After Castellanos, Claimants' Attorney Fees Jump 41.7%
By J. Todd Foster
WorkCompCentral
Claimants’ attorney fees in Florida have jumped 41.7% in the wake of the state Supreme Court’s ruling that capping those payments was unconstitutional.
WorkCompCentral analyzed data for the years 2015 and 2016, and for the time period July 1 through Nov. 23, the date when the records were requested from the Office of Judges of Compensation Claims and Division of Administrative Hearings.
Comparing the data for July, August, September, October and most of November for 2016 against the same months in 2015 shows a huge spike in August of this year — 70.3% — and then a leveling off to 44.9% in September, 43.4% for October and 34% for most of November.
From July 1 through Nov. 23, total claimants’ attorney fees were $76,888,607 for 2016 versus $54,229,555 for the same period in 2015. Fees increased 21% in July 2016 over July 2015.
The average fee awarded to plaintiffs’ attorneys climbed 26.1%, from $4,059 to $5,120, during that period.
David Langham, deputy chief judge of the Office of Judges of Compensation Claims, said it's too early to identify any trends.
“If you torture the numbers, you can get them to say anything,” he said.
Langham was paraphrasing 20th century British economist Ronald Coase, who said: “If you torture data long enough, it will confess anything.”
Nevertheless, Florida business advocates said the numbers show their fears are founded over Castellanos v. Next Door Co., which was decided April 28. The high court ruled the attorney fee formula in Section 440.34 of Florida Statutes was unconstitutional as a violation of due process under both the state and U.S. constitutions because it made no allowances to ensure attorney fees would always be reasonable.
“Clearly the impact of the Castellanos decision has been staggering, and unfortunately, the result of this decision isn’t to the benefit of injured workers, as these attorneys might portray,” said Carolyn Johnson, director of business, economic development and innovation policy for the Florida Chamber of Commerce.
“What’s happening is that businesses will be footing the bill for this trial lawyer payday, and with a 41% increase from the year prior, it's not surprising that more trial lawyers are setting up workers’ comp shops now,” Johnson said.
Claimants’ attorneys said the increased fees are a temporary spike that will recede, just as they did following initial jumps after Emma Murray v. Mariner Health and Ace USA.
The Florida Supreme Court ruled Oct. 23, 2008, that “reasonable” hourly attorney fees could be awarded under the 2003 fee statute. A year later, the Legislature deleted the word “reasonable” and capped fees on a 20-15-10 formula: a maximum of 20% of the first $5,000 in benefits obtained, 15% of the next $5,000 and 10% of all benefits obtained over $10,000. In Castellanos, the high court ruled the 2009 statute unconstitutional.
“I don’t really see this as any kind of indicator as to what we’ll see in the future. It’s going to level itself back out and in my opinion, we just need some time to see how this sorts out and not engage in speculation,” said Miami claimants’ attorney James F. Fee Jr., of Druckman & Fee.
Fee is the plaintiff in a lawsuit decided Nov. 23 in which a judge found that the National Council on Compensation Insurance and the Florida Office of Insurance Regulation had violated the state open meetings and records laws in arriving at a 14.5% rate increase, with about two-thirds of that hike a result of the Castellanos decision.
NCCI and OIR both appealed, staying the judge’s order and allowing the rate hike to go into effect on Thursday.
A Nov. 15 analysis by NCCI found a 22% increase in claimants’ attorney fees, but that was based on comparing spending from May through September 2016 with the same period of 2015.
“I see this as a temporary spike,” Fee said. “There was a period after Emma Murray, which opened up reasonable attorney fees for an extended period of time. As soon as several months passed, things started to normalize.”
Miami claimants’ attorney Mark Touby, who represented worker Marvin Castellanos, said the increased attorney fees are an “anomaly” and not a trend that will continue unless carriers keep charging employers for “wrongfully denying claims going forward.”
Before the Castellanos decision, insurers “recklessly” denied claims with virtually no consequences, Touby said.
“What these profit-driven insurance corporations conveniently leave out is that they still do not pay out a single dollar in attorneys’ fees unless they wrongfully deny legitimate claims,” he said. “If insurance companies choose to simply do the right thing — and not put greed first — Florida’s business community would have a self-executing system that gets injured workers back to work quickly.”
Tampa claimants' attorney Mike Winer said years of wrongfully denying legitimate claims have caught up with insurers.
“Perhaps what is most wrong about the situation is that carriers are seeking to pass the cost for poor claims-handling decisions on to the backs of employers,” he said. “If I hired a mechanic to fix my car and he broke his wrench in the process, it would be completely unreasonable for him to send me a bill for the cost of the damage to his wrench.”
The American Insurance Association said its members already were seeing much higher plaintiffs’ attorney awards, including one for $42,000 when the fee schedule called for $1,500.
“Our members providing coverage and handling claims are starting to see troubling signs. Their concerns are not overblown,” said Ron Jackson, AIA vice president for the Southeast region. “This is only a few months and folks are already seeing a change in behavior of claims and fee awards.”
The Property Casualty Insurers Association of America said it’s seeing the same spikes.
“This is consistent with the anecdotal information that PCI has been hearing,” said Trey Gillespie, the trade organization’s assistant vice president of workers’ compensation. “This also appears to be consistent with what was seen following the Murray v. Mariner Health decision in 2008.”
Bill Herrle, Florida executive director at the National Federation of Independent Business, said the biggest fear is not the massive comp cases with high awards and attorney fees, but a deluge of small cases.
“The impact of Castellanos isn’t going to be on those significant accidents,” Herrle said. “With Castellanos, it makes the smallest cases the most profitable. When you see them [claimants’ attorneys] advertising, saying bring us your workers’ compensation case, they’re not hoping a horrific case walks through the door. They’re hoping for a bunch of small cases, like soft tissue damage or sore wrists. They want to get the maximum amount of attorney fee on minimal involvement.”
Herrle used the analogy of a restaurant owner who makes a burger for $9 and sells it for $10, but makes a $1.50 profit off a soft drink.
“They’re happy to sell those soft drinks,” he said.
Winter Park defense attorney W. Rogers Turner Jr., of Hurley Rogner Miller, Cox & Waranch, attributed some of the fee increase to a stack of open cases that were waiting on the Castellanos decision.
H. George Kagan, a defense attorney and senior partner of MKRS Law in West Palm Beach, said that for several years there has been a backlog of cases awaiting the Castellanos ruling — a backlog he said was “aided and abetted” by compensation judges who ordered case delays.
“The sudden removal of all constraints no doubt produced a deluge,” Kagan said in an email. “So, the numbers are impacted both by absence of minor cases and by the surge of backlogged meatier ones. This is not to say, however that like floodwaters, they will recede to former levels: It stands to reason that fees in the $5 and $10 per hour range that have been freed to now rise to $250 and 275 per hour will result in sustained, statistically significant increases overall.”
Judge Langham said it’s way too early to predict where attorney fees will plateau, and when.
“I think there is every reason to believe that Castellanos changed the fee market in Florida workers’ compensation,” he said. “There is significant debate as to the extent of change. There is disagreement as to the cause of change, with each side essentially casting blame on the other. I suspect that by the first anniversary of Castellanos, the figures and volumes will be more instructive.”
