TALLAHASSEE, Fla.-Florida employers are applauding the state's new workers compensation reform law, saying the reforms will help reduce costs and fraud, improve injured worker benefits and create a more efficient system.

In fact, in response to the measure, workers comp rate increases averaging about 14% that were introduced in April were rolled back Oct. 1, when many of the law's provisions took effect.

The reform is expected to create annual savings of $400 million to $450 million, said Peter Burton, senior division executive-state relations for the Boca Raton, Fla.-based National Council on Compensation Insurance. "This is one of the largest reform efforts in the last decade" nationwide, Mr. Burton said.

But trial lawyers say that the Workers Compensation Reform Act-which was approved by the Florida Legislature in a special session in May and signed into law by Fla. Gov. Jeb Bush in July-unfairly reduces or eliminates some worker benefits and may deny workers adequate counsel by modifying the basis for paying attorneys fees.

The lawyers say the legislation is likely to be constitutionally challenged in the courts.

"There's going to be a lot of appellate activity," predicted plaintiff attorney Sean Culliton, of Tallahassee-based Anderson, Culliton & Sullivan.

Some observers say the law may also lead to more litigation against employers in cases where workers comp coverage is denied.

The legislation is designed to reduce litigation, provide greater compliance and enforcement authority for the state to combat fraud, revise certain indemnity benefits for injured workers, increase medical reimbursements for physicians and surgical procedures, and increase the availability and affordability of coverage. While most of the law's provisions took effect Oct. 1, some went into effect upon the bill's signing on July 15, and others take effect in January.

Florida's workers comp insurers collected a total of $2.80 billion in net direct written premiums in 2002, according to the Tallahassee-based Florida Workers' Compensation Insurance Guaranty Assn. Individual company and group self-insured businesses accounted for the equivalent of another $1.68 billion in premiums.

The general consensus is that Florida's workers comp system is troubled. "Florida's been cited as having the second-highest premiums in the country and one of the lowest benefits, and, based upon anecdotal evidence...employers were faced with both availability and affordability problems," said Mr. Burton.

According to the Cambridge, Mass.-based Workers Compensation Research Institute, a study of 1999 claims conducted in mid-2000 found that the average workers compensation claim in Florida was $3,081, or 18% higher than the median for the 12 states included in the survey. The findings from an updated version of the study, which will be released shortly, are consistent with the earlier study, said WCRI Senior Analyst Carol Telles.

Employers generally have welcomed the new law.

"I'm pleased with it, most pleased," said Stephen Sutter, president of Sarasota, Fla.-based Sutter Roofing Co. of Florida. "No. 1, it reduces our rates, it provides for better coverage for our workers, and it lets some of the attorneys' fees out of the system, which helps reduce the cost to everyone. I think, from a competitive standpoint, it's going to allow us to provide better pricing to our customers."

A spokesman for Chicago-based Boeing Corp., which has 2,600 employees in Florida, said, "We're very pleased with the legislation and find it a very positive improvement." Workers compensation "was the biggest cost driver for companies like us in Florida," the spokesman said. "It put us at a disadvantage. The changes that take place are going to make us much more competitive as company and easier for Boeing to do business in the state."

Frank Catapano, risk manager for Volusia County in De Land, Fla., said, "I think, from the employer's standpoint, it's positive."

"In the long run, we should save some dollars" as a result of the law, Mr. Catapano said. He cautioned, though, that "you have to wait to see how the judges and the courts interpret it."

Laura Wehrle, Tampa, Fla.-based senior vp and divisions manager for Liberty Mutual Insurance Co., which is the largest workers comp insurer in the state, said, "We think the Florida Legislature passed an excellent reform bill that addresses many areas of the workers comp system that were spiraling out of control."

However, while the system is more stable, the economics remain generally unchanged, "so if the anticipated cost savings fall short in any way, then the rate structure will be inadequate. I think most carriers realize that this is an increased risk until the benefits of reform are realized, and I think people are factoring that into the business decisions they make within the state," said Ms. Wehrle. She said Liberty Mutual remains "very committed to our customers in the state."

Plaintiff attorneys say the law troubles them.

"The disadvantages that injured workers have now in proving their cases and receiving just compensation are just insurmountable," said Mark L. Zientz, a Miami-based plaintiff attorney.

Ramon Malca, an attorney with Malca & Jacobs in Miami, said, "The so-called reform failed to address the problems that were identified by those that were looking at the system, and what we ended up with is a product that benefits insurance companies to the detriment of injured workers and employers who pay premiums."

Of particular concern to plaintiff attorneys is a provision that limits attorney fees to 20% of the first $5,000 of benefits secured, 15% of the next $5,000 and 10% of the remaining amount of benefits. A judge, though, in medical-only cases may approve a one-time attorney fee of up to $1,500 based on a maximum rate of $150 per hour.

Plaintiff attorneys contend that adequately representing workers can entail many hours of work and that this provision will discourage attorneys from taking on workers comp cases. "It eliminated reasonable fees," which historically have been determined by the amount of time an attorney spends on a case, said Mr. Malca.

While plaintiff attorneys are limited in how much they can be awarded, there is no comparable limitation on insurer attorneys, who will be paid even if they lose, said Mr. Malca.

"I think it'll lead to workers having difficulty getting adequate representation. I think it'll encourage insurance companies to deny claims that should be accepted and to delay claims benefits that should be paid promptly because there's no real penalty for engaging in that type of conduct," he said.

However, Liberty Mutual's Ms. Wehrle said, "Prior to reform, we had a situation where attorneys' fees could be significantly higher than the benefits received." The workers comp reform attacks not the funds that ultimately end up in injured workers' pockets but the other frictional costs of administering the system, she said.

Another point of contention is the limitation on compensation for psychiatric problems under the law. To receive compensation for a psychiatric problem, a physical injury must be at least 50% responsible for the mental injury. Benefits are capped at six months from the time the physical injury has healed, after which, for those with a permanent impairment, workers can obtain a one-time payment that amounts to $665 for a worker who makes $500 a week.

Some observers say they are concerned about potential situations where, for instance, a woman who is raped in the workplace and suffers subsequent emotional trauma but sustains relatively little, if any, physical injury, may be denied coverage.

Defense attorney Steve Kronenberg of Kelley, Kronenberg, Gilmartin, Fichtel & Wander in Miami said, "I understand why the Legislature did this, because there are some psychiatric injuries that are marginal or nonexistent at best, and they are trying to address that, but my concern is for the person that genuinely has a catastrophic psychiatric injury."

This issue is being looked at by the Legislature.

Florida Senate President Jim King, R- Jacksonville, has asked the Senate Banking and Insurance Committee to consider concerns raised by legislators about the reform law as to "possible unintended consequences, and how certain provisions would actually be implemented." These include the standards for compensating mental and nervous injuries. The committee's report is due Dec. 1.

Meanwhile, defense attorney Paul Westcott of Hurley, Rogner, Miller, Cox, Waranch & Westcott in Fort Pierce, Fla., said he is concerned that the higher bar required under the law to obtain workers comp coverage, combined with the lower fees plaintiff attorneys will receive, will encourage them to file more litigation against employers in civil court when coverage is denied.

Mr. Westcott said he is advising employers as well as insurers to "make sure you look at what you're doing when you're denying coverage under a claim now."

However, Claude Revels, corporate safety manger for Jacksonville, Fla.-based JM Family Enterprises, said he believes that, under the legislation, plaintiff attorneys will have a "pretty high test to pass" to successfully pursue litigation in the courts.