Sarah Abrams

In recent years, student athletes in the U.S. have gained the rights to profit from their “name, image, and likeness” (NIL). As these rights have emerged, NIL collectives have formed. The purpose of these collectives is for a school’s athletic supporters to have a way to pool their funds in order to create opportunities for their school’s student athletes. The collectives are in many ways new kinds of organizations, and they are certainly organized for new purposes. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, examines the challenges involved with trying to develop management liability insurance for these kinds of collectives. A version of this article previously was published on Law360. I would like to thank Sarah for allowing me to publish her article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

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Following the NCAA’s Oct. 7 settlement in In Re College Athlete NIL Litigation, the Name Image Likeness (NIL) revolution for amateur athletes is firmly here, bringing with it endless underwriting and claim scenarios.  

NIL collectives, which emerged following the Supreme Court’s 2020 Alston decision, are founded by secondary school or university alumni and influential supporters (but independent of the secondary school or university) to pool funds from donors to create NIL opportunities for student-athletes.  NIL collectives often present as nonprofits, even as collective funds available are often used as a recruitment tool for top athletic talent.  The unique purpose and structure of NIL collectives create underwriting challenges for management liability carriers looking to capitalize on burgeoning collective growth.

This article examines the emergence of NIL collectives, the current litigation landscape that has created a favorable environment for collectives and considerations for director and officer insurers looking to underwrite NIL collectives.  

Currently, there is no regulatory framework governing how NIL collectives manage relationships with student athletes or donor investors.  No standard of care has been established for the handling of NIL collective funds, disbursements to student athletes or services required by student athletes.  

Even so, NIL collectives often are structured as 501(c)(3) nonprofits[i] that are affiliated with—but operate independently from—a particular school and its athletic department. As with any nonprofit, there needs to be executive officers hired and a board of directors appointed. Unique to the NIL collective nonprofit is its charitable purpose to pool funds from donors, fans, businesses, and other sources to compensate student-athletes in exchange for the student-athlete competition of services.[ii]  Thus, management liability coverage to protect a NIL collective and its governing body is appropriate.  

Traditionally, the director and officer coverage part of nonprofit management liability policies are meant to cover the nonprofit, its directors, officers, employees and volunteers for their “wrongful acts” in governing and managing the organization.  On top of its loss history, insurers often consider the stated mission of the nonprofit, profile of charitable giving and marketplace experience of executives and board of directors.  

But can NIL collective’s management liability coverage be underwritten like a traditional nonprofit?  Understanding the current litigation landscape created by former athletes against the NCAA and the explosion of NIL collectives may provide insight into why insurance product creativity in this space is tantamount.

Amateur NIL collectives were created in the wake of the unanimous US Supreme Court decision NATIONAL COLLEGIATE ATHLETIC ASSOCIATION v. ALSTON ET AL, No. 20–512 (2020).[iii]  The Court determined that the NCAA could no longer restrict member institutions from offering education-related compensation and benefits to student athletes. Such compensation and benefits include cash awards for academic achievement, graduate degree and vocational school scholarships, and computers.[iv]

In addition, multiple state legislative initiatives emerged permitting student-athletes to benefit off their NIL.[v]  In conjunction, the NCAA adopted an interim policy regarding student-athletes’ ability to benefit off their NIL in a manner consistent with the laws of the state where their school is located.  Student-athletes are further allowed to use a professional service provides (agent/attorney) for NIL activities and requires the student-athletes to report NIL activities to their school.[vi]

While Alston, state legislation and the NCAA (in the interim) allow students to profit off of their NIL, there is no task force to police how NIL collectives are operating as non-profit collegiate sport powerhouses.

