From injured workers and employers to insurance carriers and attorneys, the number of entities and competing interests involved in our state's workers' compensation insurance system has kept this field in the headlines as a topic of contentious debate. For a fourth consecutive year, Florida Insurance Commissioner David Altmaier issued a final order granting approval of a statewide overall decrease of 7.5% for Florida workers' compensation insurance rates, as recommended by the National Council on Compensation Insurance (NCCI). This premium decrease is set to apply to both new and renewal workers' compensation insurance policies, beginning on Jan. 1, 2020.

To fully understand the reasoning and effects this statewide decrease will have, we must first look back at the outcomes of two 2016 constitutional rulings that have had a significant impact on Florida's workers' compensation market. These include Castellanos v. Next Door, wherein restrictive caps on fees for claimant's attorneys were struck down, and Bradley Westphal v. City of St. Petersburg, wherein the limit for temporary total disability limits was extended from 104 weeks to 260 weeks.

Following adjudication of these cases, the legal community was left guessing as to the long-term effects these combined rulings would have on claims filed, insurance companies and businesses alike.

By December 2016, the workers' compensation premium rates increased by 14.5%. The biggest cost drivers behind the rate increase were Castellanos, which was attributed for a 10.1% increase, while a 2.2% increase was credited to Westphal.

The NCCI, an organization that files recommended rates on behalf of insurance companies, noted that the 14.5% rate increase was based on market projections indicating that litigation and attorney fees would increase rapidly following the recent Florida Supreme Court decisions. The NCCI believed that such an increase would result in much more expensive claims for the insurance carrier.

In light of this dramatic increase in premiums, businesses throughout Florida were faced with the difficult decision of whether to obtain or renew their workers' compensation insurance. If so, they were to answer the even more difficult question of whether employees would need to be laid off in order to afford paying the increased premiums.

Subsequent data reflects that attorney involvement in workers' compensation claims has been on an incline in recent years. Specifically, during the 2016-2017 fiscal year immediately following Castellanos and Westphal, a total of $185,676,766.00 was paid in claimant's attorney fees. This was a 36.07% increase from the year prior. Claimant's attorney fees have continued to grow, at 6.99 % in 2017-2018 and 9.19% in 2018-2019. Additionally, in 2018-2019, there was a 4% increase in cases filed and a 4.1% increase in petitions for benefits filed.

Although this data suggests that litigation is becoming more costly since Castellanos and Westphal, there has been a steady drop in workers' compensation rates in Florida, with a decrease of 9.8% in 2017, 13.4% in 2018, and 13.8% in 2019.

During a public hearing on Oct. 4, 2019, the NCCI advised that the rate decrease was based on a decline of claim frequency along with proposed annual indemnity and medical trend selections from policy years 2016 and 2017. The NCCI noted that 90% of the data analyzed involved claims that followed Castellanos and Westphal. Further, a representative from the NCCI provided that the claim frequency decline being witnessed is "due, in part, to safer workplaces, enhanced efficiencies in the workplace, increased use of automation and innovative technologies."

With regard to economic growth, the continuing rate decreases is good news.

The premium decreases may have the effect of allowing those small businesses who were forced to downsize their labor costs, due to the rising costs of workers' compensation insurance premiums, to obtain insurance and possibly grow their company's workforce.

Additionally, with a greater number of employers insured by a workers' compensation carrier, there will be a decrease in the issue of the "uninsured employer." Under current law, a contractor may become a statutory employer if the subcontractor hired did not secure workers' compensation insurance. With a greater number of employers being properly insured, rather than compensability of the accident "going up the ladder," the actual employer will be held responsible.

In all, although the cost of workers' compensation premiums have steadily decreased over the past four years, the data suggests that carriers have experienced litigation cost increases since the Castellanos and Westphal decisions. This is particularly apparent in the payment of claimant's attorney fees and the number of new cases filed within the past two years. It appears that the recent decrease in insurance premiums is a response to the 14.5% rate increase following Castellanos. Although premature, it may be the case that, as litigation costs continue to rise, the annual premium decreases may be masking the issue of attorney fees in the workers' compensation system following Castellanos.

Indira Marin is an attorney in the Fort Lauderdale office of Kelley Kronenberg, where she focuses her practice on workers' compensation defense. She may be reached at 954-370-9970 or [email protected].