Earlier this year, the Florida Supreme Court ruled that state law limiting attorney fees in workers’ compensation insurance cases was unconstitutional. The law was found to prevent challenges to the “reasonableness” of attorney’s fees awarded in such cases. In this article, Milliman consultant Simon Wong provides a brief history of Florida’s workers’ compensation system, discussing how the court’s ruling will affect carriers and self-insured employers moving forward.
Here’s an excerpt:
The court thus found the “irrebuttable presumption,” or inability of any claimant to challenge the fee, to be unconstitutional. In striking down the fee law, the court directed the state to return to previous law “until the Legislature acts to cure the constitutional infirmity,” essentially returning Florida’s workers’ compensation attorney fees structure to the pre-SB 50A system based on hourly fees. The decision emphasizes that “the fee schedule remains the starting point, and that the revival of the predecessor statute does not mean that claimants’ attorneys will receive a windfall. Only where the claimant can demonstrate … that the fee schedule results in an unreasonable fee—such as in a case like this—will the claimant’s attorney be entitled to a fee that deviates from the fee schedule.”
The concern is that this also means a return to the high pre-SB 50A levels of attorney-represented claim costs. In response to the Castellanos decision, the NCCI initially proposed a rate increase of 17.1% to new, renewal, and all in-force policies effective on or after August 1, 2016.1 Subsequently, the NCCI proposed amending the filing to include the impact of the Westphal decision as well, and proposed a rate increase of 19.6% effective October 1, 2016.2 It should also be noted that the Castellanos and Westphal decisions have a retroactive impact on all claims that remain open or are reopened on or after July 1, 2009, and January 1, 1994, respectively. Because workers’ compensation rate-making is prospective only, insurers are not able to recoup premium to cover such unforeseen retroactive system costs.
For now, carriers and self-insured employers can look for increasingly more expensive workers’ compensation claims in Florida. Unless a legislative solution of some kind emerges, they should start preparing for higher attorney’s fees. More changes from the courts and the legislature are almost certain and should be monitored closely.