Astros' Bagwell-Related Insurance Claim Denied

Unsurprisingly, the Connecticut General Life Insurance Company denied the Houston Astros’ insurance claim for $15.6 million based on the supposed disability of Jeff Bagwell. A good overview of the dispute from the Houston Chronicle can be found here. With this much money at stake, the insurer is unlikely to make payment until such time as the insured has a cognizable claim for bad faith denial. This dispute is likely headed towards arbitration or litigation; if Bagwell in fact plays (for the Astros or another team) this year, the Astros will likely face an uphill battle proving he’s disabled.

The truth is, much of the Astros’ desperation to rid itself of Bagwell has nothing to do with his gimpy shoulder. Instead, the Astros know that Bagwell is of little value to the team in the post-steroids era. Bagwell has long been alleged to have been a steroid user, if not the “root of all steroid usage in the league.” Now that baseball has gotten (a little bit) tough on steroids, Bagwell’s MVP days are done.

I wonder whether the Astros could seek to rid themselves of Bagwell using some sort of contract theory. A few come to mind: fraudulent inducement, changed circumstances, or possibly simple breach. The Astros could claim Bagwell omitted a matter of material fact – his (alleged) use of steroids – and that they were fraudulently induced to enter the contract. That’s a hard sell since the Astros would have to show they did not know and should not have known of his use. A better claim might be based on change of circumstances – that the new steroid policy has frustrated the purpose of the contract (which was to employ Bagwell, an alleged steroid user). The best claim might be simple breach: to the extent that between 2000 and 2005 Bagwell used a banned substance, he may have violated MLB rules (which are incorporated into the standard player contracts), and thus breached a material term of his contract.

I doubt the Astros will pursue any of these claims, because it would subject their 1992-2005 locker room to intense scrutiny about who was using what and who knew what when.

UPDATE: Readers have raised questions about the citation to the "Bagwell Conspiracy" article, and, after further research, that source was probably not the best one to cite (I have now learned the author of that site meant it as "kind of a joke," see here). I merely meant to point out that that there have been rumors and speculation about Bagwell; these rumors are discussed here.

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