Florida Workers’ Comp Lawyers Retained Business After 2003 Reforms

After Florida limited the fees insurers had to pay to attorneys in workers’ compensation cases in 2003, attorney involvement in cases fell only slightly, according to new research.

In fact, a significant proportion of Florida workers injured at work were able to hire attorneys to represent them in workers’ compensation cases following the enactment in 2003 of reforms, even in many cases that would generate small attorney fees, a study by the Workers Compensation Research Institute (WCRI) says.

Lawyers had argued that limiting their fees would discourage attorneys from taking cases and impede injured workers’ access to the courts. Prior to the reforms, attorneys could receive either a contingency fee or an hourly fee (or both) at the discretion of the judge.

The WCRI study is relevant to the decisions by the courts, Legislature and governor on legislation to reverse a Florida Supreme Court ruling in Emma Murray v. Mariner Health and Ace USA.

In 2003, as part of a series of reforms, the Legislature decided to limit the fees for attorneys to a contingent fee – a percentage of actual benefits that injured workers receive – in cases involving the payment of indemnity payments.

Since the 2003 reforms, the state’s workers’ compensation rates have been reduced more than 60 percent, according to the state.

But last year, the Murray case invalidated the statutory language on attorneys’ fees as ambiguous. The court found that two sections of the statute governing fees – one setting forth a percentage formula for calculating fees and another affirming that fees should be “reasonable”— were in conflict.

The formula in the 2003 law read in part that attorney’s fees must equal 20 percent of the first $5,000 of the amount of the benefits secured, 15 percent of the next $5,000, 10 percent of the remaining amount during the first 10 years, and 5 percent after 10 years.

Strictly following this formula produced a fee of $685 total or about $8 an hour for 80 hours of work for the plaintiff’s case—which the court in Murray said was not consistent with another section of the law affirming that a claimant is entitled to recover “a reasonable attorney’s fee.”

Given the absence of a clear definition of reasonableness in the statute, the court said that fees should be determined using the Florida Bar rule, which resulted in a fee of about $16,000.

Florida has now enacted corrective legislation. A new law (HB 903) signed by Gov. Charlie Crist eliminates the reference to fees having to be “reasonable” while affirming the contingent fee percentages of 20/15/10/5.

Soon after Murray, Insurance Commissioner Kevin McCarty said he had to raise rates by an average of 6.4 percent to reflect the costs that would be added to the system because fees were no longer capped.

After the new law was signed, McCarty quickly ordered a cut in rates that he said will save employers about $172 million. The lower rates start July 1.

In the Murray case, the plaintiff argued that the 2003 fee language was unconstitutional because it produced low fees that made it very difficult for workers to hire attorneys and deprived injured workers access to the courts, due process and equal protection.

The study by the Cambridge, Mass.-based WCRI, a nonpartisan research tank, addressed whether the Florida reforms actually reduced the ability of the average worker to retain an attorney and, in cases where the attorney fee is small, whether the reforms reduced the ability of workers to retain an attorney.

The study pointed out that while a significant proportion of workers were able to hire attorneys after the reforms, there was a small reduction in attorney involvement.

The study’s analysis of more than 47,000 benefit cases found that after the reforms (cases arising between October 2003 and September 2004) 38 percent of workers with indemnity claims had attorneys, compared to 43 percent before the reforms (cases from October 2002 to September 2003).

It found that the proportion of workers who had attorneys after reforms was 3.6 percent lower than similar cases prior to the reforms. That means that one in 12 workers who had an attorney prior to the reforms would not retain one after the reforms, the study said.

The study also reviewed some 9,300 cases with permanent partial disability and/or lump sum payments under $2,500, yielding an attorney fee of less than $500 (note the fee in Murray was $648). Here the study reported that a substantial proportion of workers were able to hire attorneys after the reforms.

For cases arising between October 2003 and 2004, 34 percent of workers with indemnity claims and PPD and/or lump sum payments of under $2,500 had attorneys (versus 37 percent of workers prior to the reforms). Even in cases where the claims payments were under $1,000, 21 percent had attorneys after the reforms.

When the study controlled for changes in the characteristics of cases, the evidence was mixed, but supports at most small impacts of the reform on the typical worker’s ability to hire an attorney.

Analyzing cases with PPD and/or lump sum payments under $1,000 and under $2,500, the study found a reduction of one percentage point in attorney involvement. This evidence suggests no decline or a small decline in the ability of workers to retain an attorney.

However, when analyzing cases under $1,500 and under $2,000, the study reported a small, but statistically significant effect of the reforms on attorney involvement (with retention of attorneys lower by 2.5 to 3.4 percentage points).

The study concluded that the evidence is mixed regarding the impact of the reforms on a worker’s ability to retain an attorney, if that worker had a case that would yield a small attorney fee. However, any change in attorney representation was likely to be small.

There were limitations to the study, noted WCRI. It did not address the possibility that attorneys took cases, but invested fewer hours, reducing the quality of representation. Second, the study examined only the first year after the reforms. Third, other reforms may have affected attorney incentives to take cases.