By McConnaughhay, Duffy, Coonrod, Pope & Weaver, P.A.

An end of the year flurry of activity in the field of workers compensation sets the stage for what appears to be another very active year legislatively and from a regulatory standpoint in Florida. 

Many of the initiatives for workers compensation reform initially seen in 2008 will form the basis of continued activity for the next year.  Further details will be provided as these matters
progress to completion or further debate. 

Developing issues include:  National Council on Compensation Insurance's estimate of unfunded liabilities as a result of the Florida Supreme Court case of Murray v. Mariner Health Inc. and ACE USA, No. SC07-244 (Emma Murray); the request for increases in premium rates as a result of the Emma Murray decision; development of the maximum compensation rate for injuries occurring after Jan. 1, 2009; issuance of the annual report by the Division of Workers Compensation and Division of Insurance Fraud on fraud within the workers compensation system; notice of proposed rule development concerning changes to Rule 69L-24 Workers Compensation Insurers Standards and Practices.

As reported in last months newsletter, the Florida Supreme Court in the Emma Murray decision recently determined that reasonable attorney fees for injured workers are not limited to a percentage of benefits recovered by the attorney on behalf of the worker. Rather, quantifying such fees could include consideration of other factors, such as time expended by the attorney in the recoupment of benefits. 

Many have predicted that this decision will create substantial increases in litigation with corresponding cost increases to the system, contrary to the efforts made in 2003 by the legislature to reduce attorney involvement in the workers compensation system.

A special law only filing rate increase request was filed by the National Council on Compensation Insurance (NCCI) based solely on this Supreme Court decision.  This rate increase relates to prospective rates for new, renewal, and existing workers compensation policies (prorated) effective March 1, 2009.

In the minds of many, the real question relates to cost increases to the system (unfunded liabilities) that will result from this Supreme Court decision for dates of accident after Oct. 1, 2003 (the effective date of the 2003 statutory amendments) and the effective date of the rate increase if any (March 1, 2009), a time period in which industry assumed the 2003 limitations on the attorney fees were in effect, but has now proved, as a result of the Supreme Court decision, to be in error. 

NCCI now predicts these unfunded liabilities to be potentially up to $400 million, losses that cannot be recouped by industry, because rates are established only prospectively without remedy for unexpected retrospective losses.

 According to NCCI, Each insurer's unfunded liability will vary based on many factors including,
but not limited to, the number and the type of open claims, average claim costs and claims-handling practices.  As a result, each insurer needs to analyze its own data and calculate its own estimate of its unfunded liability. The effect of such determination on future rates remains in question.

As a result of the Emma Murray decision, NCCI made a law only filing requesting a rate increase based upon a determination that the Murray decision would create in excess of a 2% impact
on existing workers compensation premium rates justifying such a filing (to be distinguished from an experience filing annually made in August of each year based upon the experience of the
system for preceding years). 

This rate filing would affect premium charges by approximately 250 insurance companies doing business in the State of Florida. 

The overall rate request amounts to an 18.6% increase with an 8.9% increase (representing $240,000,000 in increased premiums in the state) effective March 1, 2009, to the end of the year and the remainder of the increase request beginning Jan. 1, 2010.  NCCI believes that it will take two years for the full impact of the Emma Murray decision to be realized.

On Dec. 16, 2008, a hearing was held before Insurance Commissioner Kevin McCarty concerning this rate increase.  Since this was a law only filing as opposed to the annual experience filing, the proposed rate increase would apply to existing policies on a pro rata basis. 

A decision by the insurance commissioner has not yet been made.  However, the focus of the hearing related to whether the rate decreases experienced by industry since the 2003 legislative changes were as a result of only the changes made to claimants attorney fees. 

The greater than 60% rate decrease experienced by industry since 2003 could be attributed to many
reasons including improved claims closure rates, improved return to work procedures, declines in accident frequency, increased emphasis on compliance, redefinitions of permanent to compensable accidents, increased emphasis on fraud detection, and changes in attorney fees payable to injured workers attorneys. 

The difficulty in determining whether there should be a rate increase based only on the Emma
Murray decision is quantifying the impact of reducing attorney fees payable as a component of the experienced rate decreases since 2003. 

Surveys of insurance carriers indicated the substantial cost reductions realized were in significant part as a result of the changed provisions relating to how much attorney fees were paid to injured workers
attorneys.
 
A decision by the Insurance Commissioner is expected within the very near future if in fact a rate increase can be effective by March 1, 2009, allowing sufficient notice to Florida employers as required by Florida law. 





McConnaughhay, Duffy, Coonrod, Pope & Weaver, P.A. is a workers' compensation law firm with more than 50 attorneys and nine offices throughout Florida. This article is reprinted with permission from the firm's Jan. 5, 2009 Workers' Compensation Legislative & Regulatory Update newsletter.