The University of Oregon has reached a settlement agreement of $242,000 with two insurance brokers over bonuses it paid to former head football coach Chip Kelly and his coaching staff for their on-field success during the 2012-13 season, the Register-Guard first reported.
The UO athletic department had paid a $490,000 premium to the insurers, under the impression that the Lloyd’s of London, an insurance market, policy would cover all the bonuses the coaches earned over the course of the season. But when bonuses were due at the end of the season, the insurers refused to reimburse the UO for them, saying the policy only covered the coaches’ maximum potential bonuses.
The brokers’ refusal prompted the UO to file a lawsuit for breach of contract and negligent representation.
The coaches ended up earning $688,000 after an 11-1 season during which Oregon won the Fiesta Bowl and finished ranked No. 5 in the country.
In total — after the settlement — the UO lost $936,000 it paid for the policy and the bonuses.
“The university is glad we were able to reach a settlement agreement and now we are looking forward to the upcoming season,” UO spokesman Tobin Klinger said via email.
The UO had initially negotiated the policy with Marsh U.S. Consumer of Delaware prior to the 2012-13 season, but ended up working with two brokers: Marsh and Arthur J. Gallagher Risk Management Service of Illinois. Oregon University System officials told the UO it had to get insurance through Gallagher, its preferred broker. Gallagher and Marsh then entered into a sub-broker agreement during the policy negotiations with the UO.
Before the deal was finalized, the UO asked Gallagher whether the policy would cover all potential bonus scenarios, and a Gallagher agent confirmed it would.
At the season’s conclusion, the UO filed a claim with Lloyd’s to recoup the money it paid the coaches in bonuses, but Lloyd’s denied the claim, saying the policy only covered maximum bonus scenarios: a 12-win season, a Pac-12 title, a No. 1 end-of-season ranking and a berth in the national championship game. The UO then filed its lawsuit against Gallagher for breach of contract.
Gallagher in turn filed a negligent-representation suit against Marsh. Marsh responded by suing Gallagher, saying Gallagher did not obtain written approval before answering the UO’s question about whether the policy would cover all potential bonus scenarios, thus violating the sub-broker agreement.
Per the settlement that UO just accepted, Gallagher will pay the university $125,000 of the settlement, and Marsh will pay the other $117,000. The agreement includes a non-disparagement clause and allows both brokers to “[deny] each and every allegation.”
The UO has not since taken out another similar insurance policy, UO athletics spokesman Craig Pintens confirmed.
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