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. 

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