Wednesday, May 10, 2017

First DCA Reverses Florida Rate Case

Last fall the Florida Office of Insurance Regulation approved a workers' compensation insurance rate increase. A lawsuit invalidated that increase, but an appeal was filed. Part of that appeal was a "stay" entered by the appellate court (something courts can do as part of their inherent authority, which Judges of Compensation Claims lack). Because the trial court decision was stayed last December, the rate increase went into effect, and increased rates were paid by employers over the last four months. 

May 9, 2017 brought the long-awaited decision of the Florida First District Court of Appeal in that rate challenge. For background, see Attorney Sues NCCI, FOIR, and Insurance Commissioner (yes, I added an Oxford comma to that title); and A Not-So-Quiet Thanksgiving 2016. Essentially an attorney, Mr. Fee, (as an employer of persons, and a workers' compensation insurance purchaser) challenged the manner in which the National Council on Compensation Insurance (NCCI) proposed last fall's Florida rate increase. With the District Court's recent decision, the rate increase remains in effect, and the trial court's decision is of no further import. 

From whatever perspective one might regard the substance of the case, the speed of the District Court decision is impressive. This was accomplished through expedited briefing and argument schedules. The notice of appeal was filed November 30, 2016. The initial "brief on the merits" was filed January 11, 2017, and the answer brief January 23rd. On February 22, 2017 the Court held oral argument (and in the mean time some "friend of the court," called amicus curi briefs were also filed). That is pretty rapid progress.  A total of 160 days start to to finish. That is faster than we decide most workers' compensation cases. 

The case is styled National Council on Compensation Insurance (NCCI) and the Office of Insurance Regulation (OIR), and David Altmaier as Commissioner of Florida OIR v. Fee, hereafter NCCI v. Fee. Two appeals were consolidated, cases no. 1D16-5408 and 1D16-5416. Judge Rowe wrote for the court, Judges Kelsey and Jay concurred in the opinion. 

The District Court opinion explains the Florida rate-making process. It is educational and worthwhile reading for anyone interested in better understanding how Florida, somewhat uniquely, sets workers' compensation rates. That process has been in the news this year because of proposals to change the process. Both House Bill 7085 and Senate Bill 1582 proposed rate-making changes, one toward a "loss cost" system, and the other with a more modest grace that would have allowed individual carriers to lower their respective rates without OIR approval. Neither legislative proposal passed, but their discussion was an interesting highlight of our Florida spring. 

This case against NCCI was initially filed in Miami, but was transferred to the Circuit Court in Tallahassee. That venue/forum is because the OIR is in Tallahassee and is a state agency. Once the case was transferred there, Leon County Circuit Judge Karen Gievers concluded that the rate-making process employed violated Florida's Sunshine law. WorkCompCentral covered the decision extensively last fall. 

Attorney James F. Fee, Jr. was the plaintiff. He began last spring requesting information from NCCI following the rendition of Castellanos v. Next Door Company. That court decision led to press comments about likely rate increases. Those rate comments led Mr. Fee to request information and data from NCCI, which did in fact propose a rate increase in the summer. Later, following the Court's rendition of Westphal v. City of St. Petersburg, NCCI amended its proposal, increasing the proposed rate change, and Mr. Fee continued to request NCCI data. 

The Office of Insurance Regulation (OIR), upon receiving NCCI's amended rate filing, scheduled a public hearing on rates. Mr. Fee then filed this lawsuit. He sought to prevent the OIR hearing (an injunction), and he took issue with the NCCI process that led to the rate filing, and he took issue with its responses to his information/data requests. According to the District Court opinion, Mr. Fee alleged:
(1) NCCI violated the Sunshine Law, section 286.011, Florida Statutes (2015), by 6 failing to provide notice of or a meaningful opportunity to participate in committee meetings where its rate proposals were discussed; 
(2) the amended rate filing was void ab initio due to violations of the Sunshine Law; 
(3) NCCI violated section 627.291(1), Florida Statutes, by denying Fee access to records regarding the rate proposal; and 
(4) NCCI violated the Public Records Act by failing to respond to Fee’s records requests. 
The trial court did not enjoin the OIR hearing, which proceeded on on August 16, 2016. The District Court noted that this four-hour hearing afforded public comment opportunity for "every person who filled out a speaker card" (essentially everyone that asked to speak was allowed to speak). And, the Court noted that OIR allowed "additional commentary" with a written comment period open seven days after the hearing. OIR then rejected the 19.6% increase NCCI proposed and adopted instead a 14.5% increase. 

Judge Gievers voided that approved increase, concluding NCCI and OIR violated the Sunshine Law under sections 627.091(6), 286.011, and 627.093, F.S. Furthermore, the Judge concluded NCCI violated sections 627.291(1) and 119.07, F.S. in responding to record requests Mr. Fee made. That order resulted in significant excitement and discussion last November. Those sections, the trial court interpretations and District Court holdings are as follows.

