Sunday, December 4, 2016

Constitutional Law in Florida 2016

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

The landscape of Florida workers’ compensation has been less than stable in recent years. In fiscal 2012-13, the Florida First District Court of Appeal (DCA) rendered a panel decision in Westphal v. City of St. Petersburg on February 28, 2013. The panel held section 440.15(2)(a), Florida Statutes, unconstitutional in its limitation of temporary benefits to a period not exceeding 104 weeks. Later, in fiscal 2013-14, that panel decision, relying on “natural justice,” was withdrawn and rehearing by the entire court (en banc) was granted. On September 23, 2013, the court issued an en banc decision, which abandoned the panel opinion references to constitutional infirmity and relied instead on statutory interpretation. The Florida Supreme Court issued its decision on June 9, 2016, Westphal v. City of St. Petersburg, 194 So.3d 311. This decision invalidates as unconstitutional the 104 week limitation on temporary total disability benefits.

The Supreme Court’s decision is notable for what it addresses and for what it ignores. Finding that the 104 week limitation in section 440.15(2)(a), Florida Statutes (1994), unconstitutional, the Court revived the provisions of that section prior to the 1994 revisions. In essence, the decision invalidates a 22 year old statutory limitation that has been applied in the claims of thousands of injured workers. The limitation on temporary total benefits would seem to be the 260 week limitation on temporary total previously in section 440.15(2)(a). This is a limitation that the court notes it “previously held ‘passes constitutional muster.’” Westphal, at 315. Despite this, there are those who question whether the 260 week limitation would survive review by the present court, and wonder if the prior restriction of 350 weeks may eventually be revived by a future constitutional challenge.

The Westphal Court did not address the issue of temporary partial disability benefits in 2016. Scholars will explain that this is because temporary partial (“TPD”) benefits were not squarely before the Court. However, critics argue that because the 1994 amendments intertwined these two benefits, and that the 1994 limitation of 104 weeks applied to any combination of TTD and TPD, that any revival of the prior law’s TTD provision must likewise address TPD. Despite this, the Court elected not to address TPD benefits and thus the Westphal decision leaves doubt and uncertainty in the Florida employment marketplace.

Some contend that an injured worker is entitled to a maximum of 250 weeks (almost five years) TTD benefits and an additional 104 weeks of TPD benefits. Some argue that the legislative intent of the 1994 combination of  limitations should result in the overall entitlement to temporary benefits (TTD or TPD) should be 260 weeks under the Westphal analysis. With no consensus, and with the Court declining to delineate with more specificity, the result is doubt that will have to be resolved with additional litigation.

On October 23, 2013, the First DCA issued an opinion in Castellanos v. Next Door Company. This claim challenged the amount of attorney’s fees awarded pursuant to section 440.34, Florida Statutes. Counsel for the injured worker claimed that the fee resulting from application of this statute was inadequate and that therefore this statutory provision is unconstitutional. The First DCA concluded that “the statute is constitutional, both on its face and as applied.” That was also certified to the Supreme Court as a question of “great public importance.”

Castellanos was a continuation of the attorney fee dispute litigated extensively following passage of the 2003 reforms. That litigation culminated in the October 2008 decision of the Florida Supreme Court in Murray v. Mariner Health.

The Florida Supreme Court delivered its decision on April 28, 2016, in Castellanos v. Next Door Company. The Court was unable to conclude that the statutory limitation on attorneys’ fees was unconstitutional on its face. The Court elected not to declare the statute unconstitutional as applied to Castellanos. The Court instead concluded that any limitation in Florida law that does not afford judicial discretion is an irrebuttable presumption and unconstitutional. An academically honest interpretation of the implications of this decision may be broad and potentially impact a variety of Florida statutory parameters, both within workers’ compensation and beyond. The effect of the Court’s Castellanos decision is destruction of any objective limitation on claimant attorneys’ fees under section 440.34. The sole remaining limitation on fees is now a determination of “reasonable” by the Judge of Compensation Claims.

The limitation of “reasonable” is not new to attorneys’ fees in workers’ compensation. In the original Florida Workers’ Compensation Statute section 5966 required approval of the commission for legal service fees, §5966(34), Fla. Stat. In 1955, the modifier “reasonable” was added to what was by then section 440.34, Florida Statutes, (“be awarded reasonable attorney fee, to be approved by the commission”). That modifier requiring reasonableness was present thereafter in section 440.34, but the measure of reasonableness was modified.

The Florida Supreme Court concluded that the Canons of Professional Ethics, governing the ethics of attorneys’ fees, was “a safeguard in fixing the amount of [E/C-paid] fees awarded to the claimant.” In 1966, the Florida Supreme Court rendered Lee Engineering & Constr. Co. v. Fellows, 209 So.2d 454 (Fla. 1966). There the Court concluded that a “schedule of fees ... was helpful but unreliable.” The Court therefore directed that “reasonable” fees be awarded instead, and delineated a series of considerations, or “factors,” to be analyzed in determining reasonableness. Those became commonly referred to as the “Lee Engineering Factors.” As the Court noted in Castellanos, the process became one in which “the JCC applied the formula and then increased or decreased the amount after consideration of the factors in order to determine a reasonable fee.” Castellanos, 440.

