reviewed to preserve coverage.

Consent to Settle: Policies often include clauses that preclude insureds from settling claims without the insurer’s consent. Since the NCAA negotiated the settlement on behalf of its members, it is crucial to determine how this impacts individual institutions’ obligations under their policies.

2. General Liability (GL) and Media Liability Policies:

Advertising and Personal Injury Coverage: Some GL policies may provide coverage under “advertising and personal injury” provisions, depending on the scope of coverage language. Institutions should assess whether these policies offer a sufficiently broad interpretation to include the settlement obligations.

Media Coverage for NIL Claims: Media liability policies may provide coverage for claims asserting misappropriation of names, images, or likenesses (NIL). While these policies may or may not exclude coverage for antitrust violations, they could still offer protection for related NIL claims. Institutions should evaluate whether any components of the settlement relate to misappropriation and fall under media policy protections.

3. Policy Sublimits, Retentions, and Costs:

Potentially Small Limits Relative to Liabilities: Even if coverage exists, policy limits may be relatively small compared to the financial burden institutions face. Evaluating the adequacy of available limits is crucial.

Potentially Large Retentions Relative to Liabilities: Many insurance policies contain retentions or deductibles, creating a potentially meaningful hurdle to reach policy limits that will depend on the amount of the retention and the size of the policyholder’s liability.

Antitrust Endorsements: Some policies feature specific endorsements that set sublimits for antitrust claims. For instance, an antitrust endorsement might cap coverage at $1 million with a $250,000 retention. Institutions need to understand how these sublimits apply, especially concerning the total settlement amount and the institution’s share of liability.

Sports Rule Claim Sublimits: Certain policies may include sublimits for claims arising from the establishment or enforcement of sports-related rules. If the NCAA’s settlement funding mechanism is deemed an “official rule,” a lower sublimit (e.g., $500,000 with a $100,000 retention) could apply. Clarifying the applicability of such sublimits is vital.

Cost to Pursue Coverage: Legal and administrative costs associated with filing insurance claims and resolving disputes with insurers should be factored into decision-making.

Insurance Industry Response to Market-Wide Loss: Given the scale of the settlement, insurers may react by restricting coverage availability or contesting claims. Institutions should be prepared for potential coverage disputes.

Immediate Action Items:

1. Work with Risk Managers: Institutions should collaborate with their risk managers to conduct a thorough review of all relevant insurance policies, including D&O, GL, and media liability policies.
2. Put Insurers on Notice: If coverage is potentially available, institutions should promptly notify insurers to comply with policy requirements and avoid late notice issues.
3. Engage with Insurance Claim Professionals: Legal counsel, insurance brokers, and/or claims professionals can help interpret policy language, assess coverage options, and develop effective strategies for potential claims.
4. Prepare for Coverage Disputes: Given the likelihood of insurer pushback, institutions should proactively develop strategies to address potential denials or challenges.

Stout’s team of insurance claims professionals can support this process. Visit our Claim Preparation & Recovery Solutions to review Stout’s extensive insurance claim and coverage expertise, and reach out to one of our professionals linked below for more information.

Conclusion

The NCAA settlement presents complex financial challenges for member institutions and conferences. A comprehensive assessment of existing insurance coverage is essential to mitigating financial impacts and ensuring compliance with policy requirements.

By taking immediate action to review policies, engage experts, and notify insurers, institutions can better position themselves to secure available insurance funds and manage their financial obligations effectively.