A Florida court’s review of workers’ compensation rating procedures by the National Council of Compensation Insurance (NCCI) could have a substantial impact on the State.
The case, Fee v. Florida Office of Insurance Regulation, NCCI, is currently being weighed by the Florida First District Court of Appeal. Their decision of whether to overturn an lower court’s ruling that NCCI and OIR violated Florida’s Sunshine Law in establishing a 14.5 percent rate increase will be substantial for Florida residents.
The reality is that worker’s compensation insurance rates affect all Florida residents, not just businesses. The cost of large rate increases is spread around internally by insurance carriers, which affects the cost of all lines of insurance that they offer. Further, companies looking to grow by hiring new employees will have to think twice because of their higher premiums, and unemployed Floridians, likewise, will find fewer job openings.
The outcome of the Fee case will most likely do little to change the aforementioned negative impact of the rate hike. If the court holds that NCCI should be forced to disclose how its single actuary, Jay Rosen, calculated the increase, there may be some objection to his methodology. However, the rate increase will remain in place until OIR’s next review.
The only possible mechanism to immediately challenge the rate increase would, in fact, be another lawsuit, asserting some sort of violation of the Florida constitution. A constitutional challenge could gain some traction in the Florida courts, mainly because there is an argument that one, solitary actuary, should not have the unchecked power to set the worker’s compensation rates for the entire state.
Another potential outcome from the case could have much more drastic implications for Floridians. Fee’s allegation is that the NCCI and OIR colluded in secret to settle on the 14.5 percent increase. Should Fee, through Sunshine Law, gain access to information that actually proves his theory, a litany of serious consequences could follow. The first being any decisions made by NCCI and OIR regarding rates will be subject to much more public scrutiny, and probably even more government scrutiny.
The second, and very likely result, is that businesses that have purchases worker’s comp insurance or had their rates increased during this period could bring a class action against NCCI and the State of Florida to seek return of whatever the amount of overpayment it is determined was made as a result of the alleged collusion between NCCI and OIR.
As to the merits of Fee’s case, he makes a compelling argument that Sunshine Laws apply to NCCI. The Sunshine Laws require an open meeting when “committee of a recognized rating organization with responsibility for workers’ compensation and employer’s liability insurance rates in this state meets to discuss the necessity for, or a request for, Florida rate increases or decreases.”
NCCI has hinged almost its entire argument that the word “committee” means more than one person. Therefore, because Rosen is only one person, he cannot constitute a committee. This position by NCCI is awfully tenuous, and borders on intentionally flouting the intent of the Sunshine Law. Is it possible that NCCI specifically chose to have only one person calculate the rate increase, so as not to form a “committee,” and avoid the obligation of public disclosure mandated by Sunshine Laws? That question would most likely be answered in the resulting civil suits, should Fee prevail on appeal. It is almost a certainty that the appellate court, regardless of its rulings in past Sunshine Law cases, will take serious issue with the hairsplitting that NCCI is engaging by advancing this argument.
If the rate hike were found to be determined by improper analysis, it’s quite possible that a panel of three or four actuaries could agree that the hike is warranted. Therefore, no harm, no foul. But, nationwide the cost of worker’s comp claims has only increased slightly from 2016. So, either Florida is an anomaly, as many analysts would agree, or the 14.5 percent increase is way out of line with the national trend.
Based on a review of the Initial Brief, Answer Brief, and the Reply Brief, and observation of the oral arguments in the Fee appeal, it is difficult to predict whether he will prevail and Sunshine Laws will apply to NCCI.
In my view, NCCI is a private company, but it is doing business with a public agency, OIR, and that alone should subject their correspondence and anything else they relied on to determine the rates to Sunshine Laws. The public interest is too great here for a case to hinge on NCCI’s definition of what a “committee” is. Finally, the general rule in all appeals is that the Appellant, in this case NCCI, has an uphill battle to convince the appellate court that the trial court was wrong. However, when the issue on appeal is an issue of interpretation of law, as we have here, the appellate court has much greater discretion to reverse the trial court.
Correction: NCCI stands for the National Council on Compensation Insurance and Jay Rosen is an actuary for NCCI, not OIR as an earlier version of this article indicated.
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