This process was codified in the 1977 legislature, which statutorily adopted “factors” to be considered in deviating from the statutory formula fee. Those factors were divided into paragraphs (a) through (h). This remained the same until 1994 when further revisions were made to section 440.34, Florida Statutes (1994). The formula was altered, and the factors were reduced, resulting in a similar but shorter list of (a) through (f). In 2003 judicial discretion for deviation from the formula was removed from the statute. However, the word “reasonable” remained modifying “attorney fee.”

Following a series of challenges, the Florida Supreme Court in Murray v. Mariner Health elected to not address the constitutionality of section 440.34, Florida Statutes. Instead the Court relied upon a statutory interpretation centered on the continued presence therein of the word “reasonable.” Concluding that “reasonable” was inconsistent with the percentage restrictions of the 2003 statute, the Court concluded that attorneys were entitled to “reasonable” fees despite the seeming limitation of the statutory percentage calculation.   

Following rendition of the Supreme Court’s Murray decision, in the spring of 2009, the Florida Legislature amended section 440.34, Florida Statutes (2003), to remove “reasonable,” and, thus, to again forbid hourly fees. It was this statute which faced review in Castellanos, and which has been declared invalid. Thus, from some perspectives the 1994 attorney fee statute would seemingly be revived. The Court in Castellanos endorsed revival: “our holding that the conclusive fee schedule in section 440.34 is unconstitutional operates to revive the statute's immediate predecessor.” The Court did not articulate specifically what it perceived to be the “immediate predecessor.”

The Court then declared "Only where the claimant can demonstrate, based on the standard this Court articulated long ago in Lee Engineering, that the fee schedule results in an unreasonable fee—such as in a case like this—will the claimant's attorney be entitled to a fee that deviates from the fee schedule.”  And, thus, without stating specifically, the Court clarified that the “immediate predecessor” is more likely the 2003 statute, not the 1994 statute. This is logical as that statute, including “reasonable” is the “immediate predecessor” of the 2009 statute (sans “reasonable”) that is stricken by Castellanos.  Thus, the parameters of Lee Engineering (that is, (a) through (h)) are appropriate considerations based upon the Court’s pronouncement. The arguments for the more limited analysis, (section 440.34, considerations (a) through (f)) seem unsupported.

The Castellanos decision departs from the usual analysis of constitutional infirmity. The usual course would consider constitutionality whether “on its face” or “as applied.” Few considered a “facial” determination to be a likely outcome. Meanwhile, many saw a variety of procedural obstacles to future litigation if the court determined the statute unconstitutional “as applied.” The Judges of Compensation Claims lack authority to make any determination of constitutionality. Thus, any “as applied” analysis by the court was perceived as setting the stage for a parade of claims to the First District Court of Appeal for case-by-case determinations of appropriate fees following any “as applied” decision.

The court instead adopted a very broad analysis of presumptions in Castellanos. Though section 440.34 does not include the word “presumptive” or “presumption,” the court engaged an analysis focusing upon its conclusion that any limitation or parameter, which is not subject to challenge, is an “irrebutable presumption” and as such is facially unconstitutional. By this legal standard, implying “presumption,” a great many statutory parameters and limitations might likewise be unconstitutional. Caps and limitations including speed limits, statutes of limitations and minimum sentence requirements are but a few that might similarly be misinterpreted as “irrebuttable presumptions.”

The impact of the Castellanos and Westphal decisions was immediate. In May 2016, the National Council on Compensation Insurance sought a 17.1% rate increase based upon the Castellanos decision and the legislative adjustments to the Florida medical fee schedule. Following the publication of Westphal, an amended filing was made requesting an increase of 19.6%. 

The Florida Office of Insurance Regulation (OIR) denied that request September 27, 2016, finding it had “not been justified.” The OIR instead approved a 14.5% increase in rates effective December 1, 2016. An attorney that represents injured workers filed a lawsuit against the Florida Office of Insurance Regulation and the National Council of Compensation Insurance. 

The allegations of this suit were broad and included claims that the process for determining proposed rates in Florida workers’ compensation violated the requirements of open government (Sunshine law), and that the rate-determination process should be both enjoined at that time and altered in future proceedings.  

On November 23, 2016, the Circuit Court held the process violated the Florida Sunshine Law and enjoined the rate increase. The Office of Insurance Regulation filed an appeal on November 29, 2016. As the appeal was filed by a governmental agency, the trial court decision was stayed pending appeal. The rate increase thus became effective December 1, 2016. The ultimate outcome is unknown. 

Thursday, December 1, 2016

"Trial Orders," Definitions and Rules in Florida WC

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

Data interpretation is a focus of this report. For the integrity of the data presented, criteria are uniformly applied to the categorization of orders and judicial efforts. This is in an attempt to produce consistent results. The OJCC does not exercise any guidance or control, however, over the methodology each judge employs for docket management. 

