Lawmakers scramble to nullify workers’ compensation fee hike

Miami Today–Week of February 26, 2009

By Zachary S. Fagenson

A late 2008 Florida Supreme Court ruling may have businesses reaching deeper into their pockets to cover workers’ compensation insurance.

Florida Insurance Commissioner Kevin McCarty announced Feb. 10 that a 6.4% rate increase will take effect April 1.

This first rate hike in the past six years comes after the court overturned a 2003 change said to have reduced insurance rates by more than 60%. It capped the fees workers’ attorneys were paid in injury cases.

Between 2003 and 2008, attorneys received fees based on what their clients were awarded. Now, attorneys filing claims on injured workers’ behalf are charging hourly rates.

The ruling has members of the state House of Representatives scrambling to amend the law in hopes of keeping rates down.

A bill, HB 903, has been filed by state Rep. Anitere Flores, a Kendall Republican, clarifying language the court cited as the cause of its 2008 decision. The legislation seeks to clarify vagueness the court cited and reinstate a fee schedule for workers’ attorneys.

“I think this bill strikes that balance between affordability for insurance and access for employees,” she said. “It’s important for attorneys’ fees to be reasonable on both sides.”

The six-page amendment contains only five changes to the prior law but on it rest the hopes of many local businesses already struggling against the effects of a recession.

If the bill were to pass, the 6.4% increase would be canceled, as would a 7% increase expected sometime in 2010.

“Increasing any expense for any business at this point is not good,” said Michael Burnstine, chair of the Greater Miami Chamber of Commerce’s state advocacy committee and vice president of Lockton Cos. “In the last few years, workers’ compensation had gotten under control, but this ruling” changes everything.

Meanwhile, Tamela Perdue, general counsel for the Associated Industries of Florida, said the ruling “is the straw breaking the camel’s back.”

The Tallahassee-based organization representing businesses in the state capital, Ms. Perdue said, favors meeting workers’ attorneys, their employers and their insurance carriers halfway.

“Florida’s [insurance] market was very stable until this case came out,” she said. “We think tying fees to value of the benefits secured is the best way to come up with reasonable attorneys’ fees.”

While this method of payment is in step with Rep. Flores’ bill, which, if passed, would return to the fee-schedule system, Ms. Perdue said something must be done quickly.

“I know of employers throughout the state having to make decisions to lay off employees due to the cost” of workers’ compensation insurance, she said.
“In 2001 and 2002, Florida’s workers’ compensation rates were among the highest in the nation,” said Lorie Lovgren, state-relations executive for the National Council on Compensation Insurance. “Most folks thought there was a crisis in workers’ compensation and there were efforts to complete major reform.”

That reform resulted in the 2003 law that set guidelines for how much an injured worker’s attorney could collect.

Previously, injured workers paid attorneys hourly fees out of their settlements, a fact Ms. Lovgren said was widely considered to be the cause of the insurance crisis.

“Capped [fees encourage lawyers] to quickly evaluate the case and posture it immediately for settlement, resulting in quicker returns to work for injured workers,” she said. “When you have hourly fees, it [encourages] the exact opposite response.”

Mark Zientz, immediate past chair of the workman’s compensation section of the Florida Bar, said the court’s decision leveled the playing field that once heavily favored employers and their insurance carriers.

“For a contingent fee, judges are awarding hourly rates in $200 to $300 range to lawyers who could command $400 to $500 an hour representing employers,” he said. “It has made the situation for injured employees horrible but was one of the major savings of the 2003 legislation.”

Mr. Zientz strongly opposed the 2003 change as well as Rep. Flores’ bill. “The Legislature totally wiped out any compensation for loss of wage-earning capacity,” he said.

And while he advocated a return to hourly fee schedules, Mr. Zientz placed the majority of the blame on the insurance companies, which, he said, refuse to pay compensation benefits, forcing the injured to take them to court.

“If they didn’t deny as many claims as they do and end up losing,” Mr. Zientz said, “they wouldn’t be paying any attorneys’ fees at all.”