Oct 20, 2016

Florida Approves a Double Digit Workers’ Compensation Rate Increase to Take Effect December 1, 2016

An October 5, 2016 Order from the Florida Office of Insurance Regulations (OIR) granted final approval for a statewide workers’ compensation rate increase of 14.5 percent to take effect December 1, 2016.

On May 27, 2016, the National Council on Compensation Insurance (“NCCI”) filed a Revised Workers’ Compensation Rates and Rating Values for consideration and review by the OIR that sought an overall rate increase of 19.6 percent. In support, NCCI argued the increases were necessary to offset the projected impact of the Florida Supreme Court’s recent decisions in Castellanos v. Next Door Company and Westphal v. City of St. Petersburg.  In Castellanos, the Court found unconstitutional the mandatory schedule that determined attorney’s fees on a sliding scale based on the amount of workers’ compensation benefits obtained. The Court held that the provision that created an irrebuttable presumption that the fee an attorney receives is reasonable was in violation of due process under the Florida and United States Constitutions. Two months later, the Court created additional uncertainty in the workers’ compensation insurance market when it held in Westphal that a 104-week statutory limitation on temporary total disability benefits denied injured workers’ constitutional right to access courts.  Based on its analysis, NCCI asserted that the combined impact of the Florida Supreme Court decisions could increase overall Florida workers’ compensation system costs by 13.8 to 37.5 percent.

Originally, the NCCI proposed an increase of 17.1 percent. However, in an amended filing, the NCCI sought an increase of 19.6 percent on all new, renewal and outstanding workers’ compensation policies.  In a September 27, 2016 Order, the OIR disapproved of the NCCI’s proposed increase and revised the rate increase to an overall combined average of 14.5 percent. The new rate increase was contingent on the NCCI amending the rate filing to include recommended changes outlined within the Order.  On October 4, 2016, the NCCI submitted an amended rate filing to OIR which met the stipulations of the Order. On October 5, 2016, the OIR issued a final order approving a 14.5 percent increase to workers’ compensation insurance rates. The rate increase, set to take effect December 1, will immediately impact new and renewal policies. However, there will be no change in rates for current policies.

This rate increase sets up another showdown between the legislature and the Court. What remains to be seen is whether the Florida legislature will take action to once again curb the rising costs of Florida’s workers’ compensation policies.

Startups and new businesses are advised to make every effort possible to obtain a workers’ compensation policy prior to the rate increase taking effect on December 1. Beyond that, employers need to account for increased costs to renew their workers’ compensation policies moving forward.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.  If you have any questions regarding these issues, please contact your labor and employment counsel at Smith, Gambrell & Russell, LLP.   

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