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Attorney fee ruling could mean comp rate hikes

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Florida's workers compensation insurance may be seeing rate increases in the double digits by August due to the fallout of a recent Florida Supreme Court decision.

The National Council on Compensation Insurance Inc., which files rates on behalf of Florida's workers comp insurers and other stakeholders, proposed a 15% rate increase Friday in response to a recent Florida Supreme Court decision deeming it unconstitutional to cap claimant attorney fees. The increase accounts for the potential impact the court ruling could have.

However, that calculation is conservative because it does not include the entire unfunded liabilities created due to the retroactive nature of the Marvin Castellanos v. Next Door Co. et al. decision and does not speculate how the decision affects the behavior of stakeholders in the claims and dispute resolution processes, according to Trey Gillespie, Austin, Texas-based senior workers compensation director at the Property Casualty Insurers Association of America. “These items could also have a significant impact,” said Gillespie.

In 2009, Marvin Castellanos received head, neck and right shoulder injuries from a co-worker at Next Door Co., a Miami manufacturer of doors and door frames. Although Next Door denied workers compensation claims for Mr. Castellanos, Miami attorney Mark Touby succeeded in gaining $822.70 in workers comp benefits for him.

Mr. Castellanos lawyer sought fees of $350 per hour, but was instead compensated under the state's fee system at $1.53 per hour for 107.2 hours of legal work, according to court records.

In April, the state's high court ruled 5-2 in Castellanos v. Next Door that a cap on claimants' attorney fees is unconstitutional under the Florida and U.S. constitutions.

The case decision component of this rate increase proposal only addresses the expected increase in state workers comp costs for accidents on or after Aug. 1 2016.

The unfunded liability, which comes from accidents that occurred before then that are open or may be re-opened, is being looked into by NCCI at this time, an NCCI statement said.

An NCCI spokesman declined Tuesday to comment further on the proposed rate increase.

“This decision definitely has insurance companies and employers concerned about the stability of the Florida workers comp system,” Mr. Gillespie said. “This looks like a conservative figure but because it is as high as it is, it is begging for attention from stakeholders as to whether some sort of legislative remedy is necessary in order to restore some level of stability back into the system,” he said.

NCCI filed a proposal with the Office of Insurance Regulation that consisted of a first year impact of 15% from the court decision and a 1.8% increase in response to updates to the state's health care provider reimbursement manual. If the state sees 17.1% in rate increases it will make it the highest ranked state for voluntary pure lost cost in the Southeast, according to NCCI.

Legal and industry experts agree the court decision could lead to litigation in other states that attempt to control the attorney's fees that are recoverable within the worker's compensation system regardless of who is paying the fees.