Insurance and cap relief

[THE BARON]

 

 

This is significant.  I never knew about this.  Teams can get insurance on star players.  And guess what.  This is another indictment of the Jets being poorly managed at the top.  The teams that do well consistently take advantage of it.  The Jets do not.  Am I the only one that was totally in the dark about this ???

From like below:

"WHEN AARON RODGERS tore his Achilles after four snaps last season, NFL agents and club employees went straight to their laptops to confirm something they suspected: There was no insurance addendum in Rodgers' contract."

 

"That's the crux of the loophole," the former club executive said. "You effectively can use cash to create cap space from scratch. In a closed system, that is one of the few ways to buy cap space."

It's a benefit that is discussed in hushed tones within the front offices that utilize it, and rarely with outsiders, including the media. The CBA provision has existed since 2006, and since then, the clubs that have taken advantage of this cap hack flew mostly under the radar."

"It's kind of taboo to talk about insurance," said an executive from a club that is a longtime insurance buyer.

"If I'm doing something that I think is benefiting my club, why would I want to broadcast it within an article?" an ex-cap executive said. (He declined to share information about how clubs he'd worked for handled insurance.)

And the insurance side -- there are two main brokers who sell policies to teams -- is just as buttoned up. With a fixed number of buyers, they have no incentive to promote their product"

But the Jets "tragedy" and an increase in guaranteed money and high-profile quarterback injuries have combined to raise awareness of this underground tactic. A cap executive who reviews every NFL contract said the number of contracts with insurance policies has doubled in the past five years, and two insurance industry sources said teams that had never bought insurance previously are now customers. The increased demand and an increase in claims paying out means that the cost of the premiums has gone up -- a lot.

https://www.espn.com/nfl/story/_/id/41274295/nfl-insurance-policies-star-players-aaron-rodgers-tua-tagovailoa-jared-goff-joe-burrow-christian-mccaffrey

[UntouchableCrew]

Read this as well.

Can't say I'm surprised. Woody is incompetent.

[Larz]

Maybe @Warfish will read the article this time 

[Warfish]

1 minute ago, Larz said:

Maybe @Warfish will read the article this time 

Fake mad about my reading or lack thereof?

Same article as the other thread, so nothing new here.

[THE BARON]

18 minutes ago, Warfish said:

Fake mad about my reading or lack thereof?

Same article as the other thread, so nothing new here.

I didn't see that post.  Pardon if I spammed a bit here.  I read the article this morning for the first time.  It was a huge surprise.  I had no idea teams could do this.  It allows teams that take advantage as to mitigate cap issues if one of your highly paid/capped assets goes down.  No big surprise that well managed organizations like KC, 9ers, Eagles Ravens take advantage and the hapless Jets don't.  I often wonder how teams like KC and SF have a great roster year after year rather than having the three year window to win before the cap catches up to them.

It all starts at the top.  This is just one more example of how the Jets ownership is either reluctant or ignorant on taking each and every mesure needed to compete with the other franchises that run things smartly. 

[Warfish]

14 minutes ago, THE BARON said:

I didn't see that post.  Pardon if I spammed a bit here.

No worries at all.  

[BreeceHallofFame]

Can someone actually provide an example of how having insurance on Rogers would have helped and what exactly the cap implications would have been? 
 

also any real examples of other teams getting huge breaks because of this? I need specifics before I fake outrage 

[THE BARON]

19 minutes ago, Warfish said:

No worries at all.  

Big worry.  Woody didn't see it either. 

[THE BARON]

16 minutes ago, BreeceHallofFame said:

Can someone actually provide an example of how having insurance on Rogers would have helped and what exactly the cap implications would have been? 
 

also any real examples of other teams getting huge breaks because of this? I need specifics before I fake outrage 

Count me in for these questions since this is the first time I am learning about this.  

[slimjasi]

posted yesterday, but very interesting. 

Not shocked Woody would be penny-wise but pound-foolish

[BreeceHallofFame]

8 minutes ago, slimjasi said:

posted yesterday, but very interesting. 

