By Gina McKlveen
Starting in September, National Hockey League (“NHL”) teams will face off for the 2022-2023 season, marking the League’s 106th year of operation. But prior to dropping the puck, the NHL may be faced with paying its legal fees for the period of years it was self-insured and its players suffered concussion-related injuries.
According to a June 2022 opinion, NHL v. TIG Ins. Co, issued by the Supreme Court of New York, the NHL sought to recover unpaid portions of defense costs from several insurance companies in the United States and Canada for concussion litigation expenses that began back in 2013. The over 150 plaintiffs, who originally filed multiple concussion-related lawsuits against the NHL alleging that they sustained concussive and sub-concussive injuries during their careers, were later converted into a putative class action on behalf of all retired NHL players. The players’ case was transferred to federal court in 2014, but that court denied the players motion for class certification and the parties instead settled their claims for approximately $18.5 million.
When the concussion litigation began in late 2013, the NHL provided sufficient notice of the claims between itself and the players to the insurance companies, who initially agreed to front the defense costs. While litigation ensued, the insurance companies made partial payments for the cost of the NHL’s defense against the players in the amount of nearly $20 million just for the costs incurred between 2017 and 2020. Despite this payment, the NHL sought to recover the remaining unpaid portions from this litigation.
Resultingly, the NHL, including the NHL Board of Governors and NHL Enterprises, Inc., moved for summary judgment against its insurance companies. The NHL argued that the insurers had a contractual duty to defend the League during its concussion litigation and that the allocation of costs from this obligated defense must exclude the NHL from paying, even during the years it was self-insured. While the court in NHL v. TIG Ins. Co, agreed that the insurers did have a contractual duty of defend the NHL, the court, however, was not convinced that the insurance companies should also have to pay the NHL’s defense costs during the period of years the NHL was its own insurer. Therefore, the NHL’s motion for summary judgment was granted in part and denied in part on these grounds.
In its discussion on the decision, the court first pointed to the fact that the NHL sufficiently and timely notified its insurers of the concussion litigation when it began in 2013. At the time, the insurers agreed to a reservation of rights that obligated the insurance companies to pay the defense costs. Likewise, the insurance companies were aware when litigation began that the NHL had selected its own independent law firms to provide legal counsel. The court reasoned that since the insurers neither timely disclaimed the cost coverage under the reservation of rights nor demanded the NHL cede its control of the defense by providing alternative legal counsel, the insurers waived its rights to do so now. Additionally, given that the insurers had paid nearly $20 million in defense costs to the NHL to date, the court viewed this as evidence which also indicated the insurance companies waived their rights.
On the other hand, when analyzing the issue of whether the NHL’s defense costs could be allocated to the insurers during the periods the NHL failed to obtain coverage from these insurance companies, the court ruled in favor of the insurers, finding it appropriate to hold the NHL responsible for its own defense costs when it was self-insured. In reaching this decision, the court relied on the language and interpretation of each of the insurance companies’ policy agreements. In this instance, the relevant defense cost portion of the policies of these insurance companies essentially stated that the insurers would defend claims or suits against the insured, the NHL, seeking damages to which this insurance applies. The court placed particular emphasis on the language “to which this insurance applies,” finding that such a phrase “plainly limits the scope of both the [insurance companies’] indemnification and defense obligations to bodily injury caused by an occurrence during the applicable policy periods.”
Although the NHL has been in operation since 1917, it did not have insurance until around 1974, which left a significant gap in coverage for more than 60 years. The insurance companies persuasively argued this point, contending that allocation for payment upon the NHL is necessary and should proceed pro rata, on a time-on-risk basis for the period of years it was self-insured. In fact, the NHL did not carry insurance for approximately 57 of the 97 years that the underlying concussion litigation spanned. The court agreed with the insurers’ argument and denied the NHL’s request for relief for the remainder of the defense costs from the concussion litigation.
Ultimately, the court rejected the NHL’s proposal for allocation of the defense costs entirely on the insurers and held the League responsible for its fair share of the costs related to its concussion-related litigation expenses. This judgment figuratively puts the NHL in its own kind of payment ‘penalty box’ ahead of the upcoming season and stresses the point that self-insured organizations are skating on thin ice if they expect subsequent insurers to cover their defense costs during uninsured periods.
