On Dec. 31, Exceptional Risk Advisers, a New Jersey-based wholesale insurance broker, announced it had acquired the assets of a former competitor, International Specialty Insurance. The news, buried in a largely ignored press release, drew both sighs of relief and raised eyebrows from others in the rarefied market of athlete loss-of-value insurance, who looked upon ISI as the industry’s problem child.
That group includes Chris Lack, the head of Exceptional Risk Advisers’ sports and entertainment insurance division.
“There was a failure of due diligence,” Lack said of ISI, the company ERA has now taken over. “People were giving them capacities to write insurance and probably weren’t doing enough work in the background.”
Based in Winston-Salem, N.C., International Specialty Insurance was founded in 1991 by David Ferraro and has been run by his two sons, Matthew and Joseph, since the early aughts. In 2013, the company hired Chris Larcheveque, who had previously been the head of Hanleigh Insurance’s U.S. sport and entertainment division, where he had carved out a niche by selling disability coverage to college athletes with pro potential. Although LOV insurance—which can only be purchased as a rider for a permanent total disability policy—had been in existence for decades, Larcheveque’s arrival at ISI marked the start of an explosion of new policies being issued, followed by turmoil.
In interviews with Sportico, a number of industry professionals assert that in attempting to establish itself among Lloyd’s of London’s coverholders, ISI issued policies for cheaper and cheaper premiums to a contingent of college athletes who should never have qualified for them.
Derrick Pfau, an executive at Petersen International Underwriters, said that while his company and the other Lloyd’s coverholders were “all jostling with one another, ISI came out and their rates were crazy cheap.” In addition, said Pfau, while the industry standard had been to offer LOV insurance only to consensus first-round NFL or NBA prospects, ISI was increasingly writing policies for prospective third- or fourth-rounders “with thresholds of amounts that were not even claimable.”
It wasn’t just that ISI was undercutting premiums and saturating the market, industry insiders complained, but that the company and Larcheveque seemed to be making a big production of it. For example, ISI-issued policies earned frequent mentions in news articles and tweets by then-ESPN.com sports business reporter Darren Rovell.
In 2015, as Rovell reported at the time, ISI wrote the policy that paid Oregon star cornerback Ifo Ekpre-Olomu a record $3 million after he suffered an ACL injury prior to the NFL draft. In 2018, Rovell reported on the ISI policy that made Chance Warmack, the former Philadelphia Eagles offensive lineman, the first NFL player to collect on a loss-of-value claim between pro contracts. While media stories bolstered Larcheveque’s public profile, the company he worked for, ISI, was also getting shoutouts of a much less desirable kind: as a named defendant in lawsuits filed by athletes who claimed they were misled about the terms of their policies.
Multiple requests to Larcheveque for comment on this story went unanswered. ISI’s Matthew Ferraro declined to respond directly to questions, but did release a statement through Lack on behalf of his company. “We can’t provide comment as to previous and ongoing litigation or to specific individuals,” the statement said.
Litigants against ISI included high-profile college players. In May 2017, former Penn State linebacker Nyeem Wartman-White sued ISI after being initially denied a claim on a loss-of-value and permanent disability policy he had taken out. In March 2018, ISI was among the defendants in a lawsuit filed by Arkansas defensive lineman Deatrich Wise Jr., over an LOV policy he had obtained, after his claim to recovery was denied.
Two months later, ISI was again sued as part of litigation filed by another Arkansas player, Rawleigh Williams III, who had taken out a policy for $1 million in permanent disability coverage and then suffered a herniated disc in his neck. Williams’ lawsuit alleged that ISI had misrepresented key aspects of the policy it had issued him in order to gain his business.
Richard Giller, a Los Angeles attorney who has represented a number of top athletes in insurance recovery disputes, said he has only had to file lawsuits to secure payments in three instances—and that ISI had written the policy in each. In 2016, Giller handled the lawsuit former Major Leaguer Mitch Moreland, then with the Texas Rangers, filed against ISI. In it, Moreland specifically claimed that Larcheveque had made a key misrepresention to the insurance issuer in the course of procuring a policy quote.
