Sports Outside the Beltway

Are Corporations Insuring Endorsements Against Athletes’ Scandals due to Tiger Woods?

A NY Times article headlined ‘Insuring Endorsements Against Athletes’ Scandals Ken Belson and Richard Sandomir write-

In the wake of the Tiger Woods scandal, insurers are being inundated with inquiries from corporations seeking to protect their investments, their brands and even their sales when their celebrity endorsers suffer public embarrassment.


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.

Is one source proof that companies are insuring their endorsements? Note the things in bold. The Tiger Woods scandal started on the last Friday in November.

But the article cites insurers as making more inquiries going as far back as last September. Or a full three months before the Woods scandal went into full gear.(The beginning of December) So if what Mr. Trueman is saying is true, then how much of it is really Tiger related?

Also note the word ‘enquiries’. Asking about possible insurance isn’t the same as actually taking out the insurance. The Times headline and article are therefore out of sync.

The article also says-

An increasingly common strategy for companies to better protect themselves is to change the language in their morals clauses to cover more contingencies. The more specific the language, the more expensive the insurance becomes, according to executives in the industry.

A change in the wording of contracts isn’t the same as actually taking out insurance.

One more thing.

Indeed, the stock prices of the seven publicly held companies that have or had sponsorship deals with Woods lost $12 billion in market value in the month after Woods’s statement in December that he was taking a leave from golf, according to a study by Chris Knittel, a professor of economics at the University of California at Davis.

The Study by Dr Knittel has been seriously called into question by both the Wall Street Journal and Ryan Ballangee at the golf blog waggleroom, and has seen its authors backtrack from their original figures. Let me quote from the WSJ article-

The Woods study appeared online, accompanied by a university press release, barely two weeks after Mr. Woods stepped away from the links. It isn’t unusual for universities to trumpet studies before they undergo peer review, but this one made some rushed shots into the rough, researchers said.

Prof. Stango acknowledges, in an interview and in the paper, that several challenges may have undermined his findings. Some of Mr. Woods’s sponsors are part of large conglomerates, and news of his infidelity trickled out slowly — both factors that made it tougher to interpret investors’ decisions to buy or sell. “It’s just a very difficult thing to disentangle,” Prof. Stango* says.

From today’s article I have to conclude NY Times editors and reporters don’t pay much attention to WSJ or Waggleroom. That’s just pitiful when it causes them to put out nonsense like the above.

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