Thus, judicial independence dictates that whether to hold an evidentiary hearing, a procedural hearing, or to adjudicate a matter without hearing is up to the assigned judge. There are those judges who appear to hold a significantly higher volume of evidentiary hearings than other judges. Some judges accuse others of holding such hearings for the sole purpose of producing statistics published in this report. It is impossible to determine a judge’s subjective decision to hold a trial or to rule without a trial. The data reported herein is therefore primarily a recitation of the volumes, but not an analysis of propriety or necessity for such activities. 

There are also judges who appear to hold a great many more procedural hearings than do other judges. For procedural matters, the Rules of Procedure for Workers' Compensation Adjudications provide that the vast majority of motions will be determined without hearing, and that motion hearings will be held only in exceptional circumstances. It appears that there are some judges who tend to conclude that any dispute is an exceptional circumstance and hold many procedural motion hearings. 

Anecdotally, there are also some judges who decline to follow the Rules of Procedure for Workers' Compensation Adjudications in other instances, including ignoring the Rules’ provision regarding approval of costs in conjunction with fee stipulations and motions. 

This annual report marks a departure in the methodology of quantifying trials. In 2006, a committee of Judges of Compensation Claims addressed the historical issue that this agency has faced in this regard. Prior to the legislative transfer of the OJCC to the Division of Administrative Hearings (DOAH), there were efforts at gathering and representing data. However, definition and consistency were difficult. There was no definition of “trial” and each of the 31 judges made independent definitions of what event constituted a trial. 

Historically, there were abuses under this paradigm. One judge was known to consider a “trial” to be any event which “raised his blood pressure.” There were instances in which parties, despite having reached an amicable resolution of issues, were required by judges to present for the scheduled trial so that the terms could be recited on the record. Thus, there was manipulation and inconsistency. 

In 2006, the committee concluded that it would be appropriate to include the known trial events in the definition. Final Hearings regarding petitions for benefits, and hearings regarding contested attorney fees pursuant to a verified motion or verified petition required no real analysis. But, there was recognition that some other evidentiary matters were similar to such proceedings, in that evidence would be required to determine the matter and a substantive order would be required to adjudicate the issue. Thus, the OJCC adopted a definition of “trial” that included merits hearings, contested fee hearings, and evidentiary motion hearings. 

The trial volumes, time to trial and time to order calculations have included the orders in this definition for ten years. That inclusion has not been without controversy. Each order entered by a Florida Judge of Compensation Claims is uploaded to the appropriate case docket. When that filing occurs, the filer characterized the order. Thus, how any order was initially characterized was dependent upon the judgement of the filer, be it judge or staff at the judge’s direction. 

Each year, the “trial orders” were reviewed and audited in the preparation of this report. Many were removed annually from the “trial order” list. These were orders that should not have been characterized in the filing process as “trial orders.” They were non-substantive orders, orders entered without a hearing (no hearing, no “trial”), and orders entered when no evidence was either needed or introduced. 

In the course of that process in 2016, a large volume of orders was identified that did not belong in the “trial order” categorization. Through the audit process critical to this report, various excuses and contrivances were enunciated to excuse the inclusion of these orders in the population of “trial orders.” The most disturbing of the excuses/justifications was that this Office should strive to appear engaged and busy, and these contrived orders would support such a conclusion. 

The clear conclusion is the antithesis of that justification. This Office has no obligation to “look” busy, but is instead obligated to effectively and efficiently process, mediate, and adjudicate workers’ compensation claims. The efforts of this office should be measured as required by law. But, those measurements should be accurate and concise, not contrived or concocted.

Therefore, the definition of “trial order” was changed in 2016 to include only Final Hearings regarding petitions for benefits, and hearings regarding contested attorney fees pursuant to a verified motion or verified petition. That change results in lower trial volumes, and longer periods “to trial” and “to order.” 

Tuesday, November 29, 2016

When will Electronic Billing come to Florida?

This fall, New Jersey joined the modern world of medical services, with a law requiring electronic medical billing. In the electronic age of smart phones, the Internet, email and more, paper bills and envelopes remains the predominant business practice for medical billing. It is a topic that raises curiosity and questions. Why is the medical industry, otherwise so enamored with technology, mired in the 20th Century?

In workers' compensation and other medical delivery systems, we consistently hear of the benefits of data. Data can be used to identify trends, make predictions, budget and manage limited resources. What if there were Perfect Access to Perfect Information? Of course that is not realistic. Perfection may be an admirable goal, but it is not attainable. However, there seems no reason not to pursue it nonetheless. If we pursue it, we will undoubtedly make progress towards a better process. 

Since I first wrote about electronic billing, I have had many discussions about its benefits and perceived costs. It became an ancillary topic in the National Conversation on workers' compensation last spring. What if we could do a better job of gathering and using information about injuries? If medical care providers submitted their billing electronically, and accompanied by a digital medical record of the treatment encounter, who would benefit?