Not shocked Woody would be penny-wise but pound-foolish

Do you understand the actual impact of this?

[slimjasi]

Just now, BreeceHallofFame said:

Do you understand the actual impact of this?

Yes

Do you? 

[BreeceHallofFame]

3 minutes ago, slimjasi said:

Yes

Do you? 

No, please explain it to me 

[Jet Nut]

I get how insurance covers you for the guaranteed payment to a player but how does it give you back money towards the salary cap?  I’ve never read about a policy that protects cap room.  Interesting if true why not insure every players contract?

What kind of insurance broker doesn’t make a call to the Jets when the policy is ending because of the renewed deal to get them to sign off on including insurance on Rodgers deal?  Kind of unbelievable that it lapsed due to unfamiliarity with the agent. 

[NYJCAP2]

13 minutes ago, slimjasi said:

posted yesterday, but very interesting. 

Not shocked Woody would be penny-wise but pound-foolish

This circulated last year when Rodgers got hurt that the Jets didn’t have a policy on him.

The exec quote is also misleading, teams use their cash for cap purposes but the cap limit does not change.

Someone correct me if I’m mistaken.

[slimjasi]

4 minutes ago, BreeceHallofFame said:

No, please explain it to me 

From the article:

 

The Jets renegotiated Rodgers' contract after trading for him and didn't buy an insurance policy to secure a portion of the $37 million in guaranteed money owed to the quarterback in 2023. Green Bay had a policy on Rodgers, but the Jets had no relationship with the broker who sold the Packers the policy. With the snap of Rodgers' left Achilles tendon, that $37 million for a player who wouldn't play could never be recovered.

 

And later:

 

The CBA labels insurance proceeds as a "refund from the player," which qualifies the amount as a cap credit for the club for the following season. In the simplest terms, if a player who eats up a significant portion of a club's salary cap misses significant time with injury or illness, a club doesn't have to take it as a total loss, but can recover space for the following year. Plus, insurance premium payments don't count against the salary cap.

 

 

[Sperm Edwards]

Merged

[THE BARON]

35 minutes ago, Sperm Edwards said:

Merged

merge my balls... 

[bicketybam]

1 hour ago, THE BARON said:

No big surprise that well managed organizations like KC, 9ers, Eagles Ravens take advantage and the hapless Jets don't.  I often wonder how teams like KC and SF have a great roster year after year rather than having the three year window to win before the cap catches up to them.

Are there examples of those teams actually taking advantage of a player lost for the year and using the extra cap space the following year to build a winner? I know how it works in theory, but has it actually happened? 

[THE BARON]

2 minutes ago, bicketybam said:

Are there examples of those teams actually taking advantage of a player lost for the year and using the extra cap space the following year to build a winner? I know how it works in theory, but has it actually happened? 

From where I am sitting, reading and understanding it... Yes. 

[Gaffneycatch81]

56 minutes ago, BreeceHallofFame said:

No, please explain it to me 

It’s pretty simple. Read the thread — it was discussed extensively. In short (very short, since I don’t want to restate everything that’s already been discussed), buying insurance on a contract does not count against the salary cap, but if the player gets hurt and the insurance pays out, that DOES count as a credit towards the next year’s salary cap. So, if say we had a $20M policy on Rodgers last year (which would have cost Woody around $1M to buy), this year we would have $20M more in cap money. It’s totally an out of pocket expense for the owners since they don’t have to do it, but if they are willing to buy insurance (on their own dime), they are effectively buying cap space for their team.

[Gaffneycatch81]

6 minutes ago, bicketybam said:

Are there examples of those teams actually taking advantage of a player lost for the year and using the extra cap space the following year to build a winner? I know how it works in theory, but has it actually happened? 

