The trade that was supposed to send Los Angeles Chargers linebacker Daiyan Henley to the Denver Broncos is off. When the Broncos announced that the deal would not be finalized, they did not disclose the reason why the agreement fell apart. But Chargers coach Jim Harbaugh pulled back the curtain and shed light on the negotiations, calling upon the NFL to look into a "loophole" that caused the trade to crumble.

Although both teams announced the deal ahead of the Nov. 10 trade deadline, both noted that it was contingent upon Henley completing a physical. It was that examination that led to the trade being called off. According to ESPN, the physical raised concerns inside the Broncos' front office about Henley's knee.

Harbaugh said the Broncos used their findings to negotiate trade compensation after the deadline passed. This is permitted, as long as the teams do not add other players to the trade package. The initial deal called for the Broncos to send a 2027 fourth-round pick and 2028 fifth-round pick to the Chargers in exchange for Henley.

"The Broncos based a pass/fail on a medical grade based on whether we would take less compensation," Harbaugh said on Thursday after the deal collapsed. "We wouldn't, and we didn't. In my opinion, it's one of those loopholes that the league should really look into, because it sets a bad precedent and continues to set a bad precedent."

Henley has only missed three games in his NFL career and just two (in 2023) due to injury. He was on the injury report in Week 6 with a knee issue but practiced in a limited fashion all three days and participated in that week's game. He appeared again on last week's injury report, but it was due to a shoulder problem rather than another knee ailment, and he practiced in full on Thursday and Friday.

Harbaugh said that teams "shouldn't be" allowed to renegotiate trade terms after the deadline regardless of what does or does not come up in physical examinations.

"That's why it's a loophole, and teams should not have the ability to do that," Harbaugh said. "It's a medical grade. It's a pass/fail for a medical trade. They told us they weren't going to pass him if there was a fourth and a fifth, which was agreed upon. They would not pass him for that. They would pass him for a fourth and a 'fill in the blank.' I don't know what to call that, but that's what it is."

The picture Harbaugh painted is one where the Broncos were still open to giving up the 2027 fourth-round pick but wanted to reduce the value of the second pick. According to ESPN, Denver proposed a counteroffer of a fourth-rounder and seventh-rounder or a fourth-rounder and a pick swap. The Broncos still reportedly wanted Henley but not at the agreed-upon price.

"Medical grades should be based on pass/fail, what the medical grade is, not being used by an organization to get less compensation for a trade that was agreed upon," Harbaugh said.

Henley was set for a team upgrade himself, as the trade would have sent him from the NFL's only winless squad to the AFC West leader. He has shined individually despite the Chargers' woes and is the team leader in tackles (51) and fumble recoveries (2) and posted two tackles for loss and an interception across his first eight games of the year. Since he joined the starting lineup in 2024, he has been a perennial 100-tackle linebacker and is on pace to cross that threshold again this season.

The Broncos' starting lineup is already set at the inside linebacker spots with Alex Singleton and Justin Strnad occupying the middle of the stout defense, so Henley would have likely arrived as a premier depth option.

Henley is in the final year of his rookie contract and will be an unrestricted free agent at the end of the season.