I agree with you that there is information that drove the decision that we posters won't ever have.
My understanding is that Horton's back problems arose BEFORE the window to insure for year 2 even opened (the back arose after the season ended during non-hockey workouts). CBJ could have insured him for year 1, with the exceptions for the shoulder, etc...), but there was little to insure since he wasn't going to be playing until late in season 1, and the exceptions to coverage for the most part would have swallowed the effective coverage. Some would have insured Horton in year 1 anyway, to avoid exactly what happened. Others would have rolled the dice a bit for year 1, given the unlikely event of a different injury to a different body part before they could get him insured, and used that insurance on a different player (as the Jackets presumably did).
Under the contract insurance offered by the league (at least as of 3 years ago), each team pays a premium based on the salaries of its five highest-paid players, but is free to allocate that coverage how it wishes (90% of salary is typically covered on any one contract). Further, the length of term covered by the insurance is limited to 5 years. NHL Deputy Commissioner Bill Daly has said that "typically, a team will extend coverage to as many as seven players," meaning that the teams find ways of covering more than the top 5 salaries by insuring less than 90% of the salary). Insurance coverage kicks in when a player misses 30 or more games due to same injury. The cost of insuring a player under the league program costs about 5% of his salary. However, once you get beyond the league-provided coverage, the premiums to insure any one individual player beyond the league covereage skyrocket (purportedly 25%, but can't find a source). Hurricane's GM has stated that while he wished it was easier to get each player insured, he acknowledged that the 'Cane's couldn't afford to do that. Which begs this question - can the Toronto's of the NHL afford to cover every player, or at least every player not on an ELC, but this issue confronts smaller budget teams like Carolina (and CBJ?).
While individual teams are free to pursue additional coverage, the heavy premiums make it a losing proposition from a cost/benefit/risk analysis. Per the Canes GM - "Seeking private insurance to cover a longer deal is prohibitively expensive."
http://insurancenewsnet.com/article....7b000000c1027a
So for example assume that the top 5 contracts in 2013 for CBJ amounted to
$20M annually. The premim cost for the league-provided coverage would be approximately $1M based on the above. CBJ could have allocated that $20M across as many players as it wanted, and in less than full amounts, so as to spread the coverage beyond 5 players in a manner that made sense to the FO. The length of a contract term that is insurable is also limited to a 5 year term. Because of lower salaries and shorter terms, it apears to make little sense to insure a young player on an ELC. It is under this scenario that CBJ presumably decided to omit Horton from coverage - they presumably insured other veterans using the amount of insurance available because of Horton's salary (e.g. Dubi, Foligno, Bob, Wiz, JJ, Tyutin, etc...), thinking that if Horton ever went down permanently it would be due to the shoulder problem, which would have been excluded from coverage regardless of when it happened. Relatedly, because of the shoulder being uninsurable, the risk that some other insurable injury occuring that would end his career was low. In addition, the coverage on Horton would have been limited to 5 years - any amounts owed beyond 5 years would have fallen on CBJ 100% regardless of whether Horton was put on the league's disability policy or not. The cost of insuring Horton separately outside the league plan may have been 20-25%. At those supplemental insurance costs, you would be gambling that out of 4-5 players, 1 of them (statistically) will suffer a COVERED career-ending injury in order for supplemental insurance to make economic sense. There simply haven't been enough covered career ending injuries to make that bet worthwhile. The ratio is probably 1 career-ending injury for every 50 players, so other than the large-market/large revenue teams, the NHL teams typically stick to the league-required program. Thus, the greater INSURABLE risk (from an actuarial perspective) was to other players who were going to play the entirety of the 2013-14 season and subject themselves to potential injuries that were in fact coverable - so the CBJ used its mandatory coverage on those other players.
To me, the insurance decision seems very defensible - business savy even.
