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Cap on attorney fees ruled unconstitutional

Posted On: May. 8, 2016 12:00 AM CST

In ruling that Florida's mandatory cap on attorney fees is unconstitutional, the state Supreme Court has opened the door to higher claims costs, a workers compensation rate increase and additional litigation.

In Marvin Castellanos v. Next Door Co. et al., the Florida Supreme Court ruled 5-2 in April that the state's law on attorney fees hinders an injured worker's ability to get legal representation.

The decision will significantly affect Florida's workers comp system costs, said Peter Burton, Philadelphia-based senior division executive of state relations at the National Council on Compensation Insurance Inc.

Lawyers for Mr. Castellanos, who suffered cuts on his head, neck and right shoulder during a 2009 altercation with a co-worker at the Miami company, successfully secured workers comp benefits, but received only $1.53 per hour for 107.2 hours of legal work, according to court records.

Noting the legislature's 2009 elimination of the requirement that attorney fees for injured workers be “reasonable” and calling the $1.53 hourly award “patently unreasonable,” the Florida Supreme Court late last month overturned a 2013 decision by Florida's 1st District Court of Appeal and remanded the case to the judge of compensation claims.

Actuaries at the workers comp ratings and research organization are evaluating “the cost impact” of the ruling, said NCCI's Mr. Burton, who said an off-cycle rate increase is likely to be filed later this month with the Florida Office of Insurance Regulation.

The impending comp rate filing “will catch a large number of employers” off-guard since they didn't plan for a rate hike “when they set budgets at the beginning of the year,” said Tammy Perdue, general counsel of Tallahassee-based Associated Industries of Florida, which supports businesses in the state.

There usually are only one or two off-cycle rate filings each year “due to the legislature enacting laws,” Mr. Burton said.

Already this year, though, off-cycle comp rate changes include: Tennessee approving a 2.7% reduction because its drug formulary takes effect in August and Alaska approving a 3.7% reduction due to a medical fee schedule change, he added. In addition, NCCI has filed for off-cycle rate increase of 3.4% in Oklahoma due to that state's Supreme Court ruling that deferring permanent partial disability benefits for injured workers who return to work is unconstitutional.

In Florida, Castellanos will likely lead to more litigation, hours of legal work and, as a result, higher claim costs, Ms. Perdue said.

At this point in Castellanos, Florida Attorney General Pam Bondi can seek a rehearing, appeal to the U.S. Supreme Court or rely on the legislature “to try to fix it,” Miami attorney Mark Zientz of Law Offices of Mark L. Zientz P.A., said in an email.

“There will undoubtedly be calls for the legislature to address this decision,” but there is some concern it wouldn't be addressed until next year, said Ronald Jackson, Atlanta-based vice president of state affairs for the southeast region at the American Insurance Association.

Just a week before Castellanos, Florida's 1st District Court of Appeal in Tallahassee issued a similar ruling in Martha Miles v. City of Edgewater Police Department et al.

Ms. Miles and the Fraternal Order of Police sought to pay attorneys out of pocket after the police department in Edgewater, Florida, denied both of her claims for benefits, records show. The appellate court said the state's attorney fee statutes are unconstitutional since an injured worker should be allowed to pay attorneys with his or her own funds — or someone else's funds — subject to a judge of compensation claims finding that the fee is reasonable.

“The workers comp system has become so complex” that injured workers can't navigate it on their own, said Tampa, Florida-based attorney Michael Winer, who represented Ms. Miles and Mr. Castellanos.

Reasonable attorney fees aren't “the primary goal we're all supposed to be working toward within the system,” Mr. Jackson said. “The purpose of the workers compensation system is to get these employees treated and back to work.”

The Florida Supreme Court last month also discharged jurisdiction in Daniel Stahl v. Hialeah Hospital.

Mr. Stahl, who injured his lower back while working as a nurse in December 2003, filed a civil lawsuit alleging that his injury stemmed from Hialeah Hospital's negligence and argued that the workers comp system was an inadequate exclusive replacement remedy.

In its March ruling, which now stands, Florida's 1st District Court of Appeal upheld the state's workers comp law — specifically the 1994 addition of a $10 copayment for medical visits after an injured worker attains maximum medical improvement and the 2003 elimination of permanent partial disability benefits.

“The problems referenced in Stahl are somewhat cured by the ruling in Castellanos,” Mr. Winer said. “There is still obviously a deficiency of benefits overall, but at least the burdens to get to those benefits have become greatly reduced by virtue of having an attorney on the case who can help you access them.”

Mr. Zientz, who represented Mr. Stahl, said he expects “more injured workers with lower value claims will be able to retain lawyers” as a result of Miles and Castellanos.

“If you go back and look at workers comp appeals since 2003,” when workers comp reforms took effect, “the ones that focus on constitutionality, the bulk of those have been about attorney fees,” Ms. Perdue said. “They haven't been about benefits to the injured worker. So we (could) now start seeing a shift.”