At the request of City Manager T. Jenenne Norman-Vacha, Don Roper, attorney for Public Risk Management of Florida (PRM), provided an update to the Brooksville City Council regarding recent Florida Supreme Court decisions relating to worker’s compensation. The changes will affect the purchase of worker’s comp insurance both immediately and in the longterm for the City of Brooksville, as well other government agencies and private businesses. Citing Supreme Court rulings from April and June of this year, Roper advised that costs will dramatically increase for all employers, not just public entities, and asked for the City to join a lobbying effort in Tallahassee in order to reverse some of the changes. Overall, the cost of doing business in Florida has drastically increased with these decisions.
Roper recalled the earlier days of his career which saw litigation abuses drive up the cost of worker’s comp insurance, with Florida having the highest cost nationwide in 2002. Currently, Florida ranks 28th as a result of the 2003 legislative changes which overhauled the worker’s comp system. Roper expects Florida to move toward the top of the list again due to the Supreme Court rulings which are effectively creating another overhaul of the worker’s comp system.
Using the analogy of a swinging pendulum, which began in 1941 in Florida when the worker’s compensation law was approved, Roper stated the high cost of attorney fees for both claimants and employers caused the legislature to stop the swing of the pendulum in 2003. While creating a better environment for employers and insurance carriers, the Supreme Court ruling indicates that the court believes another set of abuses is occurring, abuses which harm employees and their rights.
The first case, heard in April, was Castellanos v. Next Door Co. Mr. Castellanos suffered neck and shoulder injuries, and the insurance company denied the claim. After attorneys argued the claim in a hearing, Castellanos was awarded $822.70. His attorney’s rate of $350/hour for the 107 hours the attorney worked on the case would have awarded him $36,817.50. However, the attorney received $164.54, or $1.53 per hour, which is in accordance with the fee schedule approved during the 2009 Florida Legislative session.
In 2003, Roper recalled attorneys who stopped handling worker’s compensation claims altogether because the fees they could earn were now negligible. For cases involving medical claims, the claimant’s attorney could only receive $1500, and 20% of the amount awarded to the claimant for wage losses if the award is less than $5,000. There is a decreasing sliding scale for attorney fees as the awarded amount to a claimant increases.
The Supreme Court stated that for those fees, claimants cannot get adequate legal services, and denies clients equal rights for effective representation. Therefore, the fee schedule is unconstitutional. “That set off shock waves through the industry,” Roper said.
An actuarial study published after the April ruling by Oliver Wyman, a consulting company for the brokerage firm Marsh & McLennan, calculated a savings of approximately 60% in worker’s compensation premiums in Florida over the past 13 years. After the Castellanos case, Roper stated that the document from Oliver Wyman estimated the costs to employers will increase nearly 19% for worker’s compensation insurance.
A second worker’s comp case heard by the Florida Supreme Court is Bradley Westphal v. City of St. Petersburg. Westphal was a firefighter/paramedic who was injured and received treatment, but was never determined by his doctors to be termed permanently totally disabled. In 1994 legislation, temporary total disability (TTD) payments were reduced from five years to two. The court determined this was unconstitutional and reinstituted the five years of TTD payments for Westphal’s case and all cases that are currently open.
The National Council on Compensation Insurance (NCCI) adjusted their estimate for the premium increase from 17.1% to 19.6% after the second ruling. According to Roper, PRM has been successful in obtaining policy at only 5% over last year’s rate for “primary” worker’s comp, and a flat rate (no increase) for “excess” worker’s comp insurance. However, for the 2017/2018 fiscal year, Roper recommended that the City adjust the budget to account for a projected 20% increase in premium fees. The largest impact will be on small businesses which may not have the advantage of participating in a pool which shares cost and risk.
Roper cautioned that the Florida Supreme Court has stated they would likely throw out the entire statute if there is “an overreaction” by the legislature. In the decision, Chief Justice Fred Lewis wrote, “In my opinion, the only appropriate remedy would be to require the Legislature to provide a comprehensive, constitutional Worker’s Compensation scheme.”
Without worker’s comp, Roper states the door will open for employees to sue their employers, and a Pandora’s Box of personal injury litigation will start. In conclusion, Roper reminded the council members that claimants’ bar would also be lobbying to prevent reforms in favor of employees.
Norman-Vacha suggested contacting the City’s lobbyist, Shawn Foster, as the ruling will “be a job killer and a job eliminator for our communities.” It is a balancing act, to protect the rights of employees while ensuring profitability for employers, and one which the next legislative session is expected to address.