Florida Supreme Court recently handed down a decision that will
impact your workers' compensation insurance rates. The court ruled
that the existing statutory provision providing for an attorney fee
schedule in workers' compensation cases was unconstitutional. The
National Council on Compensation Insurance (NCCI) released a request
for a 17.1% rate increase across ALL class codes effective August 1,
2016. NCCI submitted its rate filing request to the Office of
Insurance Regulation (OIR) on May 27, 2016. The proposed workers'
compensation insurance rate increase must be approved by OIR. We will
keep you updated on this very important issue as information becomes
your convenience, the following is additional information provided by
NCCI on this issue.
NCCI Proposes Florida Workers Compensation Rate Increase Effective
August 1, 2016
Overview of Castellanos
On April 28, 2016, the Florida Supreme Court issued an
opinion in the case of Castellanos vs. Next Door Company, et al.,
No. SC13-2082 ("Castellanos") declaring Section
440.34, Florida Statutes, unconstitutional. The anticipated impact of
the decision is the elimination of the statutory caps on claimant
attorney fees and a return to hourly fees.
NCCI Proposes Rate Increase
NCCI estimates that the first year impact of Castellanos will
be an increase in overall Florida workers' compensation system costs
of 15%. This estimate does not include the following:
related to the First District Court of Appeal decision dated
April 20, 2016 known as Miles v. City of Edgewater Police
Department ("Miles") declaring
unconstitutional certain restrictions on claimant paid attorney
fees. After Miles, claimant attorney fees can be earned
regardless of whether benefits are secured. Depending on the
scenario, the source of claimant attorney fees could be the
claimant, the employer/carrier, or both. Claimant attorneys may
now have the potential to earn greater compensation than that
which would result from the Castellanos decision on its
own, putting additional upward pressure on system costs in
Florida. NCCI is unable to separately determine the Miles
entire unfunded liability created in the state due to the
retroactive nature of the Castellanos court decision.
cost impacts not otherwise reflected in this filing that may
emerge over time such as additional stakeholder behavioral
changes or interactions that may result in changes to workers'
compensation benefits or practices in Florida.
On May 27, 2016, NCCI submitted its filing to the
Office of Insurance Regulation (OIR). It includes components for two
year impact for Castellanos of 15%
of 1.8% in response to SB 1402 which ratified updates to
the Florida Workers' Compensation Health Care Provider
combined impact of the two components is 17.1% or $623M (17.1 x
$3.645B). NCCI proposes that the increased rates will apply to new
and renewal policies that are effective on or after August 1, 2016.
Additionally, NCCI proposes that the increased rates will apply to
all policies in effect on August 1, 2016 on a pro-rata basis through
the remainder of the term of these policies. Currently, Florida has a
voluntary pure loss cost of 0.99 that is comparable to other states
in the Southeast ranging from 0.94 to 1.14. If the rate filing is
approved as filed increasing rates by 17.1%, Florida at 1.16 would
rank as the highest state in the Southeast.
Retroactive Impact of Castellanos
Decision is Not Part of Proposed Rate Increase
This Castellanos component of this filing only
addresses the expected increase in Florida workers' compensation
system costs for accidents occurring on or after August 1, 2016.
However, the decision in Castellanos is also expected to
increase overall system costs in the state for accidents occurring
prior to August 1, 2016 that remain open or are re-opened. Because
workers' compensation ratemaking is prospective only, insurers are
not afforded the opportunity to recoup premium to cover such
unforeseen increases in system costs. Therefore, it is expected that
a significant unfunded liability will be created due to the
retroactive impact of this court decision. NCCI is currently in the
process of estimating the unfunded liability and will provide further
information at a later date.
For additional information, please do not hesitate to
contact the UPSA office.