This past November, one of Giller’s other baseball clients, Matt Garza, sued ISI, his retail broker and the policy’s underwriters, over a $10 million total disability insurance contract he had purchased in 2017 for $188,174. According to that lawsuit, Garza, who was already 11 years into his MLB career, was issued the coverage despite having not filled out most of the information on the application. Following what his complaint described as a career-ending shoulder injury, Garza attempted to cash in on his insurance policy but was denied on account of those omissions.
“Instead of conducting a thorough underwriting process before issuing the Subject Policy, [the defendants] instead waited until after Mr. Garza submitted his claim to conduct a complete investigation of Mr. Garza’s medical and injury history,” the complaint stated. When asked by Sportico, Lack, the ERA executive, said he was unaware of the lawsuit, which was served on ISI just a month before ERA’s acquisition.
Prior to Larcheveque’s time at ISI, while he was at Hanleigh, the company wrote policies that later became the bases of lawsuits filed by former USC players Marqise Lee and Morgan Breslin, and former LSU offensive lineman Ciron Black. In each of those cases, however, Hanleigh was not named as a defendant—only the Lloyd’s underwriters were.
The recent acquisition by Exceptional Risk Advisers was the second time ISI had been purchased in just the last two years. In February 2019, it was announced that the company had been acquired by Ryan Specialty Group, the Chicago-based insurance company created by former Aon founder Pat Ryan, who praised ISI’s “high level of professionalism and underwriting acumen.” A press release announcing the acquisition stated the Ferraro brothers and Larcheveque would continue running ISI under the new ownership. (A few weeks later, Rovell tweeted that ISI had written an $8 million LOV policy for Zion Williamson, which would kick in if the Duke basketball star were to fall below 16th in the 2019 NBA Draft.)
The acquisition deal officially closed that May but then was quietly aborted shortly thereafter, Sportico has learned; sources say Larcheveque was jettisoned from the company during the sequence of events. A spokesman for Ryan Specialty Group described the dissolution as “a mutually agreeable parting of the ways,” but declined to answer specific questions about what led to the split.
ISI’s statement to Sportico said, “The separation of ISI and RSG was amicable on both sides.”
Given ISI’s pending legal entanglements at the time, several industry sources privately said they were surprised a major insurance company like Ryan Specialty Group was ever interested in it to begin with.
Others in the industry, however, see ISI as a convenient scapegoat for an LOV market that had gotten completely out of whack by the mid 2010s—spurred on by a matrix of mercenary incentives and a general lack of oversight.
Bryan Fisher, who represented Wartman-White in his suit against ISI, pushes back on the idea that any one company or individual could have alone overwhelmed the market by aggressively writing policies. Rather, Fisher argues, that is what insurance carriers should be doing.
“The fundamentals of the insurance business are: Spread risk, spread risk, spread risk,” said Fisher, who also represented Lee in the suit over his Hanleigh policy. “Giving policies out there is a good thing from an insurance company’s standpoint. It is also a good thing from an athlete’s standpoint. ISI [was] not doing anything wrong by brokering these policies.”
Keith Lerner, a Florida-based retail broker who has sold LOV policies to college athletes for 30 years, similarly disputes that Larcheveque and ISI were solely to blame for LOV market problems.
“I don’t think if someone writes an extra 10 or 15 or more college [athletes] loss of value, here or there, it would have that significant of an impact over the total amount,” Lerner said.
As part of the December acquisition, the Ferraros have joined Exceptional Risk Advisors as partners. Lack said the deal ultimately came down to a “distribution decision,” and that he is confident in the current composition of the company ERA purchased.
“They got rid of the people that were responsible for this happening, and from there it is still a good company with good people that weren’t part of these bad decisions that got made,” Lack said.
In its statement to Sportico, ISI said it had ceased selling loss-of-value coverage prior to the botched sale to Ryan Specialty Group, “due to market dynamics.” ERA continues to sell a small number of LOV policies, but Lack said the company has no plans to utilize ISI in that way going forward.
“We didn’t bring them on for their loss-of-value capabilities,” Lack said, matter-of-factly. “They don’t have that anymore.”