Automation and Employers’ Efforts to Create Safer Workplaces Produces Short-Term Rate Reduction, but Increased Attorney Fees Poised to Have Greater Impact on Future Rates
The National Council on Compensation Insurance (NCCI) filed a proposed average 13.4 percent decrease in workers’ comp rates with the Office of Insurance Regulation. The proposed rate decrease would take effect January 1, 2019 for new and renewal policies. This is NCCI’s experience filing that is made every year, and NCCI pointed to improved loss experience as the reason for the decrease. The Office of Insurance Regulation will have to approve or ask NCCI to modify the filing before it takes effect.
It should be pointed out that about 50 percent of the data examined to inform this rate filing is from post Castellanos v. Next Door Company, a Florida Supreme Court decision that came out in April 2016 that eliminated the cap on attorney fees in workers’ comp cases. The experience used to calculate the rate decrease is from 2015 and 2016.
1. Rates Are Decreasing In Short Term Because of Automation, Safer Workplaces and Other Factors. In addition to it taking time for the data to cycle through to experience filings, thanks to advancements of technology and improving safety policies, workers are getting injured less often and injuries are generally less severe.
Additionally, the Miles case, which was released a week prior to Castellanos, might also play a role. The Miles decision allows injured workers to contract and pay for attorney fees, which had previously been paid for by the employer/carrier according to the statutory formula. This shifting of attorney fees to injured workers is not a cost that is borne by the workers’ comp system, therefore keeping workers’ comp costs lower despite claimants’ attorneys making more money.
2. Attorneys Fees Are Increasing…Dramatically. As of right now not, the favorable loss experience has offset the cost increases that have emerged from the court decisions, but NCCI points out in its rate filing that the court decisions are exerting upward pressure on system costs.
Recent attorney fee data shows that the Castellanos decision is increasing costs to the system. The year after the decision, claimant attorney fees jumped by more than 36 percent, and this year attorney fees increased another 7 percent. Prior to the Supreme Court decision, the effectively hourly attorney fee was $150 and has since increased to roughly $250 an hour.
Additionally, the data shows that claimants’ attorney fees are making up a larger portion of settlements post-Castellanos, with about one-third of settlements showing attorney fees of more than 20 percent.
The Florida Chamber will continue to monitor this rate filing and advise businesses on the impact of rising attorney fees and other cost drivers to the system. Today’s rate filing is good news for Florida job creators, but employers should be prepared for potential rate increases on the horizon as attorney fees continue to exert pressure on the workers’ comp system and more time has passed for these increased costs to be included in the rate filing.
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