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Running into trouble

Published 06/09/2007

As rugby union gets faster and more physical, and the players get bigger and more wealthy, it is inevitable that an increasing number of career-threatening, costly injuries will occur. And when you add to the equation the so-called compensation culture, insurance has some bone-crunching challenges to tackle, as Marcus Alcock reports

With France kicking off against Argentina tomorrow in the opening match of the Rugby World Cup 2007, fans throughout the world can look forward to a six-week festival of the best that the game has to offer. For the insurers of some of the top players, however, the tournament will be seen as yet another high profile risk, carrying the very real prospect of serious injury.

Not that many years ago, when rugby union was still an amateur game, injuries were seen as an unfortunate element of what is, after all, a very physical sport. But since the dawn of the professional era in 2005, the situation has become much more serious. Not only have players’ wages steadily increased, with those at the top earning six-figure salaries, and countless more in sponsorship deals, but the prospect of serious injury has become even greater, as a result of the game itself becoming more physically demanding and the fixture schedule ever busier.

A brief glance at the figures reveals the stark reality, according to Shane O’Halloran, financial consultant at Arachas Insurance Brokers, which arranges the scheme for professional players in Ireland: “There are 830 professional rugby players in England, Scotland and Wales and in the last five years there have been 33 career-threatening injuries, with players on salaries from £30,000 to £130,000 per year. Insurers are saying the chances of paying out are higher now than they have ever been.”

Of course, although the focus of attention is at the top end, it must not be forgotten that rugby is a very popular sport and the potential market for insurance is huge. In England alone, an estimated 500,000 people play rugby every week, according to the Rugby Football Union, and the game results in the second highest number of sports injuries each year, behind football.

A big impact

Given such figures, therefore, it is hardly surprising that insurance is now an essential component for many players, whether at the top end or those playing in the minor leagues. Indeed, the RFU’s scheme, which covers players and management for accidental death and specified permanent total disability incurred while playing the game, training and travelling to and from a game is mandatory for all affiliated clubs.

Of course, even the best of schemes will not always offer the levels of protection that some players require. For this reason a range of different types of cover are available in the commercial market, according to John Batty, broking director at commercial insurance broker Caunce O’Hara, who works with clubs such as Sale Sharks, Bradford Bulls, and Leeds Rugby, as well as the Professional Rugby Players’ Association.

“It is our belief that players should carry personal accident insurance in the event they suffer a career-ending injury, and this lump sum should take into account their current earnings, future potential earnings and earnings from commercial sponsorship and product endorsement,” he says. “As long as the benefit level can be justified to underwriters then we can normally obtain cover at the level required. As an example, a player who breaks into the first team at a young age is likely to be on a youth team contract at a particular club. What if that individual suffered a career-ending injury just before a new lucrative contract was signed? Had the injury not occurred, the individual concerned could have made millions and players should do everything they can to ensure their future earnings are not lost due to a cruel twist of fate.”

But PA cover is by no means the only type of insurance that the rugby world should concern itself with, adds Mr Batty, suggesting that top-level players at clubs should also consider temporary total disability cover, which would reimburse a player’s wages should they be unavailable for selection through injury. “They should also consider insuring the asset value of a player. In addition, we can insure the prospect of a club winning a trophy whereby any win bonuses paid to the playing staff are reimbursed by insurers.”

Sponsors should also consider buying a type of cover known as ‘death and disgrace’, he continues: “Commercial endorsements are a fantastic way for corporate companies to promote their products, but what if the sportsperson selected to promote the product turns out to be a drug addict, gets caught for downloading child pornography or, in fact, dies prematurely? This could have a severe impact on product sales, but could also incur costs running into thousands of pounds to employ the services of a replacement.”

And it is not only players who need to ensure they are properly covered. In the contemporary litigious arena, referees face serious liability issues in the wake of the landmark legal cases Smolden v Whitworth and Nolan, and Vowles v Welsh Rugby Union, which in effect ruled that referees have a duty of care to players and must ensure ‘reasonable care’ is taken for their safety. So, are referees still in the firing line when it comes to claims following player injury? “I think it is right that referees’ conduct comes under considerable scrutiny,” says Phillip Tracey, a partner at law firm Beachcroft. “And the claims that tend to come through are those where the injury to the player is quite significant, so they can be for anything up to £5m.”

However, he argues, just because there have been high profile cases in the past, with headline-grabbing compensation awards, does not mean that we should get carried away: “There have been cases since Smolden and Vowles but we have defended them successfully.

“At the end of the day, it still remains difficult to prove fault. And most of the claims are still out of the amateur rather than professional game – though whether that might develop as it did for football in the late eighties and early nineties, I don’t know.”

Even though it might be difficult to prove fault where a case is brought against a referee, some form of liability cover would seem essential, but it is not mandatory. Nonetheless, Mr Tracey explains, most referees have insurance in one form or another – though this is often indirect: “You generally find there is a policy that covers referees, which is taken out by the RFU, but the club in question may have its own policy too. Also, the referee’s own household policy may come into play, because there are sometimes extensions to such policies that cover you for third-party liability. Always read the small print.”

