Florida Supreme Court made your future Florida vacation more expensive

Florida Supreme Court made your future Florida vacation more expensive

I used to take my family to Disney World on the back of the NCCI annual symposium- (a workers compensation conference) which was held in or around Orlando, Florida.  This wasn’t an annual family vacation, our frequency was bi-annual, but we really looked forward to it and it was great time as a family.

Next year- If I was still attending the NCCI conference, I would have to prepare for the added expense associated with a trip or vacation to the Florida area, thanks to a few recent Florida Supreme Court decisions.

Vacationers and small businesses should prepare for the added expense as well.

Hotel costs, food costs, labor, etc. should all rise in the near term due to increasing workers compensation loss costs as a result of this decision.

Florida Supreme Court

The Florida Supreme Court is tasked with ruling on a number of difficult cases each year- and 2016 there was two cases that may negatively impact business environment, vacationers and consumers.  These two cases should have significant impact on the business environment, specifically related to insurance and workers compensation system.

Castellanos v. Next Door Co.

In Castellanos v. Next Door Company, the Court invalidated the statutory formula for calculating attorney’s fees in WC cases, holding that it violates the state and federal constitutional guarantees of due process because it fails to guarantee a reasonable fee, and revived the version of the statute enacted in 2003 (as construed by the Court in its 2008 Murray decision) “until the Legislature acts to cure the constitutional infirmity.”

The Court held that the contingent fee approach to attorney’s fees (which replaced hourly attorney fees in the 2003 legislative reforms) violated the test for determining the constitutionality of conclusive statutory presumptions, finding that the Legislature’s concern about the excessiveness of attorney’s fee awards was not a reasonable basis for the current approach, which it noted can still result in excessive awards, e.g., in a simple and straightforward case where the claimant obtains a substantial amount of benefits.

Observing that a WC claimant’s right to obtain a reasonable attorney’s fee when successful in securing benefits has long been considered a critical feature of the WC law, the Court found fault with the statutory presumption that the contingent fee approach to calculating attorney’s fees will always be reasonable to compensate the attorney – particularly in cases such as this one, where the fee awarded amounted to only $1.53 per hour for more than 100 hours of work judicially determined to be “reasonable and necessary” in litigating a complex case.

The Court also found that the Legislature’s 2009 elimination of a reasonableness requirement for attorney’s fees (in response to the Court’s holding in Murray that the 2003 statute was ambiguous) “completely eviscerates the purpose of the attorney’s fee provision and fails to provide any penalty to the E/C for wrongfully denying or delaying benefits in contravention to the stated purpose of the statutory scheme.”

In mandating reversion to the 2003 statute as interpreted by Murray, the Court held that claimants must be permitted to present evidence showing that application of the statutory fee schedule will result in an unreasonable fee. The Court emphasized, however, that this “does not mean that claimants’ attorneys will receive a windfall,” and that deviation from the fee schedule will only be permitted “where the claimant can demonstrate…that the fee schedule results in an unreasonable fee.”

The impact of uncapped attorney’s fees can be quite significant.  Although the impact is uncertain, NCCI-hired actuary Steve Lattanzio testified that his projected range of cost increases from Castellanos v. Next Door Co. alone would range from 18% to 38%.

Westphal v. City of St. Petersburg

The Florida Supreme Court ruled 5 to 2 that the 104-week cap on temporary disability benefits in the state’s workers’ compensation system is unconstitutional. The court said it was improper for disability benefits to be cut after 104 weeks for a totally disabled worker who is unable to work but has yet to reach maximum medical improvement, calling the cap “a denial of the right to access to courts because it deprives an injured worker of disability benefits under these circumstances for an indefinite amount of time – thereby creating a system of redress that no longer functions as a reasonable alternative to tort litigation.”

The court restored the previous limitation on temporary disability benefits of 260 weeks, affirming a 2013 ruling by a judge on the Florida First District Court of Appeals. The case involved a firefighter and paramedic in the city of St Petersburg who sustained severe injuries to his legs in a 2009 accident on the job and was unable to return to work.

NCCI says this Supreme Court ruling, Westphal v. City of St. Petersburg, in which the cap of 104 weeks on temporary disability benefits was raised back to 260 weeks, required an additional 2.2% rate increase, or $80 million in higher premiums. In addition, the rate-maker said updates to the state’s health care reimbursement manuals would require a 1.8% rate increase.

NCCI recommendations

A consulting actuary and an economist testified that a proposed 19.6% workers’ compensation rate increase in Florida might be half of what is needed in response to a pair of state Supreme Court rulings that favored claimants’ attorneys and injured workers.

The Florida economy

Tourism –  According to the Governor’s website, as the state’s No. 1 industry, tourism is crucial to Florida’s economy – generating 23 percent of the state’s sales tax revenue and employing more than one million Floridians. In 2011, tourism was responsible for welcoming 86.5 million visitors to Florida and generated $67.2 billion in direct economic impact.  This Supreme Court decision could negatively impact the largest industry in Florida.

Future Vacations:

Don’t be surprised when your Florida vacation costs 19% more next year, as these additional WC system costs will have a direct impact.  Small business owners and resorts are going to have to pass along the operating cost increase to customers.

The other option is to hire less staff which may negatively impact service to customers.

The WC system and costs associated is embedded in all things we consume.

Conclusion

I am all for helping injured workers and feel they should get the appropriate benefits that they deserve.  However the sad part in this situation- this added expense to the Florida WC system is largely going to the attorneys representing the injured workers, not the injured workers.

I think this decision of the Florida Supreme Court made your future Florida vacation more expensive.

Questions:

• How will businesses adapt to lower loss costs in Florida? What methods will they attempt to lower their premiums?
• Will small businesses adjust their insurance programs?  Take large retentions or deductibles?
• Will WC insurance carriers leave the state of Florida until uncertainty is reduced?
• How will this impact the Florida economy?
• Will the Florida legislature act?
• How long will it take?
• Where will you vacation instead?
• Coupled with the issues of reported cases of Zika virus in Miami area- what will happen to Florida tourism?