If a process were created thoughtfully, it is likely that everyone could enjoy some benefit, although there would undoubtedly also be some measure of cost also. The providers and payers could reduce the costs of paper, envelopes, postage, and more. The amount of time invested on both sides of this equation, creating paper billings and checks, printing and stuffing envelopes, and opening/processing on the other end is immense. 

In order for a medical provider to create a bill for services, data has to be entered into the computer. That data is then printed onto paper, and transmitted across the country on trucks. When it arrives, someone has to open and straighten the document. The same data is then input into another computer, potentially with mistakes. The document then has to be scanned or filed. At some point the paper has to be shredded and recycled, and the process starts anew. It is a resource and labor-intensive process. 

We have seen the electronic filing process benefit litigation. The claims for benefits or petitions or otherwise were prepared in some attorney's office, printed, mailed, opened, straightened and the data re-entered into another computer. In the microcosm of Florida workers' compensation litigation, we have witnessed the benefit of electronic filing. Attorneys and the state have saved millions of dollars in time, paper and postage by creating and then mandating the electronic filing process. 

There has also been a great deal of discussion of the potential for injured workers and their employers to have access to medical information. In the Social Security system, there is such access. If Florida developed a system for electronic submission of medical billing, and medical records, such a database (or data "warehouse") could be easily included. Employees and employers could have timely access to treatment records, recommendations, restrictions, limitations, plans and more. A database that would likewise reduce costs for attorneys, employers, carriers, and workers. 

WorkCompCentral reported that New Jersey joins the electronic billing states in 2016. It is, like many legislative actions, a law that illustrates compromises. It requires most medical NJ providers to submit bills electronically, with an exception for infrequent providers of workers' compensation services, those submitting "fewer than 25 bills per month." This compromise likely reflects the cost of training and equipment that will be required for the process. Allowing the small business/practice an exception makes sense. 

What does the medical provider get from the exchange? The easily identified benefits are listed above. But, this new law also provides a quid pro quo for adopting the modern process. Under the New Jersey law, the electronically submitted billing has to be paid within two months. This makes sense. With the billing submitted electronically, the payers should be able to avoid significant work involved with interpreting that data and the data-entry or processing required for bill adjustment and payment. 

According to an earlier story on WorkCompCentral, New Jersey is only the fourth state to mandate electronic medical billing. It joins an elite community with Minnesota, North Carolina and Texas. They are not the only states with electronic billing, but the only ones that require it. Six more states "have adopted an electronic medical billing framework for their workers' compensation systems:" California, Georgia, Illinois, Louisiana, Oregon and Washington. In all, ten states lead the way to an inevitable future.

The Medical Society of New Jersey, sought the exception for small practices submitting less than 25 bills per month. But otherwise was supportive of the change. Its legislative affairs spokesman said that "the world is moving to electronic. We get that." And so, “we want it to move that way in order for claims to be processed more quickly. The concept is great." There are concerns regarding the the involvement of "third parties, clearinghouses," and the potential processing costs to medical providers. The Medical Society says these costs are not inconsequential, and over time can be expected to "add up," as "practices can send in hundreds of claims per day." But there is support nonetheless. 

Despite the concerns and the potential costs, New Jersey legislatively joins an elite four. And while a total of ten states offer the platform, and evolve towards the new normal of electronic billing, Florida waits. The third most populous state in the union behind California (which permits electronic billing) and Texas (which mandates it), Florida waits, prints, and mails. Carriers, open, straighten, scan, file and repeat data entry. Doubtlessly, Florida will allow electronic billing and may require it. The question is when. 

Sunday, November 27, 2016

Electronic Filing in Florida has Saved Millions

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

Having led the way into the twenty-first century in 2005-06 with deployment of electronic filing (“eFiling,” or “eJCC”), the OJCC has continued to revise and leverage this process. In 2011-12, the OJCC began to enforce the mandatory use of electronic filing by represented parties. In 2011-12 programming was added to afford eFiling access to all users, represented or not. In 2012-13, programming was completed to allow electronic service of pleadings among and between lawyers and insurance carriers. The result is a neatly integrated electronic filing and service system that is exemplary.

In 2015-16, five hundred forty-five thousand six hundred ninety-five (545,695) documents were e-filed with the OJCC. The filing volumes are described in this chart.

Using the parameters described in the 2006-07 OJCC Annual Report, the cumulative end-user savings to date generated by this eFiling system, by the end of fiscal 2015-16, were at least two million nine hundred sixty-nine thousand four hundred seventy-eight dollars ($2,969,478). The total savings to the state is at least four million three hundred twenty-six thousand one hundred thirty-five dollars ($4,326,135). The combination is over seven million dollars in savings, and the total OJCC investment in e-filing to date is just over one million dollars. The eJCC return on investment from eFiling is about 700%. 

Electronic service was added to the eJCC platform in January 2013. This feature allows significant volumes of documents to be served electronically upon opposing counsel and insurance carriers in conjunction with electronic filing. This process change has enabled an additional annual savings to practitioners and carriers in excess of one million dollars due to the ability to serve each other documents electronically. The eService savings, combined with eFiling savings is thus about ten million dollars. This achievement is particularly gratifying in light of issues and complications experienced by other states’ systems that have expended large special fund allocations building and deploying electronic filing.

