Emma Murray v. Mariner Health/ACE USA

For its test case, the trial bar selected one with a simple premise: the inadequacy of claimant attorneys' fees and the impact it could have on claimants fighting for benefits. In Emma Murray v. Mariner Health/ACE USA (SC07-244), a Judge of Compensation Claims found that the on-the-job accident that resulted in Murray's need for surgery to repair her collapsed uterus qualified her for wage loss benefits. Medical and indemnity benefits were determined to be in the amount of $3,224.21. Brian O. Sutter, who represented Murray, stated that he spent 84.4 hours on the case, which under the current fee schedule equaled a total fee of $648.84 or $8.11 per hour. By comparison, Cora Malloy, who represented the employer/carrier, stated that she spent 135 hours on the case and was paid $16,050, which equaled $125 per hour.

Prior to the 2003 reforms, Sutter likely would have been paid hourly fees, which the trial bar argued were designed to ensure that injured workers had fair representation and access to the courts. Richard Sicking, who represented the claimant's bar before the high court, said the Murray case showed how the legislature interfered with an injured worker's constitutional right to due process and access to the courts by all but eliminating hourly fees in favor of a strict contingency basis. He said the strict fee schedule adopted by lawmakers likely would make attorneys not take low-value cases because of the level of compensation offered. Privately, many regulators and defense lawyers agree with Sicking's position and believe the court may very well find in Murray's favor.

The Challenge for NCCI

One of the most pressing issues raised by this case is how workers' compensation rates would be adjusted if the Florida Supreme Court rules against the industry. After the 2003 reforms were enacted, the estimated first year savings was 14 percent, of which only two percent resulted from the changes to the attorneys' fees statute. After the first year, however, it is nearly impossible to say how the changes in attorneys' fees have affected the system.

NCCI Government Relations Executive Lori Lovgren said that the council's initial estimate that the reforms would produce savings of around 14 percent was on target. However, Lovgren added that to attribute the entire rate reductions to the reforms would be unfair, as NCCI's rate filings in the subsequent year didn't statistically reflect changes solely in attorneys' fees. Why? Because the majority of the attorneys' fee changes are reflected in the changes in business practices across the system.

The driving force behind the 2008 rate reduction is due almost entirely to a decline in the frequency of claims, which some would attribute to the change in attorney reimbursements. But even that is a problematic explanation for the reduction in claim frequency and severity, as this is both a state and national trend extending back into the 1990s. In a recent NCCI national study, the council found that in 2006, indemnity costs per claim increased an estimated 5.6 percent and medical costs per claim grew by 7.5 percent. At the same time, however, claim frequency dropped by 6.8 percent. In fact, claim frequency steadily declined from 1.7 claims per 100,000 workers in 1997 to just 1.1 claims per 100,000 workers in 2006. The decline in claim frequency has applied just as much to small claims as large claims. It also has been spread evenly across all injury types and geographic regions.

In Florida, these numbers are even more pronounced. Over the last three years, claim frequency has dropped between eight percent and 12.6 percent, which has more than offset any changes in medical or indemnity trends. Looking at all claims, including those that were medical-only, the state registered 5,164 claims per 100,000 workers. Isolating lost-time claims where injured workers are eligible for wage-loss benefits, we can see that the number of claims per 100,000 workers equaled 1,242.

“Looking at claim frequency, there has been a huge shift, and there is no consensus on how much is due to changes in attorneys' fees,” Lovgren said.

How Many Cases?

The number of potential cases that would be circulated through the system based on a favorable Supreme Court ruling is unknown. In the years just prior to the reforms, the number of new cases increased substantially. Between fiscal year 2001-2002 and 2002-2003, the number of new cases increased by 67 percent, equating to a total of some 57,000 cases. Some experts attribute much of that growth to claimant attorneys who sought to generate as many cases as possible before the law changes.

Since an injured worker's rights are tied to the law that is in effect at the time the accident takes place, they are not subject to any future law changes. The data tends to support the view of claimant attorneys rushing forward with cases before the modifications in medical and indemnity benefits. After reaching 57,000 cases in fiscal year 2003-2004, the number of new cases fell by 23 percent to 44,000. Since then, the number of new cases has continued to decline — although at a slower rate each year. In fiscal year 2006-2007, the number of new cases fell to 36,200.

The same pattern can be seen in the number of petitions for benefits filed with the courts. Just prior to the 2003 law changes, the number of petitions jumped by 30 percent, for a total of 151,000. But in the next three years, the number of petitions fell at an average rate of 15 percent annually. By 2006-2007, the number of petitions only reached 82,600. Interestingly, the number of petitions filed with the court since 2003 have dropped by 45 percent, which nearly mirrors the 40 percent drop in workers' compensation rates over the same time. This raises the question of whether claimant attorneys are just focusing on old cases governed by the old law while effectively freezing any major new cases going forward.

While employers/carriers certainly don't want to lose in the Supreme Court, some do not see a loss as a complete return to the post-2003 world. Tami Perdue, who represents the Associated Industries of Florida, certainly doesn't brush off the negative repercussions of what a loss at the Supreme Court level could mean. However, she noted that many of the changes in the 2003 reforms would stay intact, meaning that an increase in litigation would not have a drastic effect on the system.

DWC Plans Own Study

While the market awaits the high court ruling, the Division of Workers' Compensation is preparing to conduct its own analysis of the impact of the 2003 reforms on the workers' compensation system. The study is still in the early stages and division officials have yet to identify all of the areas that will be included in the review. The study will be based primarily on data collected by the Division in the period between 2004 and 2007.

The 2003 law gave the DWC wide-ranging authority to collect a variety of information, especially claim and medical data. The changes have led to the implementation of a list of rules governing the electronic submission of records through the Division's electronic data interchange system. The DWC's stated goal was to create a database that gives the most up-to-date picture of the system's administration. The study is likely to become a blueprint that will be continually updated to provide information to regulators and the legislature.

DWC Assistant Director Andrew Sabolic said the DWC is in the process of contacting a number of individuals involved in the workers' compensation system to solicit their responses as a means to identify potential issues for examination. DWC officials have not set a timetable for conducting the review and stress that while it may touch on public policy issues, there are no plans at this time to formulate any legislative recommendations.