Monday, April 05, 2004
Lloyd's of London Sues Marlins, Alleging Fraud
Jay Weaver of the Miami Herald reports that Lloyd's of London has sued the Marlins over the policy it issued to cover Alex Fernandez's contract. Lloyd's alleges that the Marlins had simultaneously insured Fernandez through Lloyd's and The Hartford Life Insurance Co. without telling either of the overlap, and then tried to collect from both. The Hartford has already received a confidential settlement from the club.
More interesting, in a big-picture sense, are the terms of the policy:
"Like all professional sports teams with high-priced players, the Marlins bought a disability insurance policy to cover 75 percent of Fernandez's $7 million annual salary should he be unable to pitch over the next four years. The ball club said it paid a $731,253 premium for that policy."
75% of Fernandez's annual salary is $5.25 million/year. The policy was to pay $22,664.83 for each regular season day that Fernandez was disabled, yet for a starting pitcher the premium was just 14% of one year's potential payout? The club would get that back if Fernandez had spent just one month on the DL.
In fact, Fernandez tore his rotator cuff in the 1997 NLCS, missed the entire 1998 season, then pitched only briefly in 1999 and 2000. Lloyd's paid $5.25 million on the policy for 1998; this lawsuit involves claims for the 2000 and 2001 seasons.
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Jay Weaver of the Miami Herald reports that Lloyd's of London has sued the Marlins over the policy it issued to cover Alex Fernandez's contract. Lloyd's alleges that the Marlins had simultaneously insured Fernandez through Lloyd's and The Hartford Life Insurance Co. without telling either of the overlap, and then tried to collect from both. The Hartford has already received a confidential settlement from the club.
More interesting, in a big-picture sense, are the terms of the policy:
"Like all professional sports teams with high-priced players, the Marlins bought a disability insurance policy to cover 75 percent of Fernandez's $7 million annual salary should he be unable to pitch over the next four years. The ball club said it paid a $731,253 premium for that policy."
75% of Fernandez's annual salary is $5.25 million/year. The policy was to pay $22,664.83 for each regular season day that Fernandez was disabled, yet for a starting pitcher the premium was just 14% of one year's potential payout? The club would get that back if Fernandez had spent just one month on the DL.
In fact, Fernandez tore his rotator cuff in the 1997 NLCS, missed the entire 1998 season, then pitched only briefly in 1999 and 2000. Lloyd's paid $5.25 million on the policy for 1998; this lawsuit involves claims for the 2000 and 2001 seasons.
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