5 Facts about Workers' Comp Reform, Castellanos, and Westphal

5 Facts about Workers' Comp Reform, Castellanos, and Westphal

Posted By Deirdre Aretini || 22-May-2017

5 Facts about Workers’ Comp Reform, Castellanos, and Westphal

Confused about what the recent Florida Supreme Court decisions in Castellanos v. Next Door Company, Westphal v. City of St. Petersburg, and the Florida legislature’s failure to pass workers’ compensation reform mean? Here is what you should know about the turmoil surrounding Florida’s workers’ compensation system.

1. Fees for Injured Workers’ Attorneys are no Longer Limited by the Mandatory Fee Schedule

In Castellanos, the Florida Supreme Court held that the mandatory fee schedule in Florida Statutes section 440.34 that applies to attorneys who represent injured workers is unconstitutional. The Florida Supreme Court reasoned that the statute was unconstitutional as a violation of due process because it did not allow judges to determine the reasonableness of the fees awarded to attorneys representing injured workers. Judges are now free to make their own determination of what constitutes a reasonable fee based on several factors described in the court decision. As a result, the National Council on Compensation Insurance (NCCI) cited the potential for increased litigation, petitions for benefits, and claim costs to justify its requested rate hike of 17.1%. Whether the extent of the fee hikes will be ultimately justified remains yet to be seen.

2. The Statutory Limit of 104 Weeks of Temporary Partial Disability Benefits is Unconstitutional

Justice Pariente, writing for 5-2 majority, reasoned that the only interpretation of the plain language of Florida Statutes section 440.15(2)(a) was that temporary partial disability benefits would stop and the injured worker’s impairment would be determined the earlier of: (1) when the employee has reached the statutory maximum of 104 weeks of temporary disability benefits; or (2) when the employee reaches maximum medical improvement. This interpretation led to the conclusion that the 104 week limit created a statutory gap in benefits, violating the injured worker’s constitutional right to access to courts. The Florida Supreme Court implemented a fix by reviving the 1994 amendment to the statute allowing for up to 260 weeks of temporary disability benefits.

3. It is Going to Cost Money

Florida businesses face a 14.5% workers’ compensation insurance rate hike effective December and the possibility of additional rate increases. Despite the fact that the Office of Insurance Regulation (OIR) did not find support for the NCCI 19.6% rate increase, it did decide that a 14.5% rate increase was acceptable. On May 9, 2017, Florida’s First District Court of Appeals’ opinion in National Council on Compensation Insurance et al. v. James F. Fee, Jr. reversed the Leon County Circuit Court’s order invalidating the Office of Insurance Regulation’s approval of the 14.5% increase and reinstated the rate increase that originally took effect in December 2016.

4. Do Not Expect Any Immediate Relief

The Florida legislature did not pass legislation addressing Castellanos or Westphal, leaving Florida’s workers’ compensation system in its current chaotic state. Lawmakers filed two separate bills in the Florida House of Representatives, House Bill 7085, and the Florida Senate, Senate Bill 1582 in response to the Florida Supreme Court decisions. Ultimately, the Senate and the House were unable to agree on attorney fee caps proposed by the competing bills – the Senate version capped attorney fees at $250 per hour while the House version proposed a $150 per hour cap. Additional issues included a provision in the Senate bill that would move Florida to a loss-cost system in an attempt to reduce premiums.

5. All Hope is Not Lost

The continued rate increases should keep the pressure on Florida lawmakers and motivate them to pass legislation addressing the issues raised by Castellanos and Westphal in the 2018 legislative session. To put things in perspective, the Florida Office of Insurance Regulation’s Annual Worker’s Compensation Annual Report for 2016 compared Florida with other major populous states and concluded that “Florida has one of three most competitive workers’ compensation markets of the major populous states.” However, the report also noted that the dramatic shift in Florida’s loss cost for the 10 largest policy classes is concerning and may threaten the competitive nature of Florida’s workers’ compensation insurance market. We expect the topic of workers’ compensation reform to remain a hot topic for the upcoming legislative session as Florida attempts to balance the need for a modern workers’ compensation system with its interest in keeping and attracting employers to the state.

Deirdre F. Aretini, Esquire

Cristal |Hanenian

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