High Insurance Costs Limiting Pro Football Teams

The Arena Football League is back in the game last weekend after taking a season off. They resumed play with 15 teams, but none of those teams are in California. According to the New York Times, the AFL didn’t return to California because of the state’s worker’s compensation system, which allowed retired players to collect big money for claims that wouldn’t have qualified in other states.  “It’s definitely part of the decision-making process,” Jerry Kurz, the league’s commissioner, said to the New York Times. “I bring it up in the first conversation I have with anyone interested in bringing a team to California.”

There has been interest from ownership groups wanting to launch a team in California. But costs from retired athletes have halted the move. The AFL has a league-wide insurance policy which distributes costs evenly among the 15 teams, regardless of where the team is located. But California carries such high liability that the ownership group there would have to cover insurance costs themselves through a separate policy.

The problem lies in the fact that AFL runs slimmer profit margins as compared to the NFL. So a few extra insurance claims can mean the difference between a good year and a bad one. “The big guys can afford it — it’s a blip on the radar to them,” said Andrew Kline in an New York Times report, a senior managing director of the investment bank Park Lane who has advised potential California ownership groups. “It’s massive to the AFL team.”