According to Sally Longworth, a partner at Grant Thornton, referees are not the only ones who may be in the firing line when it comes to determining liability after a player has been injured. People responsible for maintaining the ground, coaches and medical staff may also be looked at in this event. “It’s not rugby,” she comments, “but a player at West Bromwich Albion football club was recently awarded £1.5m because he was given the wrong treatment by the medic, and it was established they owed a duty of care to him. And just think of high profile players – nowadays medics are very reluctant to give the opinion that they are definitely fit to play in case it rebounds on them and they end up being sued. These can be big payouts, although in rugby they would be slightly less so because there are only a handful of really big earners.”

Compensation culture

Ms Longworth explains that rugby as a professional sport has become more litigious because not only is there more money involved, but also because the players are fitter, heavier and playing more, so the likelihood of having a serious injury is higher.

She adds that for serious injuries – even at the non-professional level – compensation payouts can be considerable, especially if the injury is serious enough to warrant ongoing care. For example, Ms Longworth refers to one player who was paralysed from the neck down, needing approximately £8m over the course of his lifetime for care and equipment – and, unfortunately, he was not insured.

Given the importance of insurance in rugby these days, it is hardly surprising that brokers have been proactive in arranging new schemes that offer better terms and coverage than before. Indeed, the competition to arrange such schemes appears to be hotting up. In February, Cardiff-based Culver Insurance Brokers claimed to have beaten off rival bids from both local and national brokers to sign a deal with the Welsh Rugby Players’ Association (Post, 22 February 2007, p8). And March saw Arachas announce a deal with the WRPA’s Irish counterparts, which claimed to offer a ‘first of its kind’ package.

One of the criticisms that has previously been levelled at many of the schemes on offer – by the various professional bodies – is that they simply have not been adequate, with potential payouts too low. According to Scottish Rugby Union secretary Graham Ireland, this was one of the main reasons for the body negotiating better terms for this season’s cover (see box below): “While serious injuries in rugby are thankfully rare, Scottish Rugby believes it is important for all rugby players to have appropriate insurance cover,” he says. “As recently as two seasons ago, most of our clubs only had insurance cover up to £150,000.” For the 2007/8 season, cover provided in the case of the most serious injuries has been increased from £300,000 to £400,000.

A new deal

And Scotland is not alone in negotiating a new insurance package. The RFU is currently in negotiations for a new deal for the Premiership, while Arachas has recently unveiled its new scheme in Ireland, referred to above, called Pro Protect.

“There’s no product of its kind anywhere,” claims Mr O’Halloran, who was one of the principal architects of the deal. “I played rugby myself and when we were putting this together I interviewed players at Saracens and Bristol and know of old players who have had to retire through injury and the grievances they’ve had. So we believe we’ve come up with a decent product.” Mr O’Halloran adds that over 90% of the current Irish squad have signed up to the scheme, along with the majority of the provincial teams.

He also explains why he feels the scheme is better than previous insurance offerings: “The only policies out there were personal accident policies, which players were paying an exorbitant amount of money for, and they didn’t always give the cover players wanted. We feel we’ve come up with a solution that is much broader. It took about two years to push through and so far it’s worked out a treat.”

Although the take-up has been good, and the kudos gained by being the association’s broker no doubt impressive, has this translated into profits? “It’s worked out OK,” says Mr O’Halloran. “For the work that’s gone into it, we made nothing on it in the first year. The premiums aren’t massive by any stretch – but there’s no point cutting off our nose to spite our face.” Indeed, he adds, the response has been so good in Ireland that Arachas is now considering entering new markets, with English rugby likely to be the next move “sooner rather than later”. The next rugby season, it would seem, looks set to be a fiercely competitive one, and that is only among the brokers.

EXISTING SCHEMES The English Rugby Football Union makes it mandatory that all affiliated clubs – and therefore all players – are insured against permanent disabilities and, in particular, the inability to work and generate an income. If a player suffers a permanent disability while playing or training, which results in them being unable to ever work again, they receive a tax-free payment of £375,000 (subject to policy terms). An extension to the present compulsory cover enables players and officials to personally increase the maximum possible payment under this policy from £375,000 to £1m. The RFU is in the process of doing a deal with the Guinness Premiership to update insurance arrangements for leading players, but this has not yet been finalised.

In February this year, the Welsh Rugby Union and the Welsh Rugby Players’ Association secured a deal with Cardiff-based Culver Insurance Brokers for the provision of permanent disability insurance cover for every WRPA member. An uprated scheme is in place for members who are injured playing or training for Team Wales.

Arachas Insurance Brokers arranges the scheme for the Irish Rugby Union Players’ Association. The package, Pro Protect, offers all professional players income protection, critical Illness, hospitalisation and specific injury cover. 75% of a player’s salary will be paid for a minimum of three and a maximum of 10 years. Hospitalisation costs of EUR200 (£135) a day are also included.

In Scotland, for the 2007/08 season the Scottish Rugby Union will pay the whole of the compulsory club accident insurance premium on behalf of its member clubs. The insurance scheme, which provides a payout in the case of serious injuries to players, previously cost clubs more than £400 per adult team insured and £30 for each mini/midi-team. The level of cover provided in the case of the most serious injuries has also been increased from £300,000 to £400,000.

This article has been reprinted with permission of the Claims Standards Council

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