In today’s climate of massive salaries and complex contracts, the case for compulsory professional indemnity (PI) insurance for agents is underscored. Miller’s Billy Warner explain how changes in regulation in 2015 have left the current crop of football agents severely exposed.
The role and power of agents in football tends to polarise opinion within the sport and among its fans.
While acknowledging the positive role agents can and do play in representing their often young and inexperienced clients in what can be a complex environment, there is an enduring belief in the game that the fees they earn represent a significant flow of money outside the ‘football family.’
But agents are close to the heart of the game and, given the importance of their role, it should come as no surprise to learn that FIFA, the game’s global governing body, is currently under pressure to consider re-imposing regulations in an area it had stepped away from back in 2015.
Historically, FIFA required agents to be licensed - a process that involved taking and passing an examination and acquiring Professional Indemnity (PI) cover to safeguard clients in the event of costly errors.
But in 2015, FIFA announced that it was devolving responsibility to the national federations and the requirement for an exam pass and insurance flew out of the window. The result? A massive surge in the number of agents operating within the game. Friends, relatives and other non-qualified individuals have taken on crucial advisory roles at a time when the money available to players throughout the game has never been greater.
There has been continuing pressure from the European Football Agents Association (EFAA) on FIFA for a reversal to ensure sound professional practice at the heart of a $ multi billion industry.*
A risky business
It’s not simply the scale of the deals in football which is a concern but their complexity. Today, agreements include a web of payments covering not only on field activity - including signing-on fees and performance related bonuses - but a host of commercial activities as well as ensuring suitable image rights structures are in place.
In short, while the role of an agent has never been so demanding and complex, it has never been easier to become one with few formal qualifications and little training or preparation. This is a combination of factors which raises the risk of agent error, either through bad advice or procedural error, to Red Level.
Critically, the call for reform includes the requirement for agents to have compulsory PI insurance, covering their clients (as third parties) against losses resulting from a breach of professional duty. That is to say, if the agent is sued by a player for making a mistake or being negligent on their behalf.
- Breaches of confidentiality or a client’s data security.
- Failure to deliver the agreed services to a client.
- Breaches of intellectual property rights, or a material breach of contract.
The Professional Indemnity insurance policy will protect an agent in their activities such as:
- Negotiating sports contracts of employment.
- Negotiating image rights.
- Negotiating sponsorship contracts.
Football agents have the right to be considered professionals, but that comes with a responsibility to ensure that the potential financial impact of any error is covered in the same way as a lawyer, doctor or dentist would be. Having the right level of PI cover in place is not a tick box exercise and has to mirror the agent’s potential financial exposures.
At Miller, we work with sports agents to help protect them against the legal costs and damages arising from alleged or actual acts of omission of professional duties to third parties. Please get in touch with Billy or Steve if you would like to discuss any of your PI insurance requirements.
*see ‘FIFA reform of the intermediary system’ here.