A sure thing: an industrywide effort to secure more on-track insurance for jockeys may have kept the horses running at this year's Kentucky Derby.

This year's Kentucky Derby on May 7 will mark the horse race's 131st consecutive run for the roses. But only three months earlier, officials were worried. An insurance problem had arisen, one that involved the sport's jockeys. The worst-case scenario was that they would boycott the race, as they had boycotted two events in November.

In February, derby organizer Churchill Downs Inc. mounted a two-pronged effort to safeguard the race. On Feb. 15, the company said it was working to provide $1 million in on,track insurance coverage for jockeys i who compete at its seven racetracks, including Churchill Downs in Louisville, the site of the Derby, the first of the sport's Triple Crown events. On March 11, it signed an agreement with insurer American International Group to provide $1 million in lifetime benefits for each jockey who rides at Fair Grounds Race Course in New Orleans, and it said it would "move quickly to secure similar coverage for jockeys competing at CDI tracks in Kentucky, Florida, Illinois and Indiana" prior to the start of its 2005 racing seasons in those jurisdictions.

The Louisville-based company also chose a combative tack: On March 3, it filed suit in U.S. District Court, Western District of Kentucky, seeking injunctions to prohibit the Jockeys' Guild and its representatives from staging boycotts. The suit asked the court to find the guild's activities on Nov. 7, 2004, at Churchill Downs, and Nov. 12, 2004, at Hoosier Park, Ind., illegal and in violation of antitrust laws. The Nov. 12 action at the Churchill Downs-owned Hoosier track resulted in cancellation of racing that day and refunds to patrons. The action at Churchill Downs did not disrupt racing, but management there banished 14 jockeys for taking part in the boycott.

Churchill Downs also announced it would begin withholding voluntary payments of about $375,000 it has been paying annually to the guild through the Thoroughbred Racing Associations, a nationwide group of 40 racetrack owners. The guild had used at least some of that money until 2002 to buy insurance for jockeys, but stopped buying the insurance that year when new management took over. That left jockeys with just $100,000 in coverage provided by the racetracks at which they rode.

Work on providing better jockey insurance has been under way since late November, when a 32-member panel of the National Thoroughbred Racing Association appointed broker John Unick to negotiate with AIG. The NTRA is a coalition of racing interests made up of racetracks, horse owners and breeders. Unick, vice president and national sales manager at MOC Insurance Services, San Francisco, said he hoped the new $1 million coverage would help prevent more job actions by jockeys, noting the higher insurance amount is what they were seeking. "A hundred thousand dollars was inadequate, but $1 million should be adequate," Unick said.

Independent Contractors

As independent contractors, jockeys are responsible for their own insurance, but the reality is that only the highest-earning jockeys have ever taken on that responsibility. "For the top 20 jockeys, who are earning a couple of million dollars a year, it's not an issue," said Kelly Wietsma, agent for legendary jockey Jerry Bailey. "But the majority are just getting by, earning $20,000 or $30,000 a year. It's very difficult for them when they have a family and are not making enough." That is why the racing industry has historically provided the on-track insurance coverage of $100,000 and has been giving a reported $2.2 million a year to the guild, ostensibly for purchase of $1 million in coverage for each rider.

According to information published in The Jockeys" News, the official newsletter of the Jockeys' Guild, only six of 1,887 jockeys who rode at least one sanctioned thoroughbred race in North America last year received more than $1 million. Income figures are based on an estimate of 7.5% of total race purses. Twenty-three earned $500,000 to $999,999, and 215 more earned more than $100,000. Some 1,326 earned less than $30,000. As of winter 2004, the guild counted 1,253 active members, 56 permanently disabled and 379 retired.

