The NCAA on Wednesday took steps to close a loophole regarding athletes ability to purchase insurance against injuries that might curtail their potential professional careers.
The NCAA announced its Academic and Membership Affairs staff approved a waiver to NCAA bylaws regarding amateur status and benefits, gifts and services. Under the waiver (first reported by blogger and NCAA rules expert John Infante), athletes can now borrow against future earnings to secure a loan in order to purchase loss of value insurance.
Until previous NCAA rules, athletes could only borrow against future earnings to purchase disability insurance, which would cover them in the event their college career was ended (and professional earnings eliminated) due to injury. But athletes were not protected in the event that they suffered an injury that caused them to drop several rounds in the draft and/or receive a much smaller signing bonus and salary.
In allowing an athlete to borrow money to purchase his or her own loss of value insurance, the NCAA is hoping to eliminate the role of agents, financial advisers or other third parties in such cases (whether legally or illegally). It also encourages member schools and conferences to introduce legislation regarding loss of value insurance that can be approved by the next NCAA legislative cycle in 2015-16.
In recent years, schools had used a loophole regarding the NCAA Student Assistance Fund to draw money from the fund and help athletes pay premiums on loss of value insurance. Texas Aamp;M did so with star left tackle Cedric Ogbuehi, as did Florida State with Heisman Trophy winning quarterback Jameis Winston, in effect encouraging them to stay in school another year before turning pro.
The full text of the NCAA waiver is below (bolded portions by NCAA):
Academic and Membership Affairs Staff Approves Waiver for NCAA Bylaws 12.1.2 (amateur status) and 16.11 (benefits, gifts and services). October 15, 2014. The academic and membership affairs staff approved a waiver to allow a Division I student-athlete to borrow against his future earnings potential to secure a loan from an established, accredited commercial lending institution, for the purpose of purchasing loss-of-value insurance. The Division I amateur status and benefits, gifts and services legislation specifies that student-athletes may borrow against their future earnings potential from an established, accredited commercial lending institution exclusively for the purpose of purchasing insurance (with no cash surrender value) against a disabling injury or illness that would prevent the individual from pursuing a chosen career, provided a third party (including a representative of an institutions athletics interests) is not involved in arrangements for securing the loan. Staff waived the normal application of the amateur status and benefits, gifts and services to permit the student-athlete to secure a loan to pay for the premium for loss-of-value insurance under the same circumstances that a student-athlete is permitted to obtain a loan to pay the premium for disabling-injury insurance. In issuing this waiver, the staff noted that the intent of NCAA Division I Proposal No. 2009-23 was to address the growing trend within the community of agents and financial advisors to arrange disabling-injury insurance policies and loans for student-athletes and to allow institutions to assist student-athletes with securing insurance in order to eliminate improper third-party involvement and alleviate the pressures on student-athletes to seek out this assistance from third parties. The staff also noted institutions are encouraged to work with their conference offices to propose legislation for the 2015-16 legislative cycle. Absent changes to the current legislation, requests for waivers will continue to be reviewed by the NCAA Division I Legislative Council Subcommittee for Legislative Relief. See Case No. 732679 in Requests/Self-Reports Online (RSRO) via the search tab.