The commercial insurance market in the state of Florida has faced turbulent times over the course of the past few years. Especially in 2016 when the workers’ compensation system in particular came under specific scrutiny as the result of a number of factors.
Two court cases that publicized the matter were Castellanos v. Next Door Company and Westphal v. City of St. Petersburg. The third occurrence that caused even more scrutiny to be placed on the insurance community in Florida was State Bill 1402 (S.B.1402).
The result of these three issues caused the National Council on Compensation Insurance (NCCI), the national leader in gathering data, analyzing industry trends, and preparing objective insurance rate and loss cost recommendations, to recommend a 14.6 % increase for rates on premium for workers compensation insurance policies throughout the state.
This significant increase on coverage required by law for most businesses within the state could cause considerable damage to the state’s economy. For this reason, the Florida state legislature has come under pressure to change the workers’ compensation at the state level before the courts rule on these cases.
How did Florida get here?
Castellanos v. Next Door Company: Marvin Castellanos was an injured employee who sued Next Door Company and the case made it all the way to the Florida Supreme Court in 2016. The ruling invalidated a previous decision from a case in 2009. This previous decision limited an injured worker’s ability to recover a reasonable amount of money for attorney’s fees.
Based on the 2009 ruling, workers compensation insurance settlements were limited due to a recommended fee schedule. This fee schedule was a requirement for judges to follow when determining how much money to award a plaintiff for attorney’s fees.
After the Castellanos v. Next Door Company ruling, judges simply use the fee schedule as a starting point. They are now able to award more or less depending on the specifics of each case. Because of this change, most insurance carriers anticipate the ruling to increase the amount judges award injured employees for attorneys’ fees in civil suits.
The ruling prompted the NCCI to recommend a 10.1% premium increase for workers comp coverage in Florida.
Westphal v. City of St. Petersburg: The second case that was decided by the Florida Supreme Court was Westphal v. the City of St. Petersburg. This case dealt with the statutory limitation on temporary total disability benefits. In layman’s terms this refers to the time period for which an injured worker can collect partial salary benefits as a result of a workers comp claim. In the state of Florida the time period was previously 104 weeks. After the ruling of this case the time period was changed to 260 weeks. This is an additional 156 weeks that injured workers could possibly collect partially salary benefits.
This ruling prompted NCCI to recommend a 2.2% average increase in workers comp premium throughout the entire state of Florida and the Florida Office of Insurance Regulation approved the request.
S.B. 1402: Passed by the Florida state legislature after an update to the Florida Workers’ Compensation Health Care Provider Reimbursement Manual, this state senate bill is the main reason for the additional 1.8% premium increase in Florida.
Where Does Florida Go From Here?
These three issues occurred during the summer and fall of 2016 and caused NCCI to recommend a substantial increase in what insurance carriers should charge for premium on workers’ compensation policies. If this increase, or something similar, were in place it would impact both new and existing policies. This would make business owners get sticker shock when they renew their insurance policies.
At this time most carriers have not made sweeping changes to their approach to the workers’ compensation market in Florida, but that could change based on the outcome of these courses or changes made by the legislature. For the time being it appears most carriers are taking a wait-and-see approach.
The Thanksgiving Twist
The Wednesday before Thanksgiving brought about another twist in this story. The twist came when a Leon County Circuit Court Ruling was issued by Judge Karen Gievers. This ruling claims NCCI and the Florida Office of Insurance Regulation (OIR) did not follow proper procedure under the state’s Sunshine Law.
The sunshine law requires all meetings about matters dealing with the state to be announced ahead of time and open to the public. This case is being brought up by Miami Attorney James Fee as a reaction to what he claims were multiple private meetings between members of NCCI and OIR.
This case has created a pause and given the legislature some time to enact legislation that may make these cases all null and void.
Florida Legislature Under Pressure
As these cases move forward, the Florida Legislature will likely continue to face pressure from both the insurance industry and the business community to make changes to the workers’ compensation system soon. The house and senate are currently working to come to an agreement that will benefit injured workers, small businesses and the insurance industry. Placing a cap on attorney fees is one idea that is gaining a lot of traction as a cost saving measure.
These types of sweeping changes are not new to Florida. In 2003, the state legislature made changes to the florida workers compensation system that impacted the permanent total income and death benefits, added construction industry exemptions, strengthened compliance enforcement and expanded investigation of carrier claims handling.
These changes resulted in Florida moving from the most expensive state in the country for workers comp premium down to 33rd in price on premium. Even with a 14.5% increase, Florida would still be only the 23rd most expensive state in the country for workers comp.
Some things that have been proposed thus far include a cap on attorney’s fees, a workers comp opt-out option and a prescription drug formulary. Many experts doubt the opt-out option will move forward because it has been proposed in several other states and never made it far in the legislative process.
The longer this issue goes without being dealt with, the more pressure legislatures will face to fix the problems with the Florida workers compensation system. There are state wide elections in November 2017. The closer to the election this issue gets, the more likely it is to not be dealt with in 2017.