Unfortunately, some active members of the guild said they did not learn their guild-purchased coverage had lapsed until jockey Gary Birzer was paralyzed in an accident last summer at Mountaineer Race Track in West Virginia. "His wife was trying to get the medical bills taken care of, and she kept asking, 'What do you mean this is not covered?'" said Julie Koenig, spokeswoman for Churchill Downs. Wietsma said a lot of jockeys were "dumbfounded" the million-dollar coverage no longer existed. Birzer's medical bills must be near $1 million, and he still has as much as a year of physical therapy ahead,Wietsma said.

The lapsed coverage has made jockeys angry at their own guild, which is facing lawsuits from a number of jockeys, according to Wietsma.

"The guild knew the policy was about to expire, and it didn't notify any members," she said. "It lied to Jerry when he asked about the insurance. Serious change has to happen there before anyone takes this organization seriously. I totally don't blame the California Horse Racing Board, the TRA and Churchill Downs for withholding money from the guild. It was the guild's responsibility to see that their jockeys were covered."

The guild did not respond to requests for an interview. But in the guild's winter newsletter, President and Chief Executive Officer L. Wayne Gertmenian compared the relationship of Churchill Downs and a jockey it had "blacklisted" due to the Nov. 7 incident to the "days of Master and Slave" He wrote that "Now is the time to throw off your chains."

Wietsma said that jockeys have reacted very favorably to the action by Churchill Downs and the NTRA to put insurance into force, as has the Thoroughbred Owners & Breeders Association, the trade group that represents those parties. "We would rather see the money go straight into the insurance," said Dan Metzger, TOBA president. "We want to see a solution to this and to be a part of the solution. We also recognize that someone has to pay the bill, and horse owners are willing to pay their share"

Metzger said jockeys also should share in the costs as a way to make them "feel more vested in the program."

Koenig described the company's jockey insurance as lifetime major medical with some disability coverage. "The fact that we're getting this coverage in place and are going to court will resolve this issue without incident," she said. "We will have coverage in place before the Churchill Downs meet"

Forging New Ground

To secure coverage for the jockeys, "we are working with the senior management level at AIG to develop this product," Unick said in March. "We faced a similar crisis in California for workers' compensation coverage, and we put together a captive owned by the thoroughbred racing industry and underwritten and reinsured by AIG." Unick said he knew of no other insurer that provides jockey insurance.

California is one of five states that provide workers' compensation insurance for jockeys. The others are New York, Maryland, New Jersey and Colorado. The new coverage sought by NTRA would apply to states in which workers' comp does not cover jockeys. Unick said he anticipates that most North American racetracks would buy the coverage and that annual premiums to AIG would total "a few million" dollars.

The coverage would be for accident and health, similar to workers' compensation except with finite limits, for injuries that result from either a race or workouts at the track, Unick said. Included will be an accidental-death benefit and disability payments for being out of work for up to two years.

A side benefit of the million-dollar coverage is that jockeys could buy supplemental umbrella coverage on their own at more affordable rates. That's because such insurance would not be triggered until the million dollars is used up, Unick said. "When they had $100,000 coverage, umbrella insurance wouldn't have been affordable," he said. "The umbrella message will get out to the jockeys, and we're more than willing to talk to each one. Theirs is arguably one of the most dangerous, if not the most dangerous, of all professions. They put their lives on the line every time they put a foot into a stirrup."

According to Wietsma, Jerry Bailey carries at least $1 million to $2 million of his own insurance, including disability. "The consequences can be catastrophic when a jockey goes down, especially with a head or back injury," she said. "The worst part is that they're independent contractors. When they go down, they lose 100% of their income. Jerry recommends they do whatever they have to--drive a lesser car, live in a smaller house--to ensure they don't leave a burden on their families."

While Churchill Downs and other racetracks are committed to providing insurance for jockeys, they want other industry participants to share the increased costs. "We are ready to open dialogues with horsemen and jockey representatives in the states where we operate to determine a long-term funding mechanism for this added coverage," said Andrew G. Skehan, Churchill Downs' executive vice president and chief operating officer, in a February statement.

