$1 Billion Time Bomb

Pro football fans have definitely noticed it, even if they don’t know why. The kickoff returner catches the pigskin deeper in the end zone and takes a knee rather than run the ball.

A defenseless receiver gets hit, and the tackler is assessed a penalty. A linebacker has his bell rung in a collision, and, instead of him being given smelling salts and sent back into the game, his helmet is taken away and he’s whisked off the field for an MRI.

The rules of pro football are changing faster than a wide receiver sprinting for the end zone, but maybe not fast enough. The NFL is running too—running scared of at least 3,500 workers compensation claims confronting its $8 billion-a-year empire. Insurance brokers estimate that the NFL is facing a billion-dollar hit from retired players complaining about ailments as varied as chronic arthritis, diabetes and dementia, problems that they and their lawyers blame on the abuse they suffered in their short but violent careers.

“These are young gladiators who throw their bodies out there, risking life and limb so the owners can make huge profits,” says attorney Michael Gerson of Boxer & Gerson, who works with the NFL Players Association. “The cost for their medical treatment is not small.”

And this is just the beginning. Waiting in the wings are the current NFL players who could claim even more serious injuries, such as Alzheimer’s disease, when their playing days are over. As retired players demand lifetime care—including some as young as 39-year-old Ted Johnson, the former New England Patriot who suffers from memory loss—claims now being settled for an average of $200,000 could skyrocket to $1 million.

The players are filing their cases in California, even though the players were on teams such as the Detroit Lions, Jacksonville Jaguars and Chicago Bears. The rationale: California’s laws are unique. Anyone who has been injured or has worked or had a paycheck signed by a California company can file there. In simple terms, a third-string quarterback who warmed the bench during a single game in Oakland can file a workers comp claim in the Golden State.
“We say jokingly that, if you’ve heard of California, you can file in California,” says Alex Fairly, head of the global sports practice at Willis Group.

Was every player injured in California?

Their lawyers’ answer: Prove he wasn’t.

“Everyone gravitates to California,” says Robert Hartwig, president of the Insurance Information Institute. “The workers comp laws were not written for this. But thousands of former players are doing it.”

Retired players from Florida’s three NFL teams, for example, have filed only four claims in Florida, according to Bob Murphy, who heads Marsh & McLennan’s Global Sports & Events practice. Conversely, Murphy says, “At least 28 former Jacksonville Jaguars and 50 from the Miami Dolphins and Tampa Bay Buccaneers have active claims in California.”

Another possible reason: California recognizes “cumulative trauma” as a workplace injury. This could mean a bad back, arthritic knee or the dementia that resulted from too many helmet-to-helmet hits. “With cumulative trauma, it’s not clear which one put you over the edge,” says Darcy Johnson, senior vice president of claims practice for Marsh & McLennan.

A Gold Mine

California’s liberal workers comp rules have been around for decades. The difference is that smart lawyers and brokers have changed the rules of the game for the NFL, and it could be a game changer for everyone else. If an injured NFL player can file in California by virtue of a single work-related visit, why not airline pilots, circus performers, salespeople, truckers and even migrant workers, all of whom could suffer ailments just as severe?

“There’s a tremendous downside for employers and businesses that do business in California, and it hasn’t yet resonated with all employers,” says Fairly, who predicts that lawyers will migrate to other industries. “When they do, what’s going on in the NFL will look like a drop in the bucket. Any company that sends a worker to California is on the hook.”

Most states have a time limit on filing workers comp claims—usually from one to five years. Again, California is unique in that it requires that workers be informed of their right to file suit before the clock starts.

Critics argue that, in this respect, NFL teams put themselves at risk. Common practice in the past has been to cover a player’s medical costs during his short but often lucrative career, but not beyond his retirement. All the while, team managements typically never alerted players to their right to file a workers comp claim. NFL spokesman Brian McCarthy did not return calls and emails seeking comment. Neither did Richard Berthelsen, general counsel for the NFL Players Association.

“So the play clock never started,” says Marsh’s Murphy. “That’s why we’re seeing an inordinate amount of claims in California from guys who played in the ’60s and ’70s. New claims are being filed at a rate of 500 a year. The trend is off the charts.”

Former NFL players involved in lawsuits include the Atlanta Falcons’ Ray Easterling, the Chicago Bears’ Jim McMahon and the Denver Broncos’ Hall of Famer Floyd Little.

