When the Castellanos v. Next Door Company case from theFlorida Supreme Court came down in April 2016,striking down caps on fees for attorneys who represent injuredworkers, uncertainty abounded. The ruling was hotly anticipated,with attorneys on both sides of the spectrum, businesses andinsurance companies all speculating not only as to what the rulingwould ultimately be but also as to what practical effect it wouldhave on businesses, the insurance industry and workers'compensation claims.

In December 2016, some of that uncertainty was removed, when a14.5% increase in premiums for workers' compensation insurance forbusinesses was effectuated (with 10.1% of this increase due to theCastellanos case alone). This substantial increaseperturbed many, as the NationalCouncil of Compensation Insurance (NCCI), an organization thatfiles recommended rates on behalf of insurance companies, hassubsequently admitted that the 14.5% rate increase was not based onany relevant data or a quantitative analysis, but was rather basedon market projections.

Related: How to use actionable data to manage workplaceinjury risk

With such a substantial increase in workers' compensationpremium rates, businesses were tasked with a decision of whether toobtain workers' comp insurance with the rate increase and if so,whether employees would need to be laid off in order to afford topay the increased premium. Many small businesses had not budgetedfor such a substantial increase.

Recently, however, Florida's insurance commissioner, David Altmaier, hasordered a 9.8% decrease in the premiums businesses pay forworkers' comp insurance, which represents one of the largestdecreases in the past 10 years.

Additionally, Commissioner Altmaier has ordered NCCI to includein all future recommended rate filings a quantitative analysis ofthe impact that the Castellanos case and its eliminationof the attorney-fee caps, has had on the workers' compensationsystem.

Related: Influence of the experience modification factor onworkers' comp pricing is eroding

More affordability

The rate decrease will likely lead to more small businessesbeing able to afford workers' comp insurance, thereby reducing thenumber of businesses who have opted to not secure workers'compensation coverage due to the previous rate hike. The reducedrate will also likely lead to these small businesses being able toretain their respective current employee levels, or possibly evenlead to an increase in hiring.

With more businesses able to afford workers' comp coverage, therate at which injured workers are faced with a situation in whichtheir employer does not have workers' comp insurance that coversthe worker will likely be reduced. The issue of an “uninsuredemployer” is one that has plagued the workers' comp system for along time, and is most often seen in the construction industry.

In the construction industry, in which numerous companies are ona particular job site, it is an unfortunately common occurrencethat not all of the companies have valid workers' comp insurance orcoverage for the injured worker.

In such a situation, the company that hired the employer withoutinsurance for the injured worker, becomes the “statutory employer”and its insurance company is responsible for providing workers'compensation benefits to the employee who was injured.

Related: Florida construction company owner arrested inworkers' comp scam

Potential for increasedlitigation?

In regard to whether litigation will increase or decrease due tothe 9.8% rate decrease, it is too soon to say. When the 14.5% rateincrease was approved and implemented post-Castellanos, aprimary justification for the increase was the belief that claimantattorneys would increase litigation and attorney fees would begreater, resulting in claims being more expensive for the insurancecarrier.

At first glance, the statistics seem to support the belief ofincreased expense of claims due to attorney fees. Later this year,in the annual report by the Office of Judgesof Compensation Claims (OJCC), it will be reported thatclaimants' attorneys' hourly fees went from a statewide total of$25.9 million in the 2016 fiscal year to $75.4 million in the 2017fiscal year, which is a 191% increase.

However, as David Langham, the OJCC's deputy chief judge hascautioned, the 2017 numbers could be artificially high and the 2016data artificially low, because attorneys were delaying cases whilewaiting for the Castellanosdecision. As such, effectivelydetermining whether the substantial increase in attorneys' feespost-Castellanos was due primarily to the resolution ofcases that had been on standby, or whether the figures will remainconsistently high in the years to come is impossible to ascertainat the moment.

More telling is the fact that OJCC statistics show that newcases only increased 0.54% in fiscal year 2017 over fiscal year2016 and that Petitions for Benefits only increased by 4.61% duringthis time period. This seems to indicate that litigation volume hasnot substantially increased, but efforts to obtain or resolveattorneys' fees post-Castellanos have increased, at leastin the short term.

What seems evident, at least, is that the coming years willbring continued discussion and proposals pertaining to workers'compensation rate increases and decreases, as quantitative dataabout the post-Castellanos workers' compensation systemstarts to accrue and provides a more accurate picture of the effectof this important ruling.

Related: New workers' compensation strategies needed inFlorida

Joshua T. Higgins is a partner at Kelley Kronenberg, adiverse business law firm, focusing a portion of his practice onWorkers' Compensation matters. He may be reached at 954-370-9970or[email protected].