According to, various states have spent far more developing their case management and litigation platforms. Notably, their systems are for all workers’ compensation claims in their respective states, while the OJCC system is for litigated claims only. Pennsylvania is reported to have spent $45.1 million initially, and contracted for three years of support and maintenance at $5.1 million per year. California has reportedly spent $61 million to deploy their case management and electronic filing platform.

The Office of Judges of Compensation Claims’ success with eFiling and eService has been achieved without any extraordinary budget allocations. The aggregate total programming cost to date barely exceeds one million dollars

Thursday, November 24, 2016

A Not-so-Quiet Thanksgiving 2016

I had planned to write a reflective piece this quiet morning of Thanksgiving 2016. But the quiet was interrupted by two significant Wednesday court rulings in the world of workers' compensation. Knowing that most of the marketplace will be focused primarily upon food and festivity for the rest of the day, I nonetheless provide the following. It is hoped that in coming days readers will return from their fine feasts and a long relaxing weekend of college football rivalry, ready to consider the implications of two cases separated by hundreds of miles. 

Last spring, Kentucky Abolished and Recreated its Nominating Commission for workers' compensation judges. The process resulted in the end of various commissioner's terms on the panel, and the recently elected Governor appointed all of the members of the newly created Commission. That action, and legal challenges to it, came at a difficult time for Kentucky, because there were vacant judicial positions and their Commission, like Florida's, is critical to the process of filling vacancies. 

Following the Kentucky Governor's decision, a lawsuit was filed. The challenge was essentially about Gubernatorial authority, with the challengers asking the courts to prevent the operation of the new commission. The challengers felt that the process used, if deemed appropriate, effectively divested sitting commissioners of their authority, conveyed through prior appointment. There was also mention of separation of powers. 

As a result, for much of the last 6 months, the sitting Kentucky Administrative Law Judges (ALJ) have been doing their best to maintain docket control and render timely decisions. Kentucky law allows up to 19 ALJs. There are currently 12 serving, and there has been a recent history of 18 serving. There has thus been reference in the news to "6 vacant positions." The math on this is fairly straightforward, 6 vacancies from a team of 18 is one-third. And anyone managing a business can attest to the challenges of a short-staffed organization. 

The Glasgow Daily Times reported yesterday Shepherd says Bevin can appoint workers' comp judges. Kentucky Judge Shepherd ruled that the Governor "can now go ahead and appoint workers’ compensation judges nominated by members of a new commission he appointed." In so ruling, the Circuit Judge "amended an earlier temporary injunction to allow Bevin’s newly appointed members of the commission along with one holdover from the original commission to send the governor nominations for the vacancies."

Kentuckians will see progress from this decision. Certainly, there is the matter of perspective. Some may see it as positive progress and others as negative, but it is movement nonetheless. It will allow the new Commission to conduct interviews and propose candidates for appointment. Unlike Florida, in Kentucky the Commission nominates, the Governor appoints, and then the Senate has to confirm. That last step is absent from the Florida process. 

The Kentucky Governor praised the decision, saying in a statement that "Kentuckians were really beginning to feel the pain of not being able to move forward with their workers' comp claims.” His office lamented that the vacancies had existed "for far too long.” It is now possible that the current vacancies, and perhaps some that will soon occur due to the expiration of various judge's commissions or retirements, can be filled. 

Judge Shepherd's decision is not closure to the litigation however. As the Times reports, this "order, however, does not rule on the merits of the challenge." Instead, the judge concluded that "in light of the inability to reach a compromise he believes it in the public interest to allow the governors’ appointees to meet and nominate judges for the vacancies." Some might perhaps characterize that a decision of expedience. But, the Judge perceived sufficient checks and balances in the necessity of Senate confirmation, and concluded he there was no “useful purpose in delaying the submission of (nominees’) names to the Governor in these circumstances.” 

The Times concluded that it is likely the ultimate decision regarding executive action dissolving one Commission and creating another will be up to an appellate court. But, it appears that efforts will soon be underway for appointment and confirmation of 6 new Kentucky ALJs, and the relief in workload for the current 12 judges.

In Florida, the news on Thanksgiving eve was also from a Circuit Judge, this one in Tallahassee. The News Service of Florida reported late Wednesday that a Judge Halts Workers Comp Rate Hike over Sunshine Issues. The announcement of this ruling came late in the business day, with the News Service article dateline of 11:00 p.m. The rate process litigation has been ongoing for several months, and was directed at the decision-making process for Florida workers' compensation insurance rates. A significant rate increase was slated to take effect December 1, 2016 (next week). The judge's ruling Wednesday will delay or perhaps prevent that increase. 

The Florida Circuit Judge concluded that "the National Council on Compensation Insurance --- the organization that files rate proposals for the industry --- did not comply with legal requirements about holding public meetings during its deliberations on the" proposed insurance rate increase. The Judge cited the occurrence of "improper closed-door meetings with staff members of the Florida Office of Insurance Regulation" in reaching her conclusion that the process was not consistent with Florida law regarding open meetings and public discourse. 

