UO sues insurance company over football coaches’ bonuses
Two insurance brokers are arguing in court over who was at fault, if anyone, for a failed insurance policy University of Oregon bought. The policy covered coaches’ bonuses if the Oregon Ducks played exceptionally well in the 2012-2013 season. The Ducks had a good season, but the insurance didn’t pay out.
In 2012, UO signed a contract with Chip Kelly and his coaching staff, stating that the coaches would receive bonuses if the team did well in the upcoming season. The coaches would receive the maximum bonus if the Ducks won the BCS National Championship and had a fantastic regular season. They would receive smaller bonuses for a less fantastic season.
In July of 2012, the university was negotiating an insurance policy with Delaware-based insurance broker Marsh U.S. Consumer that would pay these bonuses. Marsh, however, was not the university’s default insurance provider, so UO was forced to renegotiate the contract through their official insurance broker, Arthur J. Gallagher and Risk Management Services, Inc.
Monica Drummer was the AJG agent that renegotiated the contract. To avoid starting from scratch, she communicated with Marsh to try and settle the same contract.
The renegotiations were rushed. It was early September, and the Ducks had already played one game, beating Arkansas State 57-34 at Autzen Stadium.
During the negotiations the university noticed that the insurance agreement appeared to only pay out if the team received the maximum bonus. The university asked Drummer about the specifics, and she replied that the university would be reimbursed for smaller bonuses, not just the maximum. At least, she said, that’s what Marsh told her.
The Ducks had a great season, with only an overtime loss to Stanford keeping them from the Championship. They beat Kansas State 35-17 at the Fiesta Bowl and ended the season ranked fifth in the nation. Altogether, the coaches received $687,965.74 in bonuses.
The insurance didn’t pay for it. According to the contract, the university’s early suspicions were right: Insurance would only pay for the maximum bonuses possible.
“The bonuses were paid out of the athletic department budget,” Laura McGinnis, a UO representative, said. The university otherwise declined to comment, citing pending litigation.
UO sued Drummer and her employer AJG in Jan. 2015 , stating, “As a result of Drummer’s representations, the University agreed to the contract and was subsequently bound to an insurance policy that failed to cover the lesser performance bonuses,” according to court documents.
In response, Drummer and AJG brought in a third party complaint, alleging that they committed no wrong. If wrong was committed, they said, it was the original insurance broker, Marsh, that mislead the university.
“Any damages and harm to [UO] ought to be discharged by the Third-Party Defendant Marsh as its conduct was the active and primary cause of the damages and harm, if any,” they said in court documents.
Marsh responded, denying all claims. UO is now waiting for the courts to decide who will be the defendant.
Others are not so sure the fault lies with the insurance companies. “Why would the university do this, and then not even read the contract?” economics professor and University Senate Vice President Bill Harbaugh said.
The trial is in the district court of Oregon. Judge Ann Aiken is presiding over the case. Currently, Marsh is still part of the lawsuit, although some of Drummer’s claims have been dismissed.