Sports

Marqise Lee's insurance policy offers no guarantees

Former USC receiver Marqise Lee had an injury-plagued junior season before turning pro. If he drops in the NFL draft, he could collect millions via a loss-of-value insurance policy. , PAUL RODRIGUEZ, STAFF PHOTOGRAPHER

KEY TERMS

Permanent total disability insurance: Available for many collegiate athletes, it provides a lump-sum payment in the case of a career-ending injury. Athletes must never be able to play their sport professionally again.

Loss-of-value insurance: A relatively new add-on to PTD that allows top athletes to collect insurance payments in the case of a moderate-to-severe injury or other events that significantly lower their expected earning potential.

LATTIMORE'S LOSS

Insurance experts say former South Carolina running back Marcus Lattimore would have been an ideal candidate for loss-of-value insurance. Here's an estimate of what he lost in the 2013 NFL draft because of a severe knee injury:

Average first-round signing bonus: $6.47 million

Lattimore's fourth-round bonus: $300,000

LOS ANGELES – Former USC receiver Marqise Lee expects to be selected in the first round of the May 8 NFL draft. But if he isn’t, he has a potentially lucrative fallback option.

Lee, 22, and his adopted family secured an unusual $10 million insurance policy in August, before his draft stock dropped as he struggled during the Trojans’ seesaw 2013 season.

The policy covered $5 million of total disability insurance, now the industry standard for top collegiate prospects, which only applies in cases of career-ending injuries and therefore won’t affect Lee. But the policy also includes $5 million in loss-of-value insurance in case of a loss of draft value because of injury — not unprecedented, but not commonplace either.

The latter could very well apply to Lee, who battled through knee and shoulder injuries, missed three games and finished as the Trojans’ No. 4 offensive producer. His case provides a window into the incredibly complex world of amateur athletics in 2014.

Before the season, Lee was widely projected to go in the draft’s top 10. ESPN’s Mel Kiper Jr. ranked Lee third among all prospects last summer, and that was worth something to insurers, who attempt to use the economies of scale to profit from top prospects such as Lee by guaranteeing them the income of a baseline spot in the draft or something similar.

For example, the first-round picks in last year’s NFL draft received signing bonuses averaging $6.47 million, according to Register research. The policy Lee signed in August likely states that he will receive a check for the difference, up to $5 million, between his actual bonus and this year’s first-round average, if he drops in the draft and the drop is determined to have been caused by injury.

It probably won’t be that simple, though. The involved insurance companies surely would argue the injuries were not the sole cause of his drop, and they’d have a legitimate case to take to an arbiter.

But for many of the best, highest-profile collegiate athletes in this country, there’s too much money on the line for this just-in-case, saving-grace insurance policy not to be appealing.

“Loss-of-value insurance is the Holy Grail for college athletes,” said Jonathan Thomas, a longtime insurance underwriter at Lloyd’s of London. “It’s the broadest coverage you could expect or hope for as a prospective future professional athlete.”

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Lee knew little about the concept of insurance for college athletes until Louisville quarterback Teddy Bridgewater secured a $10 million policy last July.

From then on, Lee said, his parents researched all sorts of policies in conjunction with USC’s compliance department, a month later settling on one offered by Ronnie Kaymore, a risk management specialist at KPM Sports.

“I didn’t really do much of anything,” Lee said. “All I did was just sign the paper and that was it. I mean, it’s cool. It’s just something I did to protect my body.”

How much did that protection cost? No one was willing to divulge the premium Lee paid, but various sources indicated a $10 million policy including loss-of-value provisions would cost about $100,000.

Per NCAA regulations, Lee was permitted to secure a loan based on his future earnings to pay for a significant portion of that. The other portion, covering the loss of value, had to be paid out of pocket by him or his family.

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