Playing Through the Pain

Many of the former greats suffer real pain…or may be beyond feeling. He was called the “Iron Man” for playing in a then-record 188 consecutive NFL games during his Hall of Fame career with the Green Bay Packers, but Forrest Gregg recently admitted that he has been diagnosed with Parkinson’s. The Chicago Bears’ Dave Duerson committed suicide, believing he had a debilitating brain injury. He specified that his brain be used in research for head injuries.

Then there is Ralph Wenzel, who played for the Pittsburgh Steelers during the 1960s and early ’70s. Diagnosed with a precursor to Alzheimer’s, “he can no longer dress, bathe or feed himself,” his wife, Eleanor Perfetto, told Congress in 2009. “He lost his warm, quiet personality.” Now the staff at Wenzel’s care facility fears the big lineman, who sometimes thinks he’s still on the field. Perfetto is battling to have Alzheimer’s and dementia recognized as cumulative traumas.

But while many suffer, others, including some workers comp lawyers, are doing well. Mel Owens is described by both admirers and critics as the quarterback of the retired players because he appears to be calling the plays. A Los Angeles Rams linebacker in the 1980s, Owens is a partner in the law firm of Namanny, Byrne & Owens of Laguna Hills, Calif., and now represents 400 retired players who have filed claims in California, according to an unsolicited email that he sends to former NFL players offering his services. Owens did not return repeated phone calls for comment.

The New York Times published a story in 2010 that described a lucrative workers comp practice for California attorneys, who often file claims for long-term and, in some cases, lifetime medical coverage. The retired players typically settle for immediate cash payments (in one instance $220,000), with the lawyers receiving as much as 18%. California claims can be filed electronically, making the process even easier, according to an attorney who had just filed three NFL claims in one day.

There are challenges. Each claim has to go through a doctor’s review and, if appealed by the employer, faces a hearing before an administrative law judge. But in California, “courts tend to have a liberal interpretation of the law in favor of employees,” says Marsh’s Darcy Johnson, who works in San Francisco and is an ardent 49ers fan. In one case, a former NFL player had just completed an Ironman Triathlon when he was awarded $300,000 for a 90% disability, Fairly says.

Workers comp attorneys tend to seek any opening in their opponent’s defense, and, with NFL players, there can be a lot to work with. NFL teams often encourage younger players to gain weight, which could make them diabetic later in life. One study shows sleep apnea is common among NFL retirees. In the latest lawsuit against the league, a dozen former players, led by one-time Pro Bowl receiver Joe Horn, have accused their teams of giving them a painkiller before and during games that worsened injuries such as concussions and has caused anxiety, depression and short-term memory loss.

Still, a 2009 study of former NFL players by the University of Michigan Institute for Social Research found they were in some ways healthier than the general population, with fewer players experiencing heart attacks, emphysema and strokes. The study did find that the rate of arthritis was as much as five times higher than the average, and nearly one in four had a joint replaced.

Not surprisingly, the study also noted that the ability of former NFL players to provide for themselves financially was “considerably higher than men of similar ages in the general population.” Indianapolis Colts’ quarterback Peyton Manning, for example, tops the chart with a $23 million payday this year, even though he hasn’t played a single down because of a neck injury.

The NFL might be feeling like a quarterback facing a blitz from all sides. In addition to the players’ claims, insurers are avoiding workers comp exposure to the NFL as if it were asbestos. There’s even a suit by one insurer claiming that the workers comp policies it wrote didn’t cover these players or their injuries.

Most workers comp insurers dropped the NFL years ago, and only two—ACE and Berkley Specialty Underwriting Managers—still provide workers comp coverage for more than one team, Murphy says. Both insurers generally have million-dollar deductibles on their policies, Murphy adds. Insurers, like almost everyone else, did not want to be quoted for this story.

Some insurers didn’t get out soon enough and discovered what many insurers found out from their experience handling claims for asbestos: They have a long tail. A suit by a unit of Travelers against the Denver Broncos last year states that policies written by the unit didn’t cover nine injured former players who have since filed claims worth more than $100,000 each. The insurer says that the identities of these employees were never provided and that coverage extended only to nearby New Mexico.

Home Field Advantage

In the game against its own players, the NFL has had a series of fumbles, interceptions and turnovers. “The laws in each state are different, so it’s difficult to get a resolution,” Hartwig says. “This will be tied up in court a long time, and no one’s scored a touchdown yet.”

NFL teams, meanwhile, want the workers comp cases to be settled in their home state. They are doubly disadvantaged in California because, in addition to the cumulative trauma clause, the state also recognizes “concurrent jurisdiction.” So if a Denver Broncos player is injured, he can file in both Colorado and California and receive whatever the best state provides, according to Gerson. There are reciprocal agreements between states that allow them to send back filers to their home states, but “only three states live up to the California standard,” Fairly says.

