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Could the Coronavirus Affect Next Season’s Salary Cap?

How might the coronavirus affect team revenues this year and could it stretch to next season and affect the NHL salary cap?

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While taking a closer look at how the COVID-19 (coronavirus) virus is affecting NHL games, TSN’s Frank Seravalli examined both the potential short-term and long-term consequences of having games altered, moved, postponed or played in front of empty seats, In all situations, unless the NHL has full insurance to cover their losses, the owners will take a hit to their respective pocketbooks.

As Seravalli points out, those economic losses will eventually fall back on the players if significant enough to dip into the escrow fund. And, if that happens, it could affect the NHL salary cap for next season.

As Frank Seravalli of TSN writes, as is, not enough games have been threatened and no games actually affected or canceled but empty seats are popping up in arenas around the United States and Canada already. Total tickets sold will eventually decrease (if they haven’t already) and there are concerns about how the economic losses could affect the salary cap moving forward. If enough games are canceled or affected, NHL players will be responsible for a rebate to ensure a 50-50 split between players and owners.

In other words, if the money the players make exceeds the money the owners make, the players are responsible for filling that escrow fund back up. This money likely won’t come out of the funds the players have already been paid, but the funds they are set to receive. Moreover, that big salary cap increase everyone projected won’t come, assuming things get really bad.

Seravalli writes:

“There is a provision in the Collective Bargaining Agreement that any money owed to the owners by players in excess of what was collected in this season’s escrow account comes directly off what is owed to the players next season – thus reducing the salary cap.”

Related: What Exactly is Escrow? Why NHL Players Hate It. And, Why It Won’t Go Away Soon.

What About Insurance?

That’s a good question. Doesn’t the NHL have insurance to cover these kinds of losses? The answer isn’t entirely yes or no.

Questions about how much insurance and what type are starting to pop up regarding the NHL and other sports leagues. The league as a whole likely has insurance but how much and what type of coverage may vary from team-to-team and in respect to the American franchises versus the Canadian ones.​

Ryan Tocicki, president of Los Angeles-based Premier Insurance Services, has said most leagues opt to pay for coverage for “communicable disease-related losses.” Unfortunately, “It is important to note, however, that losses resulting from ‘threat or fear of communicable disease’ are typically excluded under event cancellation policies.”

Related: Will San Jose Sharks Be Playing in an Empty Arena?

What this means, is that for the NHL, an outbreak of pandemic like COVID-19 may have limited coverage. Put another way, if teams elect to cancel or move games, they aren’t covered. If they are forced to by the city, state or the NHL, they may be covered. This isn’t confirmed, but it could be why San Jose chose not to cancel their remaining home games despite the recommendation, but have said they’ll follow orders on the 19th of March because of a state-wide ban forcing them to.

On Tuesday, D.C. Health officials are urging the cancellation of all non-essential mass gatherings through the end of the month because of coronavirus. This could affect the Washington Capitals home games at Capital One Arena: Thursday, Saturday and Monday. If the Caps decide not to cancel, it might tell us more about the insurance coverage.

If teams are able to recoup potential losses through insurance, they’ll likely close off the buildings. If they aren’t, they’ll only do so if forced to.

This COVID-19 virus could have short-term and long-term consequences for the NHL. The more games are affected, the more likely the trickle down hits players and teams this year and next.

Related: Edmonton Oilers News & Rumors: McDavid, Russell, Yamamoto, Klefbom, Neal, Chiasson, RNH & Koskinen

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