I don’t remember if there are specific examples of instances when there was a player who got hurt and a team that benefited, but the implication is certainly that yes, it happens

[THE BARON]

6 minutes ago, Gaffneycatch81 said:

It’s pretty simple. Read the thread — it was discussed extensively. In short (very short, since I don’t want to restate everything that’s already been discussed), buying insurance on a contract does not count against the salary cap, but if the player gets hurt and the insurance pays out, that DOES count as a credit towards the next year’s salary cap. So, if say we had a $20M policy on Rodgers last year (which would have cost Woody around $1M to buy), this year we would have $20M more in cap money. It’s totally an out of pocket expense for the owners since they don’t have to do it, but if they are willing to buy insurance (on their own dime), they are effectively buying cap space for their team.

that boils it down.  and it puts the blame on Woody for not taking advantage.  

[funaz]

speaking of inssurance. Why doesn't Hassan do what Chase did, and inssure himself and play on a one year prove it deal. This will reduce the risk of playing without a long term deal.

[bicketybam]

9 minutes ago, THE BARON said:

From where I am sitting, reading and understanding it... Yes. 

 

6 minutes ago, Gaffneycatch81 said:

I don’t remember if there are specific examples of instances when there was a player who got hurt and a team that benefited, but the implication is certainly that yes, it happens

You would think that they would have listed an example if there was a team that actually benefitted greatly because of this "loophole." 

[Gaffneycatch81]

25 minutes ago, THE BARON said:

that boils it down.  and it puts the blame on Woody for not taking advantage.  

Yeah, that’s the jist. I think the reasons for not doing it are more complicated though. Some of it may be just cheapness, some of it may be poor risk management and/or ignorance/oversight … but I also think that many owners don’t do it because I’m guessing it’s frowned upon by other owners. It’s basically circumventing the salary cap and funneling more money to the players … and do you remember how hard the owners fought the players association on the percentage of revenue that would go to the salary cap? They haggled down the to fraction of a percent. So I’m guessing that there is a gentlemen’s agreement among the owners not to use it except in the cases of big contracts, if at all … and only a few rogue owners who don’t care about being disliked (like Lurie of the Eagels) are willing to use it a lot. My impression of Woody, on the other hand, is the he badly wants to be part of the old boys club, so does care a lot about what his fellow owners think. Just my opinion.

[bicketybam]

1 minute ago, Gaffneycatch81 said:

It’s basically circumventing the salary cap and funneling more money to the players

But the only way to take advantage of this is by having your best/most expensive player injured for the season. It's not a viable strategy.

[Gaffneycatch81]

21 minutes ago, bicketybam said:

But the only way to take advantage of this is by having your best/most expensive player injured for the season. It's not a viable strategy.

You can insure more than just your best player. You could, in theory, insure every player on your team. There are going to be injuries every year to every team, so you’d be getting additional cap dollars every year — some years more, some years less. It’s not really a “strategy”, it’s a tool that clearly gives you an advantage but costs the owner (not the team, in the cap sense) money. There’s really no debate that it helps the team.

[bicketybam]

3 minutes ago, Gaffneycatch81 said:

You can insure more than just your best player. You could, in theory, insure every player on your team. There are going to be injuries every year to every team, so you’d be getting additional cap dollars every year — some years more, some years less. It’s not really a “strategy”, it’s a tool that clearly gives you an advantage but costs the owner (not the team, in the cap sense) money. There’s really no debate that it helps the team.

ROUGHLY HALF OF NFL clubs currently have an insurance policy on at least one player contract, and many clubs only insure one player, their most expensive contract.

 

Just give me one example where a big contract player was lost for the year and the team used the insurance loophole to add tens of millions to their cap the following year. There has been be at least one example, right?

[Gaffneycatch81]

33 minutes ago, bicketybam said:

ROUGHLY HALF OF NFL clubs currently have an insurance policy on at least one player contract, and many clubs only insure one player, their most expensive contract.

 

Just give me one example where a big contract player was lost for the year and the team used the insurance loophole to add tens of millions to their cap the following year. There has been be at least one example, right?

I can’t give you an example — I just know what the article says. Probably you can google and find out if you really want to know.