The Judge said that "clear and convincing evidence demonstrated that NCCI and the OIR (Office of Insurance Regulation) held a series of secret meetings in the shade … and not in the Sunshine as required, meetings at which decision maker NCCI (through its staff) discussed and decided the substance of the rate increases NCCI proposed." The Judge concluded that these meetings "had the effect of shutting the public out of meaningful participation in the rate making process."

As in the Kentucky ruling, the Circuit Judge's decision may not be the conclusion of the issue. The "NCCI released a statement Wednesday afternoon saying it was 'very disappointed' in the ruling and vowing to challenge it." It's position is that the process engaged was in compliance with the law, and it says "NCCI plans to appeal the trial court's decision." Appellate process is rarely as rapid as any party hopes. Review by the District Courts can take months, and recent workers' compensation decisions by The Florida Supreme Court required significant time also. 

The increase in workers' compensation rates was nominally attributed to three factors: the Florida Supreme Court decisions in Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, and the regulatory revisions to the workers' compensation provider fee schedule earlier in 2016. It has been suggested that potential impacts of Westphal on temporary partial disability and the First District decision in Miles v. City of Edgewater could likewise have market effects in future, but these were not discussed significantly in the rate filing process. The NCCI recommended an overall rate increase of close to 20%, and the OIR had approved a rate increase of 14.5, which was to be effective December 1, 2016. 

The News Service of Florida posits that "the ruling could add fuel to an expected battle about the workers' compensation insurance system during the 2017 legislative session." It notes that injured worker attorneys and the insurance industry are at odds regarding whether there is a need for increased insurance rates on employers. It is a subject that has been discussed much in the last 6 months, and which is likely to receive further discussion. 

There has also been a history of contention and debate regarding a variety of Florida workers' compensation issues, benefits, reforms, etc. Over the last year, I have heard many opinions expressed about how and if the Florida Legislature might amend workers' compensation in 2017. What has been consistent in these comments has been the inconsistency of belief, conjecture and prediction. 

Asked by the press for comment late Wednesday, I made the following points. 

(1) The market is seemingly stalled at this moment. Will this decision face appellate review? If so, then it could be a year before further court action, and if the matter reaches the Supreme Court, the delay for final determination  could be longer. 

(2) Will there be some process engaged in the meantime to consider rates? The NCCI conclusion was that a rate increase is needed to cover projected costs. The Insurance Commissioner agreed. If that conclusion is accurate, that rate increase is needed, and there will seemingly be inevitable delay now in implementation, what will that mean to the insurance entities that face liability for workers' compensation benefits? 

(3) If carriers view the potential liability as too significant, it is possible that some may reduce exposure by limiting their Florida portfolio of risk. There have been periods in the past when that occurred. 

(4) If there is exposure limitation, will it affect certain industries or professions because of existing perceptions of their risk? 

(5) Will impact, if any, be equal on carriers large and small, employers large and small, or is it possible that some market segments could be affected differently? 

(6) If an increase is in fact needed, and it is delayed, will that delay impact the ultimate extent of rate change? 

I concluded with the frank admission that I am certain that there are many perspectives on these questions. It is also very likely that I am simply not comprehending all of the potential arguments or impacts. But, the Circuit judge's decision is the law at least until some further ruling by a court. In light of the Judge's conclusions, as published and without having the opportunity to read the actual order, I find myself with more questions than answers.

Tune in next year for a hopefully more introspective and reflective piece on the quiet morning of Thanksgiving 2017. 

Tuesday, November 22, 2016

New Case Volumes Grew in 2016

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

The volume of “new cases filed” has been tabulated only since the OJCC was transferred to the DOAH in 2001. The term “new cases filed” refers to the volume of PFBs filed, which represent the first PFB in the history of that particular accident by that particular injured worker. 

Workers’ compensation cases often involve the litigation of multiple, serial PFBs over the course of years. The rate at which “new cases” are filed is indicative of the rate at which cases are entering the OJCC litigation process, and is not affected by the serial nature inherent to workers’ compensation generally, and thus of PFB filing.

Generally speaking, this is the inverse of the volume of settlements approved in a year, which is similarly statistically indicative of the trend rate at which cases are leaving the OJCC litigation process. Although cases can be resolved without settlement, those that are not settled may have some potential to return to the litigation process regarding some future additional claims or issues. The “new case” measure may arguably be a more accurate indicator than PFB filing volume of the effect of legislative changes to the substantive benefits provided to Florida employees through chapter 440, Florida Statutes.

