Florida Workers Compensation system is in turmoil
The Florida Office of Insurance Regulation (OIR) has been under considerable scrutiny for the last few years. After several years of moderate rates on workers’ compensation insurance, the state has had a few occurrences that have put significant stress on the system that could cost business owners immensely if not fixed by the state legislature quickly. The four significant things that happened were two rulings by the Florida Supreme Court (Castellanos v. Next Door Company & Westphal v. City of St. Petersburg) State Bill 1402 passed by the legislature and a recommendation by the National Council on Compensation Insurance (NCCI) to increase the rate for premium on workers compensation insurance by an average of 14.5%. Currently the state legislature is debating two bills to deal with the workers compensation system throughout the state and until this issue is fixed they should expect to face considerable pressure from the business community, the insurance industry and the legal community who represent both business, insurance and injured workers.
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How did Florida arrive here?
The workers’ compensation system in the state of Florida has been relatively stable for more than a decade. This is largely due to sweeping changes made by the state legislature in 2003. In 2003 the legislature enacted significant changes to the workers comp insurance system that at the time was the most expensive state in the nation for work comp coverage. The major part of this change impacted permanent total income and death benefits. It also added construction industry exemptions, strengthened compliance enforcement and expanded investigation of carrier claims handling. Over time these changes resulted in Florida moving from being the most expensive state in the country for workers comp down to 33rd place. Even with a 14.5% increase, Florida would still be only the 23rd most expensive state in the country for workers comp. This shows the dramatic impact changes by the legislature can have on a system like workers’ compensation coverage. This time OIR is facing in feeling pressure as the result of two court cases and a state bill passed by the legislature.
Castellanos v. Next Door Company: The case of Castellanos v. Next Door Company was brought about by Marvin Castellanos, an injured employee. Marvin sued Next Door Company and the case went all the way to the Florida Supreme Court in 2016. The ruling invalidated a previous ruling from 2009. The previous ruling limited the ability of an injured worker to recover a reasonable amount of money for attorney’s fees. As a result of the 2009 ruling, workers comp settlements were restricted due to a recommended fee schedule. This schedule fee was one in which judges were required to follow when determining how much money to award a plaintiff for attorney’s fees.
Now judges are only required to use the fee schedule as a starting point. They can now award more or less depending on the specifics of each case. Because of this ruling many carriers expect the amount of these rulings to increase the awards for attorney’s fees in civil suits. The increase due to this ruling prompted the NCCI to recommend a 10.1% premium increase for workers comp coverage in Florida.
Westphal v. City of St. Petersburg: Westphal v. City of St. Petersburg was another 2016 Florida Supreme Court Case that negatively impacted the work comp system. This case addressed the statutory limitation on temporary total disability benefits. This benefit refers to the time period for which an injured worker can collect partial salary benefits as a result of a workers comp claim. In Florida, the previous time period for collecting disability benefits was 104 weeks. Thanks to this case, it’s now 260 weeks—which extends how long injured workers can continue collecting benefits for an additional 156 weeks.
This court case prompted the NCCI to recommend a 2.2% average workers comp premium increase throughout the state, which the Florida Office of Insurance Regulation approved.
S.B. 1402: State Bill 1402 was passed by the Florida Legislature as 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?
Most people within the state of Florida expect the legislature to make adjustments to the workers comp system during the spring or summer session. The recommended rate changes are not impacting the appetites of many carriers for Florida Workers Compensation Coverage in the state. Thus far most carriers are currently reevaluating their books of business for Florida.
For other states throughout the U.S., the Castellano vs. Next Door Company decision could impact other states throughout the U.S. that have fee schedules, because lawyers or injured workers may decide to challenge them in state courts. As a result of the Florida rulings, some states may even proactively change the fee schedules.
Bio
Mitchell Sharp is a Marketing Associate for WorkersCompensationShop.com. Mitchell has extensive knowledge of workers’ compensation and cyber liability. His passion is in using his knowledge of commercial insurance, social media and digital marketing to benefit the small business community.