Still, the NFL appears to be gaining some traction in court cases. A U.S. District Court Judge told three Chicago Bears players, as well as the Tennessee Titans’ Bruce Matthews, that they violated their contracts by filing claims in California. The Miami Dolphins’ Kendall Newson, who was hurt in a game against the Pittsburgh Steelers, was told by a Pennsylvania magistrate to file in Florida.

Then there was a major setback to the owners. They fought hard to get a clause restricting players’ filing rights during the final, tense week of negotiations leading to the 2011 contract but were stopped by the players’ negotiating team. Workers comp is a “major benefit when it comes to long-term health care,” wrote players association executive committee member and New Orleans Saints quarterback Drew Brees in an email at the time of the July settlement, “and (the players) will never let (the league) restrict our health and safety.”

Defeated at the bargaining table, NFL teams are trying an end run: getting state legislatures to adopt laws restricting players’ workers comp filings to their home states. The NFL has been successful in Florida, where a law signed by the governor in June allows players to file a workers comp claim in another state but restricts their benefits to those offered in Florida.

California Assemblyman Curt Hagman, who serves as vice chairman of the insurance committee in the state’s General Assembly, says he plans to introduce legislation to close the state’s workers comp loophole by March. “We don’t want to be the lawsuit capital of the United States,” he says.

But Hagman faces overwhelming odds before he even takes the field. His opponent is twice his size. There are eight Democrats on the insurance committee, and he is one of only four Republicans. Even if NFL contracts and state laws forbid joint filings, the players can appeal to federal courts, arguing that this violates collective bargaining and other constitutional rights.

“An employee cannot be forced to sign away social benefits like workers comp in a contract,” Gerson says. “If that were the case, many employers would do it.”

Faced with all this opposition, the NFL is changing the rules of the game. Since head-on crashes are more deadly at higher speeds, the NFL moved up the kickoff from the 30-yard line to the 35-yard line, hoping that kick returners who catch the ball in the end zone would forgo the run and start at the 20-yard line. But many do not.

The NFL is also asking refs to be more aware of head injuries, react to unnecessary hits on defenseless receivers and quarterbacks, and penalize players who use their helmets as weapons. NFL Commissioner Roger Goodell told the Congress of Neurological Surgeons in October that he thought the players had already gotten the message. “You’re always going to have some who go outside the rules, but they know we’re watching,” he said, adding that the NFL plans to spend $100 million over the next 10 years to study brain injuries.

Many players say the NFL’s effort is too little, too late, and they’ve joined class-action lawsuits that claim team owners knew about the danger as early as the 1920s. But the irony is that their biggest enemy is their own fans—and themselves.

“The fans want an exciting product,” Hartwig says. “They like to see hard hits. They don’t want to watch 300-pound men have a pillow fight.”

In a game against the New York Jets in October, the San Diego Chargers’ Kris Dielman took a fourth-quarter hit so severe it left him struggling for balance. He waved off an umpire, finished the game, and told no one. Before he could disembark from the flight home in San Diego, he suffered a season-ending seizure.

Learned behavior is hard to change. In 2010, the Pittsburgh Steelers’ Hines Ward punched a Baltimore Ravens player in the mouth. When the two bitter rivals met again this past November, Ward was paid back with a helmet tackle from behind by the Ravens’ Ray Lewis. Ward suffered a possible concussion. Lewis was fined $20,000, but Baltimore fans were happy. The Ravens won by three points.

Can the NFL make the game better without making the players worse? Perhaps the league should rip out a page from the playbook of then-President Teddy Roosevelt just after the turn of the 20th century, when players’ protective gear consisted only of a leather helmet or a thick head of hair. Teddy thought the game, which was similar to rugby and mostly played on the ground, was too violent. So he called together college coaches who instituted the forward pass—and things have never been the same.

But one thing is clear: The calculus of football is changing on the gridiron because of the grim mathematics in the courtroom. The stakes could hardly be higher. On one side is the future of the game, both the way it is played and the amount of money it stands to lose. On the other are the aging heroes who were hurt giving their all for the team, now haunted by the possibility of living shortened lives with dementia and Alzheimer’s.

It’s tough to get 300-pound men who are pumped up on adrenaline and testosterone to stop destroying each other, particularly when the fans roar when they do and boo when they don’t. What do fines of $20,000 mean to someone who’s making millions?

But when the cheering and the big payday end, it’s a different ball game. The opponent is no longer the guy across the line. It’s now the NFL.