However, a “new case” filed in 2015-16 could involve an accident that year, or could involve an accident that occurred years prior. It is possible that an injured worker might receive all benefits due, without any need for litigation, for many years following a work accident. Such a case may enter litigation after many years of administrative delivery of some benefits. The OJCC has not attempted to delineate the age of accidents that enter the OJCC system as “new cases” each year.
The volume of “new cases” filed steadily declined after 2003 statutory amendments. The rate of decline in “new cases” filing was less than the rate of PFB decline in almost every fiscal year since 2003. An exception was 2009-10, when “new case” filing decreased over ten percent (10%) compared to an overall PFB filing decrease of eight percent (8%). In 2013-14 and 2014-15 “new case” filings increased slightly. That trend continued in 2015-16, and the rate of increase may be strengthening. The following graph depicts the declining OJCC “new case” filings (red), and the PFB filings (blue).

These figures support that “new cases” and PFB filings each increased significantly between 2001-02 and 2002-03. Notably, in 2004-05 (107,319), two years after the 2002-03 volume “spike” (151,021), PFB volumes returned to a level reasonably consistent with 2001-02 (115,985). The “new cases” volume similarly “spiked” markedly in 2002-03 (56,869), but returned to pre-2002-03 levels only five years later, in 2008-09 (33,995).

This comparison supports that overall PFB filing volume has demonstrated more elasticity than the “new cases” volume. The coincident increase in both PFB and “new case” volumes in 2013-14 had not occurred since 2002-03. It was suggested in the 2014-15 Annual Report that a demonstrated second year of increased volume could be significant. It is now suggested that the third year of increase in 2015-16 substantiates an upward trend, of as yet unknown extent or cause.

The volume of “new cases” filed may also be expressed as a percentage of the gross volume of petitions for benefits (PFB) filed during the same time period. This compares the relationship of each annual “new cases” volume to the corresponding annual overall PFB filing volume. This comparison demonstrates that the percentage of all PFBs that were “new cases filed” remained fairly consistent after the 2003 reforms; in fiscal 2003-04 (34.5%) and 2004-05 (35.9%). As overall PFB volumes have decreased significantly, and “new case” volumes decreased more moderately, the percentage of “new cases” has remained above 40% since 2005-06, and the overall trend has been upward, peaking in 2014-15, and most recently trending down.

In summary, the available data supports several conclusions. First, the overall PFB volume stabilized in 2008-09, and returned to a measured and consistent decline thereafter. In 2013-14 PFB volume began to increase, and that trend has continued over the last three years. The volume of “new cases filed” has decreased at a much slower rate generally, punctuated by a marked decrease in 2009-10 (10.21%) and a marked increase in 2013-14 (2.97%).  The trend for “new cases” is likewise now trending upward for the last three years. However, the PFB volume is still remarkably lower than historically experienced. The 2015-16 volume is similar to 2009-10, but remains much lower than in the years 2001 through 2008-09. 

Though the percentage of “new cases” has declined to 46.3% in 2015-16 (as the rate of increase in overall PFB volume has strengthened), and is similar to percentages in 2008-09 and 2010-11, it remains significantly higher than in the first years of the century. This data does not support that constraints on the litigation process, that is the 2003 statutory amendments, are decreasing the litigation of issues in claims occurring after those revisions. The data appears to support the contrary, that litigation involving new claims remains reasonably consistent, while litigation on previously filed claims has decreased over time.

The intuitive conclusion from this analysis might focus on attorneys’ fee payments, as amended in 2003. One might conclude that there is a perception that litigation early in a claim was more lucrative than subsequent litigation. Such a perception might be demonstrated by a willingness to file new cases, but reluctance to litigate arguably minor issues thereafter due to fee compression. It is possible that the potential volume of future benefits is sufficient, early in a claim, to accommodate litigation. 

This may be more supported in claims that are completely denied, or in which there are vast disparities in perceptions of the degree of future medical care required, leading to denial of benefits with significant monetary value and thus significant associated fee issues under the statutory formula reiterated in the 2009 legislative session. If this contention holds, Florida might expect to see continuing increases in PFB filing volume with the judicially created attorney fee changes.
In the past fee statute iterations, hourly fees were common. Thus, there was less compression on fee entitlement in subsequent litigation of comparatively minor medical issues. With hourly fees, litigation was economically viable on moderate to low monetary value benefits regardless of the stage of that claim in which such benefits were sought. The strict percentage fee calculation in place since 2009 may have influenced market behavior, and their elimination may likewise affect behavior and therefore volumes.

Sunday, November 20, 2016

Florida Petition Volumes Grew in 2016

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

The Florida Legislature enacted significant amendments to the Florida Workers’ Compensation Law in 1994 and again in 2003. After the 1994 reforms, PFB filing volume consistently increased each year. Just prior to the 2003 reforms, annual PFB filings peaked at 151,021. The progressive increase in PFB filings between 1994 and 2003 belies the efficacy of the 1994 reforms’ intent to decrease litigation. 

Immediately following the 2003 reforms, the PFB filing volume decreased at a consistent annual rate of approximately fifteen percent (15.21% to 15.9%) over each of the next three years, and then continued to decline with reasonable consistency through fiscal 2013, with the sole exception of a slight increase in 2008-09. PFB filing volume increased just over two percent in 2013-14 and another 1% increase in 2014-15, followed by a 12% increase in 2015-16. The PFB volume in 2015-16 was about 76% higher than the 38,254 filed in 1993 before that “sweeping reform” was passed.

