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Friday, July 15, 2016

Florida Worker’s Comp Costs Going through the Roof Next Month!

                                 Florida Worker’s Comp. Costs                             Going through the Roof Next Month!


     In April of 2016, the Florida Supreme Court issued two opinions which will, by themselves, cause the cost of worker’s compensation insurance to go through the roof starting this fall.   In Castellanos v. Next Door Company the Supreme Court ruled that a law passed in 2009 creating a mandatory attorneys fee schedule for workers compensation cases was unconstitutional under both the Florida and United States Constitution. 

     Prior to the Castellanos decision, attorneys’ fees had to be commensurate with the damages received by the plaintiff in a workers’ compensation case. In this case, Mr. Castellanos was seeking benefits in the amount of $822.70.  His attorney billed 107 hours and sought a fee of $36,817.50.  However under the 2009 fee system, Castellanos’ attorney was awarded attorney's fees of only $164.54.

     Writing for the majority, Justice Barbara Pariente said the law creating the fee schedule violated Castellanos' due process rights under the state and U.S. Constitution because it prevents challenges to the “reasonableness” of legal fees in workers-compensation cases.   “Without the likelihood of an adequate attorney’s fee award, there is little disincentive for a carrier to deny benefits or to raise multiple defenses, as was done here,” Pariente wrote.“Virtually since its inception, the right of a claimant to obtain a reasonable prevailing party attorney’s fee has been central to the workers’ compensation law.”  By replacing the former “reasonable” standard with a sliding scale of legal fees, Pariente said, “the Legislature has thus eliminated any consideration of reasonableness.”
     In the second ruling, Westphal v. City of St. Petersburg  the Florida Supreme Court struck down the two year cap on workers’ compensation temporary benefits, re-establishing the cap at five years.
     Mr. Westphal was a firefighter who was seriously injured on the job, needing multiple spine surgeries. Under Florida’s workers’ compensation system, Mr. Westphal was barred from bringing a legal action for his injuries against his employer, and instead was required by statute, to apply for workers’ compensation benefits. Under the workers compensation system, Mr. Westphal was required to agree to his employer’s choice of physicians and to abide by those physicians’ advice.  After 104 weeks (2 years) of treatment by the employers physicians, Mr. Westphal’s temporary disability benefits ran out.  Despite the fact Westphal was still unable to work the employers physicians opined Westphal’s condition was still improving, and as such, he did not qualify for permanent disability benefits.   Thus, Mr. Westphal was completely cut off from the ability to receive any workers comp benefits until such time as he qualified for permanent disability.
     Based on the fact Westphal fell through the statutory cracks and was ineligible for continuing benefits, the Supreme Court held the eligibility time limit in the workers' comp law unconstitutional “as a denial of the right of access to courts.”   Then, rather than invalidating the entire statute, the Court employed the judicially created remedy of “statutory revival” replacing the 104 week temporary benefit cap with a 260 week benefit cap which existed in a prior version of the statute.  The Court further stated 260 weeks of temporary benefits “passes constitutional muster”.
     As a direct result of these two rulings, insurance industry analysts are predicting a 20% increase in workers’ compensation insurance premiums beginning this fall.  The increase being mainly to cover increased attorney’s fee awards resulting from the Castellanos decision, and to cover three additional years of benefits now allowed by the Westphal decision.

     With an increase of 20% in worker’s comp insurance, it goes without saying Florida consumers and homeowners alike can expect to pay a lot more for goods and services starting this fall as many companies, predominantly in the construction sector, go out of business.  

     For instance, companies such as roofers will see their premiums escalate so much that homeowners simply won’t be able to afford to have the work done and work will dry up.  With homeowners being unwilling to afford to pay licensed and insured roofers, you can then expect unlicensed and uninsured roofers to come in and fill the void at substantially lower prices.  Why is this a problem for homeowners?  Well, aside from the fact the quality of work will suffer with unlicensed and uninsured companies, if a homeowner hires an unlicensed and uninsured contractor there could be serious financial repercussions if a worker is hurt on their property.

         These two opinions also expose the inherent problems with the current workers compensation system.  For instance, the Supreme Court correctly recognized in Castellanos the current system encourages abuse by insurers since, without the fear of large attorney’s fee awards, there is no incentive for insurers to do the right thing on an $822 claim and just pay it.  However, on the flip side, I can think of no other court or administrative proceeding where anything approaching $36,000 would ever be found to be a reasonable amount of attorney’s fees on an $822 damage claim.  Thus, this ruling will only serve to encourage unscrupulous billing practices and file churning by plaintiff's attorneys.

         The same sort of conundrum is also apparent in Westphal.  Clearly, if a man is legitimately unable to work due to a work injury, but has yet to qualify for permanent disability his benefits should not be terminated.  However there is also no doubt that raising the time cap from 2 to 5 years will be another avenue of abuse of the system by workers, as there will be no incentive for them to settle their claims and return to work.

That all being said, perhaps the most disturbing part of both of these opinions to me are the legal red flags which are exposed.  In each of these decisions, the Supreme Court has yet again taken a judicial activist role, ignoring the separation of powers which is key to the workings of our government. 

Under the separation of powers, the legislature is empowered to make policy determinations and enact the laws of the state.  The judiciary is empowered to interpret the constitution and laws of the state, not pass judgment upon the wisdom of legislature's policy decisions.

In both Castellanos and Westphal, the Supreme Court has strayed from simply interpreting the law but rather, has taken it upon itself to encroach in to the legislature’s realm of deciding what constitutes good policy for the state.  In fact, in Castellanos and Westphal Justices Canady and Polston politely take their colleagues to task for ignoring separation of powers and invading the legislature’s authority to make policy determinations. 

In the Castellanos dissent, Justice Canady recognized that it was a policy determination, and the Legislature was fully within its authority to establish a relationship between the amount of benefits obtained in workers’ compensation cases and the amount of attorney’s fees awarded.  He went on to chastise the majority for declaring the law unconstitutional simply because they disagreed with the wisdom of the Legislature's policy determination.

Canady and Polston also penned a similarly themed dissent in Westphal because essentially the majority of Justices arbitrarily decided 260 weeks of benefits was constitutional, yet the 104 weeks of benefits authorized by the Legislature was not.

 We know almost for certain that since this an election year, there will be no special session called to deal with the workers comp insurance.  Thus, it seems likely the Legislature will deal with amending the workers comp statute as soon as the 2017 legislative session begins.

We can only hope this time, when the Legislature comes up with its fix, the Supreme Court will respect the principle of separation of powers regardless of whether they concur with the wisdom of the Legislature or not.