Despite its efforts, the NCAA is facing an uphill battle as it tries to gain control over the explosion of NIL collectives.[vii]  On October 7, 2024 the NCAA’s settlement proposal in In Re College Athlete NIL Litigation was approved by the presiding judge in the Northern District of California.[viii]  The NCAA agreed to 2.8B of backpay damages offered to athletes who couldn’t benefit from NIL before 2021 and also states that NCAA must continue to allow third-party NIL benefits over and above existing scholarships and other benefits permitted by the NCAA.[ix]  The court’s preliminary approval came after previous attempts at settlement with more NCAA oversight of NIL disbursements had been rejected.[x]

Even with the preliminary settlement in In Re College Athlete NIL Litigation which formally allows for NIL collectives to keep operating and paying amateur athletes,pending lawsuits against the NCAA for antitrust violations remain.  On September 10, 2024, four former University of Michigan football players sued the NCAA and the Big Ten Network for unreasonable restraint of trade under the Sherman Act.[xi] The former athletes seek monetary damages against the NCAA and the Big Ten Network for their loss of market value and suppressed earnings due to the former athletes’ inability to utilize NIL while they played for Michigan.[xii]

After the Alston decision and, in anticipation of the settlement approval In Re College Athlete NIL Litigation settlement, the number of NIL collectives participating in amateur sports programs continues to rise.  32 states have articulated their own NIL regulations and 18 have no legislative guidance. Those without codified NIL statutes defer to the NCAA interim rules which are likely to change considering the proposed In Re College Athlete NIL Litigation resolution. 

Unsurprisingly, California’s “Fair Pay to Play Act,” was the first state NIL law enacted and most following states have mirrored its language.[xiii]  Under California’s Fair Pay to Play Act, student athletes at colleges, universities, and high schools can earn compensation for the commercial use of their valuable Name Image Likeness assets. The Act restricts students from endorsing or sponsoring products that conflict with existing team contracts (like Nike/Addidas); athletes being recruited must disclose NIL endorsement deals and athlete compensation cannot be conditioned on athletic performance.

To circle back to the question of whether a NIL collective management liability policy can follow nonprofit underwriting guidelines, there needs to be consideration given to the likelihood of typical management liability claims.  Typically, nonprofit director and officer liability covers allegations of breach of duty and any other “Wrongful Act” that cause harm to the organization or its members. Regulatory coverage is often included as an endorsement to the policy as a protection to the organization and individuals employed or serving on the board for purported statutory violations.

Notably, regulatory exposure to a management liability from violation of California or 30 plus other state NIL legislation seems to be far greater for the student athletes and their representation. 

Because NIL collectives cannot base compensation to an athlete based on their performance, stating as much in a contractual provision would eliminate any confusion that the collective was running afoul of such a regulation.  In addition, the Fair Trade Commission (FTC) has recently issued rules and regulations for advertising products and services requires student-athletes promoting products on social media to make it obvious when they have a material connection with a brand when making certain kinds of posts.[xiv]  Similarly, a contract provision warning that student-athletes are solely responsible for compliance with FTC regulations may shift liability from a NIL collective.

In addition, because most NIL collectives organize as 501(c)(3)s, the barrier to entry to become a collective is to be “organized and operated” exclusively for “exempt purposes,” such as religious, charitable, scientific, literary, or educational purposes.[xv]  The failure of an executive to manage the NIL collective funds and athletes in such a way to maintain a nonprofit status may create a liability from or to the IRS and donors that rely on a tax write-off for contributions to the collective.  Such a management liability claim would need to be brought by a donor who may be making their own tax filings relevant in bringing such an action.

In addition, because a NIL collective is a nonprofit, not a LLC or investment firm, the owed fiduciary duty is solely to collect and distribute funds to athletes acting for a charitable purpose.  As stated above, in most states there can be no condition of performance by an athlete or team as part of a deal and the NIL collective is not meant to turn a profit for its investors.  A NIL collective board should have finance and governance committees with oversight of the collective’s stated charitable mission being carried out. 