One component of the 2003 reforms was an amendment to section 440.34, Florida Statutes, which addresses the payment of attorneys’ fees in workers’ compensation cases. The interpretation of that statutory change was litigated extensively, and multiple decisions of the Florida First District Court of Appeal (DCA) interpreted section 440.34, Florida Statutes (2003) as limiting fees to a “percentage of recovery” fee. 

Under those DCA interpretations of section 440.34, hourly attorneys’ fees were forbidden in most cases. In October 2008, the Florida Supreme Court decided Murray v. Mariner Health, 994 So.2d 1051 (Fla. 2008). The Supreme Court’s interpretation of section 440.34 differed from the DCA decisions, and effectively restored entitlement to hourly attorneys’ fees for cases with a date of accident after 2003. It is possible the marginal increase (1.6%) in 2008-09 was related to the Murray decision.

In the spring of 2009, the Florida Legislature amended section 440.34 to again forbid hourly fees. Therefore, the Court’s Murray decision affects cases between October 1, 2003, and July 1, 2009. The mandatory fee schedule was thus in effect again beginning July 1, 2009. This was challenged as unconstitutional, and Castellanos v. Next Door Company, 192 So.3d 431 (Fla. 2016) was decided in 2016. This decision concluded several key points. 

First, that attorneys’ fees are the most important element of the Florida workers’ compensation law. The Florida Supreme Court in Castellanos noted “that the right of a claimant to obtain a reasonable attorneys’ fee has been a critical feature of the workers’ compensation law.” The Court went further, however, concluding that “a reasonable attorneys’ fee has always been the linchpin to the constitutionality of the workers’ compensation law.” Castellanos, at 435. Not “a” linchpin, but “the” linchpin. 

The common dictionary definition of “linchpin” is “the most important part of a complex situation or system.” Claimant attorney fees, according to the Florida Supreme Court, is the most important part of the Florida workers’ compensation system. Second, that limitations on fees are unconstitutional. And, that access to counsel is a critical element of the workers’ compensation system.

It is, again, possible that perceptions of the outcome of a case, Castellanos in this instance, is affecting PFB filing volumes currently. Some suggest instead that the Florida economy is rebounding from the Great Recession and that increased Florida employment overall is driving increased injury volumes and therefore injury litigation. The OJCC has no foundation to determine what if any particular force is driving the current increase. 

Florida workers’ compensation premiums decreased significantly after the 2003 reforms. The cumulative premium decrease through fiscal year 2008-09 was approximately 58%. Interestingly, in that same time period, PFB filings had decreased approximately fifty-two percent (51.85%), which might be interpreted as a close correlation. Any perceived correlation between litigation filing rates and insurance rates is difficult to defend however. 

Despite consistently decreasing PFB filing rates between 2009-10 and 2012-13, workers’ compensation rates increased annually during that period. Notably, the rates changes are approved annually in the fall of each year. The filing rates reported demonstrate PFB volumes prior to each described premium change. The effect, if any, of such PFBs might not become apparent for months or even years after filing. Thus, while the rate of filing is interesting, it is in fact the subsequent affect of filing, that is, whether injured workers prevail or not, that could actually affect premium.

The following graph represents PFB filing since 1992-93. The 1994 reforms were intended to curtail litigation. Despite that intention, the PFB filings increased markedly thereafter.

The OJCC was staffed by 31 judges in 1993. Following the 2012 budget/position reductions, the OJCC is again staffed by 31 judges. While the judicial workload has decreased from the demands of the exceptional filings in recent years, it has not yet returned to the baseline of 1994. The 2014-15 filings (60,021) remain about 57% higher than in 1993-94 (38,254). And, the filing trend is upward at this time. In coming months, that trend may moderate or become more profound, and should be monitored carefully. 

The figures for periods prior to 2001 (the transfer of the OJCC from the DLES to the DOAH) are based upon data previously published by the DLES. The reliability of these statistics can no longer be independently verified.  Some question as to the validity of these figures is raised by the fact that the Petition for Benefits (PFB) process was not added to chapter 440, Florida Statutes, until the 1994 statutory amendments, and that the DLES figures nonetheless reflect “PFB” filing prior to that time. 

This could be indicative of an actual flaw in the data, or the figures prior to 1994 may represent the filing of “Claims for Benefits.” Prior to the PFB process, “claims” were filed to put an E/C on notice of a dispute, but the jurisdiction of the OJCC was not invoked until a separate pleading, an “Application for Hearing,” was filed. The current statutes’ PFB is therefore effectively a combination of the prior “Claim” and “Application.” Because of this distinction, it may or may not be appropriate to compare “Claim” or “Application for Hearing” filing to PFB filing. 

Presuming the accuracy of the DLES volumes, the PFB filing rate in 2012-13 was the lowest in eighteen years, since 1995-96. And, since that time the trend has indicated increased filings. Preliminary data for fiscal 2017 indicates the potential of significantly increased petition filings, consistent with the demonstrated trend.