Why Do Florida Businesses have to Bailout Work Comp Insurance Companies With Bad Business Models?
Earlier this year, the Florida Supreme Court decided the work comp case of Castellanos v. Next Door Co. finding that the 2009 changes to the work comp attorney fee statute were unconstitutional. What were the changes, you ask? The 2009 special session legislature voted to remove the word “reasonable” from the statute. “Are you serious?,” you ask. “That doesn’t sound reasonable,” you say. But, in fact, our legislature actually thought it was reasonable to remove the word “reasonable” from the attorney fee statute.
Special interest groups with certain levels of power and influence convinced our legislature to call a special session in 2009 so the word “reasonable” could be removed from the work comp attorney fee statute. “So what?,” you ask, “Why does it matter?” It matters because this statute outlines what an insurance company would have to pay to the injured worker’s attorney if the insurance company wrongly denied a benefit to an injured worker. (If the carrier correctly denies a benefit, there is no fee due to an attorney for an injured worker.) In other words, if the injured worker is improperly denied coverage or a certain benefit in his work comp case, and he has to hire an attorney to get the coverage or benefit that he should have had anyway, the insurance company is required to pay his attorney fees for him. Sounds fair, right? The word “reasonable” in the statute before 2009 required the insurance company to pay a “reasonable” fee. If you take out the word “reasonable”, the remaining statute allowed insurance companies to wrongly deny benefits and, if they got caught, only have to pay a small percentage of the value of what was denied. Let’s use an example.
Worker has accident and is injured. Employer reports accident to Work Comp Carrier.
Carrier chooses doctor to examine Worker. Worker has to go to doctor chosen by Carrier.
Doctor says medical treatment is needed. Doctor sends recommendation to Carrier.
Carrier denies medical treatment. Worker calls Carrier to find out why coverage is denied.
Carrier does not respond. Worker doesn’t know what to do, so hires lawyer.
Lawyer sends letter to Carrier asking for medical treatment and explanation.
Lawyer also sends Carrier’s doctor’s records supporting request. Carrier still does not respond.
Lawyer files Petition with Carrier’s doctor’s records attached.
Carrier receives Petition and recommendation for medical treatment for 3rd time.
Carrier still doesn’t respond. More than 30 days go by.
Worker goes without medical treatment. Employer is without a good experienced worker.
Carrier still does not respond or finally responds with denial.
On 31st day, Carrier may now ultimately be responsible for Worker’s attorney fees…
– but only if Worker proves he’s entitled to more treatment for work injury.
Carrier has defense attorney it pays by the hour or some other contracted rate not controlled by statutes.
Carrier continues to deny the claim, and pays for another doctor to disagree with its first chosen doctor.
Now, there is conflict in medical opinion. More than 6 months have gone by.
Worker still not getting medical treatment. Employer is still without one of its workers.
Judge must appoint a tie-breaker doctor whose opinion will decide if worker gets more treatment.
Tie-breaker doctor agrees with Carrier’s first chosen doctor. Worker should get medical treatment.
After 11 months, Judge awards coverage to Worker so he can finally get medical treatment.
(Worker is soooooo relieved he has won. Not only can he finally get treatment,
-but he was really worried about having to pay Carrier’s defense costs if he lost.
Judge also orders Carrier to pay Worker’s attorney fee of $231.00. –the equivalent of $4.34 per hour.
Judge based this fee amount on the 2003/2009 statute capping fees at a percentage of benefit obtained.
So, without the word “reasonable” in the statute, the insurance carrier gets to deny benefits without fear of having to pay any type of “fine” for improper denial. Does anyone believe there would be insurance companies that would take advantage of this situation? Before 2009, I found myself in a conversation with a very blunt adjuster. My client, the injured worker, was asking for a scope surgery that the carrier’s chosen doctor had ordered. I could prove every which way you could imagine that my client was legitimately entitled to the scope surgery. And, the surgery under work comp rates was only going to cost $3,200. I used common sense and reason with the adjuster. I pointed out that there was no way the insurance company could win, the law was on my side, and once my client filed a petition and proved her case, my fees alone would be more than the surgery. (And, that did not even take into account how much the carrier might pay a defense attorney.) I was rather surprised by the answer I got. The adjuster admitted I was right. So, do you think they gave in and gave my client the surgery she needed to get better and get back to work? The adjuster’s explanation for continued denial of the surgery may or may not surprise you. At the time, it surprised me. Unfortunately, it doesn’t surprise me anymore.
I was told by the adjuster that her company has a policy to deny all claims like my client’s regardless of merit. She knew I would win and the insurance company would have to provide not only the surgery, but also pay me a fee in an amount that was as much or more than the surgery. However, she informed me that if you look at all these type claims that were denied as a whole, the company comes out way ahead by just denying coverage for everybody in these circumstances. Most of the cases would just go away, presumably because the injured worker found another way to get treatment (think Medicare/Medicaid/State Voc Rehab) or the worker may have an inexperienced or lazy attorney that would just settle the case quick and cheap. So, my logic about how much my little case may cost them didn’t hold water when you looked at how much the company saved by just denying everyone. And, this was told to me when the word “reasonable” was still a part of the attorney fee statute! When the word “reasonable” was removed from the attorney fee statute, it limited an attorney like me to only 20% of the $3,200 or about $640 for roughly 75 hours of work getting the case through a win at trial. That’s $8.53 per hour that at attorney with almost 20 years of experience would be paid to help an injured worker fight an unscrupulous carrier.
The Supreme Court found that the above situation was just not right. The work comp system over the years has become very complicated with more and more rights being taken away from injured workers. This, unfortunately, not only hurts injured workers, but also hurts Florida businesses that need their workers healthy and able to return to work. So, when you hear someone trying to complain about how the Supreme Court has decided these work comp cases just so the greedy trial lawyers can line their pockets with more and more, ask yourself, “What happens to the injured worker without an experienced work comp attorney to help? ” At least the trial lawyer is out there using common sense and fairness to fight for those not blessed with a lot of power and influence.
To be fair, there are some insurance companies that make a point of having a good business model of properly and fairly adjusting claims. They recognize when there is a clear responsibility to provide benefits to injured workers and actually timely provide them. I know this because when I represent one of their injured workers, it is most often for the purposes facilitating settlements or resolving issues that are truly those have to be litigated because the facts are not that clear. These “good” insurance companies most likely are not faced with a large “unfunded liability to pay attorney fees” that is being discussed by some following the Supreme Court’s decision in the Castellanos case. However, those other companies with a bad business models, that now find themselves in a situations where their wrongly denied benefits exposes them to pay “reasonable” attorney fees, –it is these “bad” companies that are desperate for Florida businesses to bail them out of this responsibility by paying increased premiums for work comp coverage beginning December 1, 2016. And, Florida’s Insurance Commissioner has given approval for this bailout. (The total increase approved is 14.5% with 10.1% being related to the bailout for the bad adjusting of claims.)
This is not fair to Florida businesses and not good for Florida’s recovering economy. And, has anyone remembered that the excess profit statute for work comp carriers was repealed a few years ago relieving insurance companies from returning the excess profits to Florida businesses?