Florida Court Approves Workers’ Compensation Ratemaking Process

By | May 11, 2017

A Florida appeals court has rejected a trial court’s finding that the process for determining workers’ compensation rates used by a rating organization and state insurance regulators violated the state’s Sunshine Law.

The decision means that a 14.5 percent workers’ comp rate increase that went into effect at the end of 2016 will remain in place.

The Florida First District Court of Appeal (1DCA) found Tuesday that the National Council on Compensation Insurance (NCCI) and the Florida Office of Insurance Regulation (OIR) did not violate state Sunshine Laws in establishing the 14.5 percent rate increase last year, overturning a lower court’s ruling on the matter.

The decision addressed an appeal by OIR and NCCI in the case of Fee v. National Council on Compensation Insurance (NCCI)/OIR (Office), that was filed in Leon County by James Fee, a Miami attorney who represents injured workers.

The plaintiff Fee contended that NCCI’s actuary, NCCI staff, and OIR met the definition of a committee and their deliberations were subject to Florida’s Sunshine Law. The trial court judge, Karen Gievers, agreed, finding that NCCI was in violation of Florida’s Sunshine Laws by holding “multiple, non-public, secret meetings” internally and with OIR in establishing workers’ compensation rates. Gievers’ decision halted OIR’s order increasing workers’ comp rates.

OIR and NCCI immediately appealed the trial court’s ruling and requested that the appeals court expedite the process and allow the rate increase to go into effect. The appeals court agreed to both requests in mid-December.

NCCI and OIR denied Fee’s allegations, saying they followed the proper procedures for an open and transparent process when necessary, including an August 2016 public meeting that allowed testimony from stakeholders.

NCCI also argued that its single actuary who determined the rates, Jay Rosen, could not constitute a committee and therefore it was shielded from the Sunshine Law’s public disclosure requirement.

In the 1DCA’s May 9 opinion, justices stated that it was undisputed that NCCI’s argument that “no committee at NCCI has been charged with the responsibility for determining workers’ compensation insurance rates in over 25 years.”

NCCI has instead enlisted a single actuary, Rosen, to evaluate and determine workers’ comp rates. The 1DCA disagreed with the plaintiff’s argument that Rosen, his team, NCCI staff, and OIR who reviewed his work, met the definition of a committee under Florida’s Sunshine Law. Therefore, the court said, none of the meetings were subject to the law.

The court also disagreed with Fee’s assertion that Rosen, in his individual capacity, acted in place of the rate-determination committee, saying “this argument ignores the plain language of the statute and the ordinary meaning of the terms within it.”

Ultimately, the court found that it comes down to the definition of the term committee under Florida law.

“The statute applies only to meetings of a rating organization committee where workers’ compensation insurance rates are discussed and determined,” the opinion states. “A ‘committee’ has been defined as a ‘subordinate group,’ not a single person.”

The court added that a multi-person concept of the term committee” further finds support in “well-established precedent construing the Sunshine Law,” for which it cited the case Sarasota Citizens for Responsible Gov’t v. City of Sarasota. That case explained that Sunshine Law protections extend to formal and informal meetings only when two or more members of the same board or commission meet to deal with a matter on which action will be taken in the future.

“Thus, under the plain and ordinary meaning of the terms ‘committee’ and ‘meet,’ Rosen, in his individual capacity, does not act or ‘meet’ as the statutory rate-determination committee contemplated by [statute],” the court wrote.

The appeals court further stated that the trial court was incorrect in finding that the NCCI’s peer review team, meetings between Rosen and his staff, and the meetings between NCCI and OIR constituted committee meetings that would be subject to the Sunshine Law.

“The Sunshine Law does not apply because none of the other participants, other than Rosen, had any authority to determine the workers’ compensation insurance rate to be proposed to OIR,” the court wrote.

As to the plaintiff’s assertion that NCCI had violated the Sunshine Law because OIR had delegated its authority over rate filings to NCCI therefore NCCI should be considered a government body and not a private entity, the court also disagreed.

It said NCCI didn’t have authority to carry out an agency function required to be performed in the sunshine.

“OIR approves and disapproves rate filings; it does not make rate filings. Conversely, NCCI and individual insurers have no authority to approve or disapprove rate filings; rather they are under a statutory mandate to file such proposals,” the court wrote.

The appeals court also disagreed with the trial court’s rulings that NCCI had violated the Florida Public Records Act by not providing the plaintiff (Fee) access to certain records.

It ultimately concluded that the trial court erred in declaring OIR’s final order void and reinstated its Oct. 5, 2016 final order increasing workers’ comp rates by 14.5 percent.

OIR expressed satisfaction with the court’s ruling, saying in a statement to Insurance Journal, “We’re aware of the ruling and pleased by the outcome.”

Justin Parafinczuk, an attorney in Fort Lauderdale, Fla., following the case, said he wasn’t surprised by the ruling and doesn’t expect any fallout from the decision given it was a “unique and nuanced case.” He added, however, he expects NCCI will make internal changes to its ratemaking process.

“I would expect NCCI to change some of its rate setting protocols to avoid litigation over this issue in the future,” Parafinczuk said.

1DCA Opinion in Fee v. National Council on Compensation Insurance (NCCI)/OIR

Topics Florida Workers' Compensation Talent

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