So, what’s the big new thing in the sports world? Scandal Insurance. In the wake of the Tiger Woods media meltdown, companies are scrambling to ensure that they are covered whenever the next athlete’s mistake causes continual national news coverage.
“Companies are saying if it could happen to Tiger Woods, it could happen to anyone,” said Brian Socolow, a lawyer who runs the sports practice at Loeb & Loeb, which represents athletes and companies in sponsorship deals. “For some companies, it’s a tremendous investment, and when it goes bad, it is not only the loss of investment, it’s a black eye for the company.”
Dan Trueman, who runs the enterprise risk department at R J Kiln & Company, the managing agent for Lloyd’s, said his firm had seen an eightfold increase in inquiries into this type of insurance between September and December, the bulk from pharmaceutical and financial service companies. “It’s more than just the flavor of the week,” he said. (via NYT)
“If it could happen to Tiger Woods, it could happen to anyone…”
There, within that aforementioned sentence is the reason for the boom in insurance. Kind of interesting that even in a PR nightmare, Tiger Woods is able to completely revolutionize the sponsorship market, isn’t it?
And what of the morals clause, the clause that usually protects companies from the wrong-doings of the athletes? They essentially have no effect. Athletes won’t sign a broad morals clause that would give the company blanket protection in situations such as infidelity or the like (too risky for them to be penalized for any mistake or indiscretion), and there are obviously a wide-range of PR problems that fall outside of the usual felony/crime of moral turpitude, which are the types of situations morals clauses usually cover.
So what happens to sponsorship going forward? It looks like companies will be forced to spend money on insurance for the foreseeable future, or to perhaps look at working with retired players which carry a lot less risk. In any event, it looks like the idea of “scandal insurance” is more than just a passing fad…its a regular component of the sports sponsorship business.
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