And yes, I understand that many teams insure only one player or only high value contract players — I have already addressed why that may be (basically, collusion among the owners not to circumvent the cap in a systematic way), and was saying that hypothetically an owner COULD ensure his whole team. I was talking more about the loophole in theory, not the practice.

[y2k8]

On 9/18/2024 at 12:45 PM, Warfish said:

Yes, I did.  I didn't see any reference as to who made the decision.

If I missed it, and it named Woody as the decision maker, my bad.  

Why double down?

No chance that you saw the thread, read the OP, read the 3600 word article and then wrote and posted your response in 7 minutes. 

[Asymmetrical]

2 hours ago, bicketybam said:

 

You would think that they would have listed an example if there was a team that actually benefitted greatly because of this "loophole." 

Buffum said when he worked for the 49ers from 2014 to 2022, the Niners discussed buying a policy for almost any non-minimum extension, and most of the time, the decision was yes.

The team insured three players who missed a significant amount of time due to injury in 2020: Jimmy Garoppolo (10 games), Dee Ford (15 games) and George Kittle (8 games). Garoppolo's contract insurance language said the team insured up to $15 million, but it did not specify for which years (it was likely for less than that amount in 2020 because he was in Year 3 of his deal), and Ford's playing contract specified up to $8 million of his regular-season salary for that year.

"It was just a windfall of insurance that year," Buffum said.

Each policy is different based on the player's position, age, injury history and career trajectory. Clubs can choose from a range of deductibles and wait time -- some expensive policies start paying cash to clubs after just one game missed, other more affordable policies don't pay until the eighth consecutive game missed.

The Niners declined to comment on the amount of insurance proceeds they received that season, but Roster Management System reports San Francisco earned $11.2 million in end-of-year cap adjustments, a sum that includes insurance credit, along with other forms of credit or expenses, such as unearned incentives. For the 2021 season, San Francisco's adjustment was $5.5 million more than the second-place team. The cap decreased by $15.7 million that year because of the 2020 COVID season losses, and no team besides the 49ers was even close to making up that gap.

[MykePM]

2 hours ago, bicketybam said:

 

You would think that they would have listed an example if there was a team that actually benefitted greatly because of this "loophole." 

The Niners declined to comment on the amount of insurance proceeds they received that season, but Roster Management System reports San Francisco earned $11.2 million in end-of-year cap adjustments, a sum that includes insurance credit, along with other forms of credit or expenses, such as unearned incentives. For the 2021 season, San Francisco's adjustment was $5.5 million more than the second-place team. The cap decreased by $15.7 million that year because of the 2020 COVID season losses, and no team besides the 49ers was even close to making up that gap.

"The cap went down for the first time ever," Buffum said. "And it aided our ability to keep our team intact."

The Niners' 10-year total in end-of-year adjustments is $54.3 million, double the second-place team's total. This number isn't only insurance credit, but representative of other savvy cap hacks that benefit teams when players get hurt, such as paying salary in the form of per-game roster bonuses. Philadelphia's $19.1 million over 10 years is good for sixth.

[MykePM]

1 hour ago, bicketybam said:

But the only way to take advantage of this is by having your best/most expensive player injured for the season. It's not a viable strategy.

Then you probably don't think having insurance is ever a viable strategy, because this is the both the practical and salary cap iterations of it.  No one is saying that the system should be leveraged by buying insurance and then hoping your star players get injured, but it's a nice silver lining to have in place if an important player does get injured.  

There was one path where the Jets would have gotten some additional salary cap money for this year due to Rodgers' injury and one where they did not, and the only practical cost of the better path was Woody spending an amount of money that is a drop in his financial bucket.

[JKlecko]

https://www.espn.ph/nfl/story/_/id/41274295/nfl-insurance-policies-star-players-aaron-rodgers-tua-tagovailoa-jared-goff-joe-burrow-christian-mccaffrey

The Jets chose NOT to insure Rodgers new contract when he was traded to them from GB.  GB had insured Rodgers contract.  If the Jets had insured Rodgers contract, they would have been able to regain up to $22 million in cap space this season.