November 17, 2008

Florida lawyers win, employers lose

Florida employers have seen about a 60% rate decrease since the 2003 workers compensation reform but it looks like all that is about to change. NCCI has just filed for an 8.9% Florida rate increase in the wake of a recent Florida Supreme Court ruling. This is an enormous change, particularly in light of the 18.9 percent decrease that had been proposed prior to the ruling.

Why such a giant leap? In Murray v. Mariners Health/ACE USA, the court struck down a cap on attorney fees, which had been a hallmark in Florida's 2003 workers compensation reforms. Hourly legal fees were eliminated and replaced with contingency fees capped at 20 percent of the award.

An article in Insurance Journal at the time of the ruling tracks some of the reaction by employer and industry groups. Unsurprisingly, this ruling is wildly unpopular with those groups. According to Cecil Pearce of the American Insurers Association:

"A key driver of claim costs prior to the reforms was hourly attorney fees, which made the cost of litigated claims 40 percent higher in Florida than in any other state because of the increased litigation. The 2003 reforms linked attorney fees to the value of benefits secured through a fee percentage schedule, eliminating the ability of claimant attorneys to bill by the hour. With that law now overturned, it is expected that an increase in workers' compensation premiums will be inevitable."

A 2001 benchmark study of Florida Workers' Compensation Claim Costs conducted by the Workers Compensation Research Institute (WCRI) noted that Florida was among the most litigious of the eight large states studied. According to Richard A. Victor, executive director of WCRI:

"The involvement of defense attorneys in workers' compensation claims - an indicator of litigiousness - is highest in Florida and growing ... About 30 percent of claims with more than seven days of lost time involved defense attorneys in Florida, a nine percentage point increase for claims with 24 months' experience since 1994. By contrast, defense attorneys are involved in less than 8 percent of claims in Texas and Wisconsin."

The study revealed that defense attorney expenses were also the highest in Florida at more than $2,600 per claim - three times higher than Connecticut, the study state with the lowest expenses.

A Florida Insurance Council Backgrounder on 2003 Comp Reforms noted that today, "The percentage of workers' comp cases with attorney involvement remains higher in Florida than the national average - 20 percent in Florida compared to about 16 percent nationally. The percentage of cases where the injured employee represents him or herself is the same or less than before the 2003 reforms."

| 2 Comments

2 Comments

Any injured worker who represents him or herself has a fool for a client.

Thanks you Andrea, for clearly underlining the fact that attorneys, who don't account for a sizable percentage of direct costs, are considered by most reputable researchers in the field to be a major indirect driver of indemnity and medical costs.
I'm going to be doing a fellowship in Western Australia next year, where they've come up with the ingenious solution of scheduling claimant attorney fees on the basis of the work done - so much for a motion, so much for a hearing, etc.. Just like a doctor gets paid - and there's no serious question that HCPs remain motivated to do the best job they can for their patients... There's is data available for worker outcomes and systemic costs under the old system (like US) and the new system. Hopefully, the data is robust enough to explain, once and for all, why (by way of example, and to quote from a report done during the DE WC reforms of a few years ago) cases in that state with attorney representation had 11 times higher medical and 31 times higher indemnity costs, over a two year period, than unrepresented cases. I know Andrea is likely to cheer at that and offer it as evidence supporting her opinion, but let me ask - if lawyer skill, or case severity, were the principle reason for the difference, then why don't the percentages of difference between medical and indemnity track closer? (I'd suggest the answer is that attorneys in DE weren't getting awards based on medical - only indemnity)
It's time to recognize that our attorney fee structure creates an inherent conflict of interest between the worker (who generally wants to get on with his or her life and avoid unnecessary work disability) and the attorney, who gets more in his or her pocket the more disabled the worker becomes...
So, Andrea, if we're dusting off old bromides, how 'bout some Shakespeare? "First thing we do, let's get rid of all the lawyers" (And by the way, the initial experience with THAT experiment, in New South Wales, is rather encouraging...)

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This page contains a single entry by Julie Ferguson published on November 17, 2008 11:00 AM.

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