It’s been a tumultuous year for the Florida insurance industry.
It would seem the biggest story would be the end of Florida’s hurricane drought as the state got hit by not one, but two hurricanes this year, the first hurricanes for Florida since 2005.
But those catastrophes weren’t the only storms Florida experienced in 2016. Florida Supreme Court decisions that upended the state’s workers’ comp system and subsequent rate hikes; the effect of ongoing abuse of assignment of benefits; the continuing battle over flood insurance rates; and the state’s first new insurance commissioner in 13 years, were all major headlines throughout the year.
Those in the industry say each of these stories will have a significant impact on the state going into 2017.
Workers Comp Market in Turmoil
The state’s workers’ compensation system was dealt two big blows this year that has since led to a huge rate increase for Florida businesses. The biggest blow came in April when the court ruled the attorney fee schedule passed in 2009 as part of state reforms is unconstitutional under both Florida’s and the U.S. Constitution as a violation of due process. The court ruling in the case of Castellanos v. Next Door Company, which said the schedule eliminates the right of a claimant to get a reasonable attorney’s fees — a “critical feature” of the workers’ compensation law. The court said the statute violates due process by installing an “irrebuttable presumption” that whatever fee the schedule comes up with is reasonable and by not providing any way for a claimant to refute the fee.
The court said that “it is undeniable” that without the right to an attorney with a reasonable fee, the workers’ compensation law can no longer “assure the quick and efficient delivery of disability and medical benefits to an injured worker.”
On the heels of that ruling, the court struck down the state’s statutory 104-week cap on temporary total disability benefits, saying it too is unconstitutional. The court’s decision came in the case of Bradley Westphal v. City of St. Petersburg.
In the opinion, the justices said the limitation results in a statutory gap in benefits in violation of the constitutional right of access to court. The court opted to revive a previous limitation of temporary disability benefits, upping the limit to five years (260 weeks).
The National Council of Compensation Insurers (NCCI), which files on behalf of Florida insurers, responded to the rulings with a rate increase request of 19.6 percent.
The Florida Office of Insurance Regulation (OIR), however, denied its request saying it wasn’t justified and instead ordered NCCI to amend and refile its rate increase for 14.5 percent. That rate request was approved in October for all policies effective as of Dec. 1, 2016.
OIR said the individual rate impacts will include:
- A 10.1 percent statewide average rate increase for the April 28 Florida Supreme Court decision in the case of Castellanos v. Next Door Company.
- A 2.2 percent statewide average rate increase for the June 9 Florida Supreme Court decision in the case of Westphal v. City of St. Petersburg.
- A 1.8 percent statewide average rate increase related to updates within the Florida Workers’ Compensation HCPR Manual per Senate Bill 1402. The manual became effective on July 1, 2016.
The workers’ comp matter was further complicated last month when a judge blocked the rate increase after finding that NCCI and state officials did not comply with the state’s Sunshine Laws and open meeting requirements in setting the new rate.
OIR filed a Notice of Appeal on Nov. 28, which allowed the rate hike to proceed on Dec. 1. The case must now be reviewed by the First District Court of Appeals.
The challenge to the rate increase was brought by James Fee, a Miami attorney who represents injured workers. Fee claimed, and Leon County Circuit Court Judge Karen Gievers agreed, that NCCI was in violation of Florida’s Sunshine Laws in holding “multiple, non-public, secret meetings” internally and with the OIR over the rates.
NCCI claims it has complied with applicable open meeting and other Sunshine Laws on transparency and noted after the judge’s ruling that it would appeal.
“NCCI is very disappointed in the decision of the Leon County Circuit Court. We continue to believe that NCCI and the Florida OIR have fully complied with the law,” NCCI said in a statement.
While the courts work out this latest workers’ comp challenge, insurance advocates in the state say it is imperative that the state come up with a fix for the workers’ compensation system that addresses the Florida Supreme Court rulings, or both small business owners and employers will suffer.
“These rulings have left employers and employees potentially vulnerable to conditions that existed years ago when Florida businesses were burdened with some of the highest workers’ compensation costs in the nation,” said Logan McFaddin, PCI Florida regional manager for State Government Relations.
Many expected the Florida Legislature would address the issue in a special session in 2016, but that didn’t happen.
McFaddin said PCI plans to work with state leaders on solutions to return Florida to a “vibrant workers’ compensation marketplace, meeting the needs of injured workers and controlling costs.”
The Florida Association for Insurance Reform (FAIR) said the solution will entail taking a deeper look at how to best address the overall problems with the state’s workers’ comp system.
“There is no real simple fix … the system needs a complete overall and we have to look at it from top to bottom,” said Paul Handerhan, FAIR’s senior vice president, Public Policy. “There are a lot of different areas that can be focused on outside of addressing attorney’s fees that can bring costs down.”
Each top Florida insurance topic of 2016 will be highlighted this week. Check back tomorrow for what’s next for the state’s assignment of benefits crisis.