Section 627.091(6): Judge Gievers held that NCCI violated this section "by conducting meetings of the statutory rate determination committee outside the sunshine."

This section applies directly to government entities. But has also been extended to cover any "committee of a recognized rating organization with responsibility for workers’ compensation . . . insurance rates." Thus any meeting of an NCCI rate committee must be held publicly. 

The District Court noted "it is undisputed, that no committee at NCCI has been charged with the responsibility for determining worker’s compensation insurance rates in over twenty-five years." But, Judge Gievers concluded that meetings between and among NCCI and OIR employees were effectively "committee" meetings, and were held without requisite public notice. Judge Gievers found that NCCI abandoning the rate committee structure, and delegating rate proposals to one actuary, was "an attempt to evade the sunshine." 

The District Court concluded however that none of those meetings were "committee meetings," and that the NCCI actuary that made the rate filing was not himself, a "committee." The Sunshine Law applies to two or more people "meeting." Essentially, the Court concluded that Mr. Rosen did not "meet" with himself, and thus his efforts were not subject to the notice requirements. 

Section 286.011: Judge Gievers held that OIR delegated its authority over rate filings to NCCI, subjecting NCCI’s rate proposal activities to the Sunshine requirements.

The District Court held Section 286.011 requires meetings of boards, commissions and others to be "held in the sunshine." That law generally "does not apply to private organizations." But, it can when "a public entity has delegated 'the performance of its public purpose' to a private entity." Judge Gievers concluded that "OIR delegated its authority over rate filings to NCCI." But, the District Court held that "no evidence in the record supports" this. The Court explained the roles of NCCI and OIR in this process, and concluded "OIR did not delegate to NCCI any authority." 

Section 627.093: Judge Gievers held that this section "requires NCCI to conduct its activities in the sunshine." 

The District Court held this section says that the Sunshine Law applies to "every rate filing, approval or disapproval of filing, rating deviation from filing, or appeal from any of these." These requirements thus apply to the actions of OIR "subsequent to receiving a rate filing." This section therefore does not apply to "NCCI’s activities in this case," but to the OIR activity thereafter. 

Finally, the District Court addressed the various records requests made by Mr. Fee, and the obligation of NCCI to "fully and completely respond." Mr. Fee contended that the NCCI responses violated sections 627.291 and 119.07, Florida Statutes. The District Court concluded that "NCCI was not required to provide (Mr.) Fee with access to its records under either provision."

First, the Court noted that information must be provided to "an insured who has been 'affected' by a rate," and that Mr. Fee "could not have been 'affected' by a rate that had yet to go into effect." The Court concluded that the legislature's use of past tense (affected), limits "any rating organization’s obligation to turn over rate information to rates that were already in effect." The Court said "because nothing in section 627.291 makes it applicable to pending or rejected rate filings, NCCI was not required to provide records in response to Fee’s requests."

Neither did section 119.07, Florida Statutes require supplying records according to the Court. That law applies to the records of "an agency.” For Judge Gievers to apply this section to NCCI, the District Court concluded, the "trial court was required to determine whether NCCI acted on behalf of a governmental agency." However, "the trial court expressly declined to apply the" appropriate analysis in making that determination. Therefore, the District Court held that Judge Geivers' conclusions of section 119.07 violations were not supported. 

The practical effect, mentioned above, is that the 14.5% increase in workers' compensation rates approved last fall remains in effect. The trial court decisions regarding the rate-making process and the Sunshine Law are of no effect. In due time, as it does every year, NCCI will examine the Florida marketplace and make a rate proposal for 2018. That may be to increase, decrease or maintain current rates. 

In this litigation, it is possible that Mr. Fee would ask for a rehearing, suggesting some reason for the District Court to reconsider or readdress some legal or factual point. It is also possible that he might ask for rehearing en banc, an opportunity for the entire First District Court to hear the case (the May 9, 2017 decision was made by a three-judge panel, as is the usual appellate process in Florida). Or, he might seek review by the Florida Supreme Court, which has reviewed several workers' compensation issues in recent years (thus, Castellanos, Westphal, etc.). Only time will tell regarding whether this litigation continues or concludes.

Some forecast that further Florida rate increases are inevitable, and others insist that they are not. Various arguments I have heard in this regard are based on the data and projections that people personally find persuasive, but they are nonetheless arguments, prognostications, and predictions. Not being a statistician, an actuary, or a fortune teller, I remain curious and intrigued to see which perspective is ultimately borne out in time, but unwilling to make a prediction. As with the future of this litigation, I think only time will tell the future of Florida workers' compensation rates. 

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