What I don't know is whether the CBA and the free agent market in 2013 made giving Horton a 7-year deal in 2013 a smart move because only 5 years would have been covered even if he had been insured/insurable. But in looking at other long-term contracts around the NHL, many teams do just that (Crosby, Kane, Toews, etc.). It may be that a 7-year term is what it took to get a player of Horton's caliber to sign with CBJ (big-market teams were offering that). The guarantied contract in the NHL is what makes term almost as important as the annual salary. It also is somewhat unique to our American sports world that is programmed to see many players cut from NFL teams all summer long, and with only the proven stars with guarantied money (and many of those partially guarantied).. The NHL teams with contract terms longer than 5 years are either 100% on the hook for those excess years, or have enough revenue to purchase additional disability insurance (at 20-25%) or have enough revenue to in effect self-insure such circumstances (although they can't get insurance for something like Crosby's concussion syndrome). Maybe this is the unspoken larger reason why small market teams struggle with getting the big FA signings or trades - or in retaining bigtime stars. Admittedly high-end talent strains the salary cap. But the cap isn't a huge issue for teams like CBJ (yet). The annual salary is doable as long as the player is playing. But smaller-budget teams can't afford the risk of a Horton situation blowing up in their face - they can't afford to pay the injured player AND replace him with a similarly talented veteran player, they can't afford the supplemental insurance to cover beyond the 5 year term limit, they have to use a large portion of their allocable NHL disability insurance on that one player (assuming that all body parts are in fact insurable). Even if Horton had been insured, CBJ would have been on the hook for 10% of first 5 years, and 100% of any years beyond 5. That's a bit hit to a smaller market team like CBJ whose year-to-year profitability is based in large part on ticket sale fluctuations and playoff revenues, as opposed to larger established market teams who have essentially guarantied full houses 41 nights a year, large local TV contracts, and cash stashed from prior years, etc....
CBJ gambled by signing Horton in the first place; had it worked, FO would be lauded for having foresight to commit to a stud FA long-term and to pry him away from big-market team like Bruins (or others who were pursuing him - thought most thought he would stay with Bruins). The gamble FO could see was whether his shoulder would mend and stay healthy enough for him to play. They had medical opinions that the shoulder would be fine, so they rolled the dice. The back issues arose in a short gap period after year 1 and before year 2 insurance could be decided. Vegas won that bet. Had a monied team made this gamble, no one would have blinked because the $5M+ per year would have meant little. It means a lot to a budget-concious team like CBJ - as in $5M+ from a bottom line that is already thin. Toronto proves that theory by being able to afford to pay Horton not to play and not to count against their cap, and to ship us Clarkson not because of cash flow but because his play was dead in the water in Toronto and they get to replace Clarkson with whomever they can fit under the cap. And NO ONE but CBJ would have taken Clarkson (it was a good move under bad circumstances). Toronto is a cap team with excess cash beyond the cap. Several other teams fit that description. CBJ does not - partly why some of us love them so much.
Given these circumstances, the question is whether CBJ is in a position to make a Horton-type bet in the future. If it's a star with a 3-5 year window, that may be doable, as the player isn't looking for term beyond 5, and CBJ insures it. But if you are looking at the blockbuster pickup of a player for the next 7-10 years (which is how the Horton deal was viewed around the league, in terms of talent, leadership and off-ice poise), that may be a gamble that CBJ can't make again. While the risk may be low of getting burned, if you do get burned, it's 5-alarm fire.
However, the reason I started to post was just to laugh/speculate that the next time a similar situation arises, I'd bet that the FO takes the more conservative approach and insures over it, even if it has to purchase insurance outside what the league offers, just to keep HF off its tail.
Then I started analyzing (again).Ultimately the FO won't put great weight on what the fanbase thinks about the Horton situation, but it does affect the FO somewhat - they are human and want to avoid repeating a mistake, and want to salve wounds that could have cost them some goodwill (a few season tickets). They will look at such a deal, but gunshy might be the descriptive phrase.
EDIT - Sorry, I got bored!
Last edited:
