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Court rulings, big rate increases concentrate reform efforts in Florida

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Florida’s workers compensation landscape has garnered attention for its legislative activity in response to major court decisions that have upended the system over the past year.

The state is considering various reforms to address elements of its workers comp law that were struck down in separate Florida Supreme Court decisions in 2016: Bradley Westphal v. City of St. Petersburg and Marvin Castellanos v. Next Door Co. et al.

The National Council on Compensation Insurance Inc. initially sought a 19.6% increase in state workers comp rates in response to these court decisions last year, but the Florida Office of Insurance Regulation approved only a 14.5% rate increase that took effect last December.

The vast majority of the higher rate filing was “due directly to the Florida Supreme Court’s Castellanos decision striking down the statutory attorney fee schedule, and that highlights why it’s so critical that the legislature act to address the attorneys fee cost drivers effectively and as soon as possible,” said Ronald Jackson, Atlanta-based vice president for state affairs, Southeast region at the American Insurance Association.

The 14.5% rate increase is estimated to increase annual premiums over $528 million, $368 million of which is assignable to Castellanos in the first year, according to a state House Commerce Committee staff analysis provided by the Florida Office of insurance Regulation.

“The portion attributable to the cost impact of Castellanos is controversial and is expected to continue to develop in subsequent years, which would lead to additional rate increases. The actual impact on attorney’s fee related costs will not be known for some time,” according to the analysis.

The Florida Office of Insurance Regulation ultimately approved a 14.5% increase, but also acknowledged that, depending on stakeholder behavior in the workers comp system, additional increases could be necessary in 2017, said Trey Gillespie, Austin, Texas-based assistant vice president of workers compensation for the Property Casualty Insurers Association of America.

The rate increase is being challenged under Florida’s Public Records Act, and that case is pending before the Florida First District Court of Appeals.

Reform bills recently proposed in Florida include workers comp opt-out and a prescription drug formulary.

It “seems like a drug formulary is on the horizon in Florida,” said Desiree Tolbert-Render, Orlando, Florida-based assistant vice president, national tech compliance for workers comp at Sedgwick Claims Management Services Inc.

Last December, Jacksonville Beach, Florida, state Rep. Cord Byrd, also proposed a bill that would allow companies in Florida to opt-out of purchasing workers comp insurance, but the bill was never formally introduced and experts say that Florida adopting opt-out for workers comp is unlikely.

“All the other states that have tried to put it through have failed. If I was a betting man I would say opt-out is not something that I think would move forward,” said Dennis Tierney, New York-based national director of workers compensation claims for Marsh L.L.C.

“Don’t expect any movement on the optout issue,” Mr. Jackson said.

Other workers comp reform legislation in Florida includes H.B. 7085, which would extend total combined temporary wage replacement benefits from 104 weeks to 260 weeks, cap attorneys’ fees at $150 an hour and make injured workers responsible for remaining attorney fees. The bill has been amended since its introduction and has received support from the business community and organizations such as AIA.

However, concerns about S.B. 1582 remain because while it provides for a transition to loss-cost ratings, it will not address the primary drivers of workers comp costs: excessive litigation and attorney fees, Mr. Jackson said.

S.B. 1582, introduced by Sen. Rob Bradley, would codify Westphal, increasing the time limit on temporary partial disability and temporary total disability benefits from 104 weeks to 260 weeks and change workers comp attorney fees to address Castellanos, which ruled that a cap on workers comp claimant attorney fees was unconstitutional.

“Both bills have opposition and challenges in Florida,” said Ms. Tolbert-Render of Sedgwick. “It could be considered a good sign that neither side — the trial bar, the claimant attorneys or those who say they represent injured workers — are satisfied with the proposal. We have statewide elections in Florida next year and the question then becomes ‘is there enough of a spirit of compromise?’ Time will have to tell.” 

Regardless of any legislative changes, the way that claims are handled in Florida has already changed, according to experts.

“The whole theme is litigation avoidance, even with some of these laws passing ... there is still a huge increase in the exposure in Florida,” Mr. Tierney said.

“We have to be cognizant in the way we go about handling claims in Florida and doing everything we can to avoid litigating claims that don’t need to be litigated.”