I remember it being reported that the reason Markov got the 3rd year on his contract, compared to the 2 year deal MTL offered was because the insurance company he had would cover most of his salary if he got hurt.
The reason I still don't mind resigning Markov is that with this season being a wash, we could use the next 30 games (Markov should be back after the All-Star break), to see what he is at.
If Markov is still having issue's and retires because of his knee, his cap hit is complete gone, and the he deals with the insurance company and they decide what they want to pay him, ex Bryan Berard. But Markov has to prove that his injury is career ending.
I'm pretty sure that when a player retires because of injury they may get a small pay-out but nothing close to the value of the contract.
As far as Markov is concerned, I find it hard to believe that his knee is covered in any insurance agreement. It's considered a pre-existing condition. If he were to come back and then suffer a severe back injury that ended his career then they would pay him, but not because of his existing knee injury.
There's absolutely nothing wrong with keeping a guy on LTIR. Philly has had to do it twice. First with Mike Rathje then Ian Laperriere. Toronto did it with Mike Van Ryn. Markov's contract doesn't hurt us as long as he's injured and on IR. If his knee isn't fit for him to play, the Habs won't be hindered by his cap hit.
The one thing the Habs org has not gotten credit for is their willingness to spend over the cap in real dollars. Since Molson took over they've gambled on expensive contracts (and so far lost every time) but they have not been cheap. I think the people who moan and groan about the cap limitations of the team (ie. Marinaro) are mostly full of it. There may well be a buyout window for the new CBA, if not there is always Hamilton, LTIR and/or Europe. Philly, NYR and NJ have all simply buried their cap problems, there's no reason the Habs can't do the same. If you're willing to eat the wasted dollars, the Habs really don't have to pay any other price for Markov's contract being a bust. They can rid themselves of Gomez and/or Kaberle too. The habs don't have cap problems, they have talent, size and grit problems.
The insurance company (being subrogated with the Habs rights) would probably turn around and sue Markov and his agent to recoup the money seeing as how they did not fully disclose the true nature of Markov's knee recovery at the time of the contract negotiations. And probably argue that Markov and his agent negotiated in bad faith.