Top 10 Jockeys
By Earnings in 2004

                         Earnings
Jockey                  ($ Millions)        Wins       Mounts

John Velasquez                 $22.3         335        1,327
Edgar Prado                    $18.3         281        1,445
Victor Espinosa                $15.9         240        1,336
Stewart Elliot                 $14.5         262        1,363
Jerry Bailey                   $14.5         148          641
Javier Castellano              $13.0         212        1,283
Corey Nakatani                 $12.5         220        1,080
Rafael Bejarano                $12.2         455        1,922
Ramon Dominguez                $11.5         383        1,353
Cornelio Velasquez             $11.1         240        1,593

Source: Equibase

Key Points

* Jockeys are independent contractors, not employees, but few buy their own health or disability insurance.

* The industry interpreted job actions in November by jockeys as a threat to this year's racing season, including the Kentucky Derby.

* Racetrack owners are in the process of securing high levels of insurance for jockeys.

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RELATED ARTICLE: Higher levels of jockey insurance up to each racetrack.

The effort by the National Thoroughbred Racing Association to provide jockeys with up to $1 million of insurance for on-track injuries won't result in instant and uniform policy terms across the industry. Instead, it will be up to owners of each racetrack to negotiate terms of its policy, if any, and whether industry partners will help pay the premiums.

"Over the next several months, 20 tracks might end up placing coverage through AIG,' said Keith Chamblin, senior vice president of industry relations and marketing and head of the NTRA's Jockey Insurance Panel, in March. "With us not being the signatory on the insurance, and not being in a position to negotiate on behalf of track members for one policy for each individual track or racetrack " company, we suggested that AIG begin discussions with the largest racetrack operators."

The thinking was that if the largest operators were able to come to coverage terms, the sheer volume of that business would help drive the pricing for the remainder of the industry, Chamblin said. Individual track pricing still ultimately would be determined by American International Group after looking at the loss/run data for each track, he added.

As of March, more than a dozen tracks had negotiated new policies with AIG, Chamblin said. Among large tracks that had bought million-dollar jockey insurance as of late March were Keeneland and Turfway Park in Kentucky, Sunland Park in New Mexico and Churchill Downs Inc.'s Fair Grounds Race Course in New Orleans. Andrew G. Skehan, Churchill Downs executive vice president and chief operating officer, said in March the company will "move quickly" to secure similar coverage for jockeys competing at CDI tracks in Kentucky, Florida, Illinois and Indiana before the start of racing seasons in those states. That would include the Kentucky Derby on May 7 at the Churchill Downs track in Louisville. Riders in the other Triple Crown events, the Preakness in Maryland and the Belmont in New York, are covered by workers' compensation in those states.

Chamblin said AIG was working with tracks in Delaware, Arkansas, Florida, Illinois, Indiana and Iowa, and that virtually every major and midsize company is in discussion with the insurer. "A big component is finding the mechanism to pay for the insurance," he said. "Tracks are stepping in to fill a void created by the Jockeys' Guild. In many cases, the tracks would like to see the additional cost of the insurance [amounts in excess of the $100,000 tracks have traditionally provided] shared by a cross-section of the industry. That is subject to negotiation at each track." The guild has said it will not pay for jockey insurance, which created a level of frustration among members of the NTRA insurance panel, he said.

The 32 panel members were from virtually every segment of the horse-racing industry, Chamblin said. Among them were members of the guild, individual jockeys, and state racing regulatory bodies, including parimutuel regulators in North America and the Association of Racing Commissioners International. A panel subcommittee, after exploring a variety of options, determined that AIG was the most logical candidate to provide a higher level of private insurance coverage at a reasonable cost. "So we put our member tracks and horsemen in touch with AIG, and then it was up to individual entities to buy the coverage," said Chamblin.

John Unick, a San Francisco-based broker and NTRA panel member who writes for AIG, served to help structure deals, either as middleman between a track and the insurer or with a track's existing insurance broker, Chamblin said.