If an audit of a NIL collective finds differently, the NIL collective’s management liability cover may be implicated.  Notably, a cause of action for breach of duty for failing to carry out a stated charitable purpose would likely be brought by a donor losing tax exempt status. Which, again, may make the donor’s tax returns relevant.  It is even less likely that an athlete profiting from NIL collective donations is going to be a whistleblower.  

Another common cause of action against charitable organizations is financial fraud.   A demand for books and records can be made or a lawsuit stating as much can be brought by NIL collective donors.  However, overcoming the burden of proof demonstrating that NIL collective expenses and distributions were not in support of student athletes may be challenging without the cooperation of student athletes or agents benefiting from collective donations.

An example that may show how this exposure plays out is with how the Matthew Sluka-UNLV drama resolves. According to Sluka, a UNLV assistant coach verbally promised Sluka a $100,000 name, image and likeness payment for transferring from Holy Cross.  UNLV and the third party allegedly responsible for paying Sluka deny that any money — beyond $3,000 for an appearance this summer — was ever promised to Sluka.  UNLV’s NIL collective denied having a deal in place with Sluka that required them to pay the starting quarterback and on September 26, 2024, Sluka left the team.  UNLV has gone from 3-0 to 4-1 without him and is refusing to accept a Las Vegas Sportsbook offer to cover the $100,000 alleged offer.[xvi]

Because the Friends of UNLV collective is denying any such promises were made, and the agreement was allegedly verbal by a UNLV employee, a breach of contract case against the NIL would be tough to pursue.  However, there is always potential that vicarious liability could arise if there is proof of communication between the collective and UNLV about requirement.  When and if Sluka pursues an action against UNLV or the collective, the complaint may allege unfulfilled promises, thwarting other business opportunities, or improper inducement.  

Given that UNLV and the NIL collective have stood their ground, the potential for exposure to the Friends of UNLV NIL Collective seems limited.  If UNLV’s football team loses without Sluka, however, the Friends of UNLV may not remain so friendly to its directors or officers.  While this may result in ouster of certain executives or board members, impact to the collective’s management liability policy seems unlikely.  

With the dynamic landscape of what, if any, rules govern NIL collectives, whether a collective is a good risk remains under review.


[i] The IRS chief counsel concluded many NILs do not qualify for 501(c)(3) status. https://www.alston.com/en/insights/publications/2023/10/the-irss-latest-play-on-nil-collectives#:~:text=Their%20exempt%20purpose%2C%20as%20required,the%20collectives%20would%20be%20taxable.

[ii] https://www.mmwr.com/when-one-ncaa-door-closes-another-nil-door-opens-what-pre-collegiate-enrollment-nil-deals-mean-for-schools-nil-collectives/

[iii] https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf

[iv] Id.

[v] https://cbjlawyers.com/ncaa-student-athletes-compensation/

[vi] Id

[vii] GRANT HOUSE, et al., Plaintiffs, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, et al., Defendants Case Nos. 4:20-cv-03919 CW, 4:20-cv-04527 CW (June 2021), Hubbard v. National Collegiate Athletic Association, 4:23-cv-01593, (N.D. Cal.), Carter v. Nat’l Collegiate Athletic Ass’n, 23-cv-06325-RS, (N.D. Cal. Apr. 29, 2024)

[viii] Id.

[ix] Id.

[x] Id.

[xi]https://www.pacermonitor.com/public/case/55034636/Robinson_et_al_v_National_Collegiate_Athletic_Association_et_al

[xii] Id.

[xiii] https://www.saul.com/nil-legislation-tracker

[xiv] https://www.fisherphillips.com/en/news-insights/starting-qb-leaves-undefeated-team-over-nil-dispute-5-things-universities-and-collectives-should-do-to-reduce-disputes-and-legal-risk.html

[xv] https://www.irs.gov/charities-non-profits/charitable-organizations

[xvi] https://www.si.com/college-football/circa-ceo-offers-to-pay-alleged-nil-deal-to-unlv-qb-matt-sluka