Florida Braces for Rate Hikes, Litigation Due to Workers’ Compensation Fee Ruling

The Florida Supreme Court’s ruling that the state’s current attorney fee limits are unconstitutional will have serious ramifications on the workers’ compensation market in the state, according to Florida Insurance Commissioner Kevin McCarty and other workers’ compensation experts.

Those ramifications will include and are not limited to a significant amount of new litigation concerning old workers’ comp cases.

McCarty also said he expects insurers will seek a significant rate increase because of the ruling.

“Obviously we are deeply concerned,” McCarty said shortly after the ruling was announced. “Limiting attorneys’ fees was an important part of the cost containment reforms that were passed [in 2003]. This decision will have a destabilizing effect on the workers’ comp market.”

The state’s high court ruled on Wednesday that the fee schedule passed in 2009 is unconstitutional under both Florida’s and the U.S. Constitution as a violation of due process. It ruled in the case of Marvin Castellanos, an injured employee who sued his employer Next Door Co. and its insurer, Amerisure. The high court noted that the issue has also been raised in as many as 18 lower court cases.

The Castellanos court ruling said the current schedule eliminates the right of a claimant to get a reasonable attorney’s fees – a “critical feature” of the workers’ compensation law. The court said the statute violates due process by installing an “irrebuttable presumption” that whatever fee the schedule comes up with is reasonable and by not providing any way for a claimant to refute the fee.

McCarty, whose last day in office may be next week, said the Florida Office of Insurance Regulation (OIR) will start work immediately with the National Council on Compensation Insurance (NCCI) to evaluate the impact this decision could have on policyholders. He said he expects NCCI will submit a rate filing with a significant rate increase because of the ruling.

He also expects Florida lawmakers to call an emergency session to develop a legislative remedy to counteract the court’s decision and its repercussions.

“This ruling could lead to more cases of litigation,” McCarty said. “It could also affect a critical part of the economy as businesses look at the cost of workers’ comp in the state.”

McCarty said OIR will work on finding a solution that works for everybody, but the answer, he said, is not within the judicial system.

“We need to look at what specifically the court felt was flawed about attorneys’ fees and see if there is any reasonable way to address that, or what we can do to address injured workers seeking attorneys’ in the first place,” he said. “If the burden to assist them lies on the judiciary system, that will be prohibitively expensive for businesses and prohibitively expensive for the system.”

Allison Hartnett, senior partner with Walton Lantaff Schroeder & Carson in Miami said the ruling will open the floodgates to new litigation.

“The court did emphasize that only in cases where the claimant can demonstrate that the fee schedule results in an unreasonable fee, will the claimant’s attorney then be entitled to a fee that deviates from the statutory fee schedule,” she said. “Any claim with any date of accident will be subject to this ruling.”

Kimberly Fernandes, partner in the Tallahassee office of the law firm Kelley Kronenberg, said the decision takes the workers’ comp market full circle back to 2008 when the Florida Supreme Court opened up attorney’s fees to an hourly option in the Murray v. Mariner Health case.

In that instance, she said, the Legislature quickly reversed the decision by amending the statute to require a statutory calculation dependent only upon the amount of benefits obtained.

“Time will tell if the Legislature desires to repeat history by amending the statute again,” she said. “Regardless, we are sure to see a revival of attorney fee litigation right now, as claimants’ attorneys dust off their old but viable claims and start seeking hourly fees instead of the statutorily calculated fees on benefits that were obtained for their clients ages ago.”

McCarty said before workers’ comp reforms were passed in 2003, Florida was among the highest for litigated workers’ comp cases in the country. Addressing the attorneys’ fees was just one of the changes that was made to enhance the workers’ comp system overall. This ruling could derail all of those efforts by undermining the current system and driving costs back up.

“When you have a system where your administrative system is working, then you aren’t as reliant on a judicial system and attorneys to administer benefits,” he said.

According to the OIR, until the legislature addresses this decision, attorney fees will be evaluated under the “reasonable” award standard articulated in the Murray v. Mariner Health decision.

On the same day that the attorneys’ fee schedule was struck down, the workers’ compensation system may have dodged a bullet as the same court declined to rule in another closely-watched case brought by an injured nurse that challenged the constitutionality of the state’s entire workers’ compensation system.

In the case of Stahl v. Hialeah Hospital, the Supreme Court said simply, “After further consideration and hearing oral argument in this case, we have determined that we should exercise our discretion and discharge jurisdiction. Accordingly, we dismiss review.”

Meanwhile, there is another case in the court system that challenges the constitutionality of the 104-week limitation on injured workers’ temporary benefits.