Wednesday, November 12, 2014

The Data is Corrected, Florida Defense Fees Decreasing

Defense attorney fees decreased in 2013-14. The OJCC Annual Report will be published later this month and will have more detail on the recent history of defense fees. The OJCC captures data on claimant's attorney fees by reviewing each fee order that is entered throughout the year. Defense fees are documented through a process in which carriers, servicing agents, and self-insured employers report their individual aggregate Florida defense fees each year. 

This is required by Rule 60Q6.124(5).
"No later than September 1 of each year, all self-insurers, third-party administrators, and carriers shall report by e-JCC to the OJCC the amount of all attorney’s fees paid to their defense attorneys in connection with workers’ compensation claims during the prior July 1 through June 30 fiscal year."

Math is not the subject that defines many of us in the legal profession. Many times I have joked that I would have gone to medical school had it not been for having to pass calculus. Just last week, I was asked to reconcile a set of statistics from the OJCC clerk's office with my manual calculation of similar statistics provided to a judge 18 months ago. It took me an hour to find the incongruity. As usual, human error was responsible. That's not good. Worse, it was my human error. 

Unfortunately, we all make mistakes. We all invest much time in checking, double checking, proof reading, etc. and nonetheless we all still make errors. Computers are a great benefit in this regard. Adam Osborne is credited with saying "people think computers will keep them from making mistakes. They're wrong. With computers you make mistakes faster." 

Other great computer quotes for which I have not found attribution are "computers make very fast, very accurate mistakes" and "computer: a device designed to speed and automate errors." These tongue-in-cheek truisms remind us that computers are powerful and convenient, but that power can compound our human errors. 

For the last several years, the trend in claimant's attorney fees has been consistently downward. The reported trend in Florida defense fees demonstrated increase early in the century, which then resolved into a vacillating trend, with the increase seen through 2005-06, followed by two years of decrease (06-07 and 07-08), then two years of increase (08-09 an 09-10), then two years of decrease (10-11 and 11-12). Then in 2012-13, the trend was reported back to increase.

This year, the defense fee report aggregate total demonstrated a marked decrease. The extent of the decrease made me wonder about the cause. I spent a day comparing the figures in each line this year's report to the corresponding lines in last year's report. A couple of lines proved worthy of additional investigation. One in particular showed a servicing agent with a decrease in reported defense fees of almost $26 million this year compared to last. 

I wondered what would cause a company to make such dramatic decreases in its defense fee expenditure in a one year period. I suspected that there had been a sale, merger, etc. that had resulted in some portion of business being done under some different identity. I thought I might find some new entity that had reported the rest of the $26 million or some part of it. I also wondered if I would find that some new entity that had acquired that business had not reported its defense fees, perhaps not knowing of the requirement.

I contacted the servicing agent and inquired about this marked $26 million difference. The answer was not what I expected. Essentially, after investigating their reporting, the company explained that a simple human error had been made when it generated the 2012-13 figure it had reported last year. 

Essentially, computers answer whatever question you ask, they are literal not intuitive like humans. This company had asked a question which was not sufficiently specific, and their computer answered that question literally and correctly. The answer was correct, the question was flawed.

That led me ask whether the prior year's figure for 2011-12 was likewise error; turns out it was. Turns out that all of the figures this servicing agent reported between 2002-03 and 2012-13 were erroneous for the same reason: flawed questions asked, literal answers provided and reported.

The company was gracious about the effect of the errors, and agreed to recalculate the accurate defense fee amounts for each of the last eleven years. I have some experience with generating data from databases; I am certain that this was no small task and their effort in this regard, particularly in recalculating rapidly to facilitate clearing-up this data in the 2013-14 Annual Report was most appreciated. The difference over eleven years was significant, it totals $120,082,482.  

That aggregate defense fees have been declining in Florida over recent years was already apparent; it was apparent even before the corrected figures were provided. But the overall change is not what was thought. 

Defense fees for 2014 were $237,082,331, compared to claimant fees of $141,858,184. Combined, these two are $378,940,515; 62.56% defense fees and 37.43% claimant fees. The annual tabulation of attorney fees, previously (erroneous) reported defense fees and the corrected defense attorney fees are represented in this chart:


Fiscal Year
Previously Reported Defense Attorney Fees
Previously Reported Percent Change
Corrected Defense Attorney Fees
Corrected  Percent Change
2002-03
$220,044,685.00

$216,698,474

2003-04
$231,150,559.00
5.05%
$226,585,434
4.56%
2004-05
$264,058,532.00
14.24%
$259,021,415
14.32%
2005-06
$299,412,570.00
13.39%
$290,172,000
12.03%
2006-07
$287,443,033.00
-4.00%
$277,386,580
-4.41%
2007-08
$270,501,374.00
-5.89%
$260,160,946
-6.21%
2008-09
$277,664,217.00
2.65%
$269,280,414
3.51%
2009-10
$279,570,117.00
0.69%
$269,657,104
0.14%
2010-11
$270,955,703.00
-3.08%
$259,323,175
-3.83%
2011-12
$264,022,959.00
-2.56%
$242,446,703
-6.51%
2012-13
$266,885,471.91
1.08%
$240,894,494
-0.64%
2013-14


$237,082,331
-1.58%









 

The corrected trend is down over the last four years. The last previous increase in 2009-10 is no longer even one percent. That increase is likely statistically insignificant (it likely insignificant at .69%, reported previously, but arguably less significant now) at about two-tenths of a percent. the trend in 2009-10 thus now appears to have been a flattening of the trend to "no change" followed by four consecutive years of decrease defense fees through 2013-14. 

It is hoped that this entire exercise reminds us all of the challenges of mathematics and statistics. Computers will answer many questions, but they will do so literally, answering exactly what we ask. It is important that our questions are therefore accurate. 

The real lesson though is that we can catch our errors, and when we do the best course is to correct them. That requires added effort, and it is unlikely to be pleasant, but it is what we do. 

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