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A $3 Million Payday From an NFL Draft Free-Fall

Kavitha A. Davidson is a former Bloomberg View columnist.
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For the first time ever, a former college football star will cash in on an insurance policy that protected him from a free-fall in the NFL draft.

CBS Sports' Dennis Dodd reports that Ifo Ekpre-Olomu will collect a $3 million claim after the All-American cornerback from Oregon suffered a season-ending injury in December. A projected first- or second-round pick, he tore the anterior cruciate ligament and dislocated the kneecap in his right leg, causing him to tumble to the seventh and final round, where he was taken by the Cleveland Browns.

The claim was underwritten by Total Planning Sports Services for Lloyd's of London, and is expected to be paid out in the next month or two. Ekpre-Olomu was just one of many players for whom Oregon paid premiums on injury or loss-of-value insurance, which cost $8,000 per $1 million of coverage. That money comes out of the NCAA's Student Assistance Fund, used to aid  student-athletes "in meeting financial needs that arise in conjunction with participation in intercollegiate athletics."

Loss-of-value insurance is different from disability insurance, which pays out in the case of catastrophic injury that ends a player's career. Rather, it provides a sort of gap coverage for players who fall at least one round lower than their projection in the draft. The use of such policies has expanded since the NCAA clarified last year that schools were allowed to use the assistance fund to cover premiums. Players were previously on the hook for their policies themselves, but after the NCAA allowed Texas A&M to cover offensive tackle Cedric Ogbuehi and Florida State to cover quarterback Jameis Winston, Oregon reimbursed players including Ekpre-Olomu and quarterback Marcus Mariota for their costs.

Last October, the NCAA also approved a waiver to allow players to borrow against their future earnings to secure a loan to pay for loss-of-value insurance, giving them and their schools more options in funding the policies. The assistance fund isn't bottomless; in 2013-14, the NCAA provided more than $75.5 million to Division I schools, distributed by each conference, which vary in how they give the money to individual institutions. Based on recent years, each school can typically expect to receive at least $300,000 from the fund. The insurance policies for star players can carry hefty premiums of tens of thousands of dollars -- the cost for Ogbuehi's policy could range from $50,000 to $60,000.

The wisdom of allowing schools to cover these costs is debatable, but there's clearly more than enough money to go around in high-revenue sports, and with all the restrictions on players receiving any form of compensation this is at least a small way universities can show some tangible good faith toward their best athletes. The NCAA would have you believe that its uncharacteristically permissible attitude toward insurance costs is both out of practicality and benevolence to its athletes, to "eliminate improper third-party involvement and alleviate the pressures on student-athletes to seek out this assistance from third parties." But as with scholarships that finally cover the true cost of attendance, schools paying insurance premiums is really just a way for the college sports establishment to claim it adequately compensates its players while doing far less for them than the players do for the schools' revenue.

In a way, however, the NCAA undermines its own claims of amateurism by paying for such insurance policies. It's a tacit admission that big-time college sports are nothing more than minor league systems for professional basketball and football. The NCAA runs a platform to showcase one's talent to get picked as high in the draft as possible.

The NFL is just as culpable as the NCAA in maintaining this system. The obvious next step is playing out in the current conversation around Louisiana State sophomore running back Leonard Fournette, whom many are urging to sit out next season to avoid injury before he's eligible for the NFL draft in 2017. Most scouts agree that Fournette is an electrifying player who is ready for the pros now, but NFL rules bar him from entering the draft until three years after high school. He's reportedly looking into his insurance options for some financial protection. 

If Fournette doesn't sit out next year, he's going to need hefty coverage; he'd be the number-one pick if the draft were held today and he were eligible. But whether he takes his insurance in the form of a sideline stint or a seven-figure policy, it shows what we already know to be true: The end goal of big-time college sports isn't the name on your diploma -- it's the signing bonus on your rookie contract.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Kavitha A. Davidson at kdavidson19@bloomberg.net

To contact the editor responsible for this story:
Tobin Harshaw at tharshaw@bloomberg.net