Workers comp attorney pay caps challenged

A pending Florida Supreme Court decision and state legislative efforts are putting new focus on how to fairly compensate workers compensation attorneys without inviting additional litigation and greatly increasing claim costs.

The Florida Supreme Court is expected to rule soon in Marvin Castellanos v. Next Door Co. et. al., which challenges the constitutionality of Florida's cap on attorney fees for workers compensation claimants.

As a result of the cap, Mr. Castellanos' lawyers received $165.54 for 107.2 hours of legal work that a Florida workers comp judge deemed “reasonably necessary” to secure workers comp benefits for injuries Mr. Castellanos received in a 2009 altercation with a co-worker, court records show.

With Castellanos, it's easy to point to “how allegedly unfair this particular fee was, but doing that alone without putting it in a much broader context” misses the point, said Bruce Wood, Washington-based vice president and associate general counsel at the American Insurance Association.

“Workers compensation was never meant to require an attorney to begin with,” Mr. Wood said. While injured workers don't have to involve the courts to get benefits, they may want to “in light of how complex we've allowed state workers compensation law to evolve.”

The question of whether attorney fee caps are constitutional could arise in other states moving forward, as “most state constitutions include a provision about access to the courts,” said Trey Gillespie, Austin, Texas-based senior workers comp director at the Property Casualty Insurers Association of America.

Other states are already dealing with the issue legislatively.

Last month, Oregon Gov. Kate Brown signed H.B. 2764 into law. The law is intended to ensure that injured workers have access to adequate legal representation by increasing the cap on attorney fees while modifying the circumstances under which such fees are awarded in workers comp cases.

Some payers fear that such “measures (will) increase the amount of litigation, potentially delay the resolution of disputes and, in general, undermine the efficient delivery of benefits within the system,” Mr. Gillespie said. “To what extent that's true or not true is in the eye of the beholder.”

Since workers comp reforms were passed in Oregon the 1990s, “there's been a slow evolution of attorneys leaving our system,” said John Shilts, administrator of the Workers' Compensation Division of the Oregon Department of Consumer and Business Services in Portland.

“There were areas in Oregon's workers compensation system where attorneys were not provided fees, even if they represented the worker and prevailed,” Mr. Shilts said. Claimants' attorneys “are now able to earn a fee for defending their fee” and collect interest, like injured workers, if benefits are delayed.

The attorney fee cap will be raised to $4,000 effective next January from the current $3,000. Since the fee already was adjusted based on Oregon's average weekly wage, the effective cap was about $3,500, Mr. Shilts said. Given that, he said he doubts the law will significantly increase costs for employers.

The National Council on Compensation Insurance Inc. conducted a cost impact analysis of the bill in February and determined that it would increase Oregon's loss-cost rate more than 5%.

However, the final, compromise bill reduced the circumstances under which attorneys could collect such fees compared with the original proposal earlier this year.

As a result, the law now is expected to result in an “unquantifiable increase,” Lori Lovgren, division executive of state relations at NCCI, said in an email.

The law “may put upward pressure on loss costs that we file in the future,” Ms. Lovgren said. “We expect the final impact will be less than the over 5% impact estimated for the initial version of this bill.”

Mr. Gillespie said it's difficult to say whether a similar compromise could be achieved in other states.

Legislators introduced bills regarding attorney fees — S.B. 427 in Connecticut and H.B. 1611 in Washington — this year.

“Obviously if the Florida Supreme Court comes back and says that the attorney fees statute is unconstitutional, that will make attorney fees a legislative issue in 2016 in Florida ... and potentially for other states,” Mr. Gillespie said.