By Dennis Tierney, Senior Vice President, Director of Workers’ Compensation Claims, Marsh
Two recent decisions by the Florida Supreme Court, Castellanos and Westphal, could have significant cost implications for the Florida Workers’ Compensation system and all employers that operate in that state. These two decisions have made the state of Florida the “hot topic” in the Workers’ Compensation industry and have all affected employers wondering how much their Workers’ Compensation costs will rise.
The Castellanos Decision
On April 28, 2016, in Marvin Castellanos v. Next Door Company, the court found that the mandatory fee schedule in section 440.34 of the Florida workers’ compensation statute is “unconstitutional as a violation of due process under both the Florida and United States Constitutions.” The court ruling said the attorney fee schedule passed in 2009 is not valid because it eliminates the right of an injured worker to get a reasonable attorney fee, a right it says is a “critical feature” of the workers’ compensation law. The court also stated that “it is undeniable” that without the right to an attorney with a reasonable fee, the workers’ compensation law can no longer “assure the quick and efficient delivery of disability and medical benefits to the injured worker.”
- The statutory fee caps on attorney fees are no longer applicable and are replaced by claimant attorney’s ability to claim a “reasonable” attorney fee for their work.
- Rather than using the statutory formula, judges of compensation claims will now evaluate the reasonableness of attorney’s fees using factors outlined in Florida Bar Rule 4.1.5.
- If a judge of compensation finds a fee to be unreasonable, the judge can replace it by determining a fee based on hourly rate and billed hours.
- The 15% rate increase is the estimated first year impact of this ruling on new claims. The National Council on Compensation Issues estimates that the ruling could ultimately increase Florida’s workers’ compensation costs as much as 38%. The expectation is that it will take a few years for the long term cost impact of Castellanos to emerge.
The Westphal Decision
On June 9, 2016, in Bradley Westphal v. City of St. Petersburg, the court declared the state’s 104 week duration cap of temporary total disability (TTD) benefits to be unconstitutional. The decision reinstates the 260 week duration cap that was in effect prior to legislative reforms introduced in 1994. The court ruling further states that the temporary disability benefit statute of the state’s workers’ compensation law operates in an opposite manner to the intent of the law, which is to “facilitate the quick and efficient delivery of indemnity and medical benefits to an injured worker and to facilitate the worker’s gainful reemployment at a reasonable cost to the employer.”
- The 104 week cap of TTD benefit payments has been deemed unconstitutional.
- Pre-1994 statute providing 260 weeks of TTD has been revived.
- A 2.2% increase is the estimated first year impact of this ruling on new claims.
What changes to my claim handling should I be implementing to combat these decisions?
Awareness – raising awareness about the decisions and their potential impact on workers’ compensation costs and claims handling.
- Discuss these cases with your legal counsel, and how their holdings will affect both litigation costs and claim values for Florida claims.
- Schedule client education/meetings with TPA/Carrier to address the potential cost impact of these decisions.
- Partner with your TPA/Carrier panel Florida workers’ compensation defense attorney firms and hold Q&A sessions, where they can provide insight on what you can do to help mitigate your claim costs.
Update your Special Claim Handling Instructions – this is your playbook on how you want your TPA/Carrier to handle your claims, so they need to be updated to meet the new challenges arising from these Supreme Court decisions.
- Complete investigations and issue benefits in a timely manner.
- Implement clear instructions on who to contact for wage info and employer statements following an occurrence.
- Require regular communication with the Injured Worker.
- Require adjusters to complete a litigation cost project analysis and discuss with the client prior to deciding to litigate a claim.
- On litigated cases, select defense counsel that will work to expeditiously resolve any and all issues.
- Require defense counsel to provide a detailed litigation plan.
- Ultize private mediation whenever feasible.
- Request itemized timesheets with signed affidavits from petitioners’ attorneys.
Litigation Avoidance – Given the holding of the Castellanos decision, which will almost certainly result in an increase in litigation costs, the main objective should be to try and resolve a claim without having to resort to litigation. Without the protection of statutory fee caps, litigation costs could quickly outpace the value of the litigated claim.
- Open communication must be enforced among employer, employee, and claim administrator in an effort to avoid litigation.
- Consider putting together a claim guide for HR to provide to the claimant, so they are introduced and familiarized with the workers’ compensation system.
- Assist the injured worker with any questions they may have in the claim process, including medical and prescription drug information to ensure a seamless experience.
- Ensure that ongoing communication with the claimant continues from all parties regularly throughout the life of the claim.
New Resolution Strategies – with regard to claims that are already in litigation, what can be done to help resolve those claims in a timely manner?
- Claims need to be reviewed on a case by case basis to determine if the case is worth litigating.
- Discuss these issues with your TPA/Carrier and defense counsel to ensure that efforts are dedicated to litigating impactful cases and resolving the smaller issues.
Medical Management – clients need to be educated regarding the use of and access to preferred medical providers who understand workers’ compensation and the need to focus on return to work and the importance of communication.
- Verify that injured workers are being advised of appropriate medical providers that are within the preferred provider organization (PPO) network.
- Reinforce the appropriate use of independent medical examinations (IMEs).
- Discuss the Florida change of physician provision with your TPA/Carrier and defense counsel to ensure compliance.
- Adopt evidence based medical guidelines to help achieve better outcomes.
- Implement focused referred guidelines for TCM/FCM to validate diagnosis, treatment, and disability duration, as compared to medical guidelines.
- Implement and/or reinforce return to work programs.
- Partner with TPA/Carrier and their nurses to determine the most appropriate medical providers to drive positive outcomes.
In closing, the Castellanos and Westphal decisions are anticipated to increase the claims costs of Florida workers’ compensation claims. There are some tools available to help mitigate the impact of these changes, as discussed above. We advise clients to be proactive, and work with their claims providers and broker partners to help minimize the effect of these new conditions. Avoidance of litigation will be a key factor, as the Castellanos decision striking down the statutory fee cap will almost certainly increase costs. It will also be important to get injured workers back to work in order to avoid paying prolonged TTD benefits, and to be willing to settle cases that are ripe for resolution before reaching the courthouse.
About Dennis Tierney
Dennis Tierney is a senior vice president in the Marsh Claim Practice (MCP) and serves as the Director of Workers’ Compensation Claims. In this National Role, Dennis works closely with the Workers’ Compensation Center of Excellence to enhance the Marsh Claim Practice’s value proposition around Workers’ Compensation claims and managed care. Dennis is also responsible for establishing continuing processes and protocols around the delivery of advocacy services relative to Workers’ Compensation. Dennis also works closely will Risk Consulting claim leaders on all total cost of risk related tools and analytics. In addition, Dennis interfaces with senior Workers’ Compensation claim leaders from all major carriers and Third Party Administrators.
Marsh is a global leader in insurance broking and risk management. Marsh helps clients succeed by defining, designing, and delivering innovative industry-specific solutions that help them effectively manage risk. Marsh’s approximately 30,000 colleagues work together to serve clients in more than 130 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy, and people. With annual revenue of US$13 billion and approximately 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a leader in providing risk and reinsurance intermediary services; Mercer, a leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a leader in management consulting. Follow Marsh on Twitter, @MarshGlobal; LinkedIn; Facebook; and YouTube.
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