When the Castellanos v. Next Door Company case from the Florida Supreme Court came down in April 2016, striking down caps on fees for attorneys who represent injured workers, uncertainty abounded. The ruling was hotly anticipated, with attorneys on both sides of the spectrum, businesses and insurance companies all speculating not only as to what the ruling would ultimately be, but also as to what practical effect it would have on businesses, the insurance industry and workers' compensation claims.

In December 2016, some of that uncertainty was removed, when a 14.5-percent increase in premiums for workers' compensation insurance for businesses was effectuated (with 10.1 percent of this increase due to the Castellanos case alone). This substantial increase perturbed many, as the National Council of Compensation Insurance (NCCI), an organization that files recommended rates on behalf of insurance companies, has subsequently admitted that the 14.5 percent rate increase was not based upon any relevant data or a quantitative analysis, but was rather based on market projections.

With such a substantial increase in workers' compensation premium rates, businesses were tasked with a decision of whether to obtain workers' compensation insurance with the rate increase, and if so, whether employees would need to be laid off in order to afford paying the increased premium. Many small businesses had not budgeted for such a substantial increase.

Recently, however, State Insurance Commissioner David Altmaier has ordered a 9.8 percent decrease in the premiums businesses pay for workers' compensation insurance, which represents one of the largest decreases in the past 10 years.

Additionally, Commissioner Altmaier has ordered NCCI to include in all future recommended rate filings a quantitative analysis of the impact that the Castellanos case and its elimination of the attorney-fee caps, has had on the workers' compensation system.

The rate decrease will likely lead to more small businesses being able to afford workers' compensation insurance, thereby reducing the number of businesses who have opted to not secure workers' compensation insurance due to the previous rate hike. The reduced rate will also likely lead to these small businesses being able to retain their respective current employee levels, or possibly even lead to an increase in hiring.

With more businesses being able to afford workers' compensation insurance, the rate at which injured workers are faced with a situation in which their employer does not have workers' compensation insurance that covers the worker will likely be reduced. The issue of an “uninsured employer” is one that has plagued the workers' compensation system for a long time, and is most commonly seen in the construction industry.

In the construction industry, in which numerous companies are on a particular job site, it is an unfortunately common occurrence that not all of the companies have valid workers' compensation insurance, or workers' compensation insurance that covers the injured worker.

In such a situation, the company that hired the employer which did not have insurance for the injured worker, becomes the “statutory employer” and its insurance company is responsible for providing workers' compensation benefits to the injured worker.

In regards to whether litigation will increase or decrease due to the 9.8 percent rate decrease, it is too soon to say. When the 14.5 percent rate increase was approved and implemented post-Castellanos, a primary justification for same was the belief that claimant attorneys would increase litigation and attorney fees would be greater, resulting in claims being more expensive for the insurance carrier.

At first glance, the statistics seem to support the belief of increased expense of claims due to attorney fees. Later this year, in the annual report by the Office of Judges of Compensation Claims (OJCC), it will be reported that claimants' attorneys' hourly fees went from a statewide total of $25.9 million in the 2016 fiscal year to $75.4 million in the 2017 fiscal year, which is a 191 percent increase.

However, as David Langham, the OJCC's deputy chief judge has cautioned, the 2017 numbers could be artificially high and the 2016 data artificially low, because attorneys were delaying cases while waiting for the Castellanos decision. As such, effectively determining whether the substantial increase in attorneys' fees post-Castellanos was due primarily to the resolution of cases that had been on standby, or whether the figures will remain consistently high in the years to come is impossible to ascertain at the moment.

More telling is the fact that OJCC statistics show that new cases only increased 0.54 percent in fiscal year 2017 over fiscal year 2016, and that Petitions for Benefits only increased by 4.61 perccent during this time period. This seems to indicate that litigation volume has not substantially increased, but efforts to obtain or resolve attorneys' fees post-Castellanos have increased, at least in the short term.

What seems evident, at least, is that the coming years will bring about continued discussion and proposals pertaining to workers' compensation rate increases and decreases, as quantitative data about the post-Castellanos workers' compensation system starts to accrue and provide a more accurate picture of the effect of this important ruling.

Joshua T. Higgins is a partner at Kelley Kronenberg, a diverse business law firm, focusing a portion of his practice on Workers' Compensation matters. He may be reached at 954-370-9970 or [email protected].