Attorney fees as a percentage of workers’ compensation benefits and settlements in Florida have risen significantly in the wake of a controversial 2016 state Supreme Court decision, according to multiple studies.
This rising share of attorney payments, however, has been masked because the overall payments of compensation to injured workers have dropped – partly due to safer work environments and procedures around the state, according to business groups.
The Florida National Federation of Independent Business referred to the attorney fee trend in its Small Business Scorecard released last month.
“New data from NFIB shows that attorney’s fees have skyrocketed after the Florida Supreme Court’s decision in Castellanos v. Next Door, which ruled that the attorney fee schedule used in workers’ compensation was unconstitutional,” the Florida NFIB said.
Businesses might not be feeling the full effects of the attorney fee trend in the year ahead, however, since the Florida Office of Insurance Regulation has approved a decrease in workers’ comp rates of 7.5 percent, effective Jan. 1. The decrease reflects a decline in overall workers’ comp claims, according to the Florida OIR.
And that, in turn, may make it less likely that Florida lawmakers will pass legislation to reinstate attorney fee caps in workers’ comp cases in the coming year, according to the NFIB Florida state director, Bill Herrle.
Declining workers’ compensation rates make it more difficult to convince state lawmakers about the need to deal with underlying increases in attorney payouts in workers’ comp claims, Herrle said.
“We don’t see any legislation yet,” he told the Florida Record. “But we expect they’ll file it.”
Herrle says the workers’ comp claims data can’t be ignored.
“For the first time since the Castellanos opinion, (which) vacated the statutory attorney fee cap in workers’ compensation, we have hard, retroactive data on attorneys’ fees that show that attorneys’ fees, as a portion of injured workers awards, have increased dramatically,’ he said in a prepared statement.
The Record reviewed data on workers’ comp claims from recent studies by both the National Council on Compensation Insurance (NCCI) and the Workers Compensation Research Institute. The numbers verify that although benefit and settlement awards to injured workers in Florida have dropped substantially in recent years, the share going to attorneys went from 15 percent in 2016 to 22 percent in the first half of this year.
“Increases in claimant attorney fees have been reported by all carriers interviewed by NCCI,” Jeff Eddinger, NCCI’s senior division executive, told the Record in an email. “In addition, the ratio of claimant attorney fees to benefits and settlements has risen from 13 percent prior to the decision to 22 percent in 2018 and 2019.”
But lower overall payouts to deal with injured worker have more than offset the attorney cost percentages that have become apparent since the Castellanos decision, Eddinger said.
In addition, the NCCI said in a report in August that the full effects of the Castellanos ruling would not be felt for several years to come because of the time lag that occurs before many workers’ comp cases can be resolved.
The NCCI regularly submits recommendations to the Florida OIR for changes in workers’ comp rates in the state based on recorded data using actuarial standards.
A study of workers’ comp claims in 18 states that was released in October by the Workers Compensation Research Institute also affirms concerns about the rising share of workers’ comp awards going to attorneys.
The percentage of Florida claims filed with worker attorneys represented 38 percent of the total evaluated in 2018, compared to a median of 26 percent among all the states evaluated in the study. And the share of claims with defense attorney payments greater than $500 was 41.1 percent in Florida, a level that is greater than 11 other states examined in the analysis.
The total cost per claim in Florida was typical of the other states studied, according to Dr. Rebecca Yang, author of the institute’s report.
“This result masked several offsetting factors,” Yang said in an email. “Among those, Florida had more frequent worker attorney and defense attorney involvement, and higher defense attorney payments per claim compared to other study states This more frequent defense attorney involvement and higher than typical costs may be related to more frequent lump-sum settlements.”