Florida Supreme Court Decisions Prompt Rate Increases
NCCI’s proposed rate increase arose from two prominent Florida Supreme
Court decisions in 2016 that are expected to increase costs associated with
workers’ compensation insurance claims in Florida. In Castellanos v. Next Door Co., 192 So.3d 431 (Fla. 2016), the
Florida Supreme Court determined that a mandatory attorneys’ fee schedule
in the workers’ compensation law was unconstitutional as a violation of due
process because it created an irrebuttable presumption relating to
attorneys’ compensation that precluded consideration of whether the
attorneys’ fees were reasonable. The result of this decision was to
eliminate statutory caps on claimants’ attorneys’ fees and return Florida
law to its position prior to July 1, 2009, when claimants could recover
reasonable attorneys’ fees.
[3]
The resulting increase in insurers’ costs prompted a proposed increase in
rates.
The OIR announced on May 27, 2016, that it had received a workers’
compensation rating filing from NCCI arising largely from Castellanos. The OIR noted that the filing proposed a 17.1% rate
increase, of which 15% was attributable to Castellanos. The OIR
announced that it would hold a public hearing to discuss the filing and
allow interested parties to submit testimony or comments.
While the rate filing relating to Castellanos was pending, the
Florida Supreme Court, on June 9, 2016, issued its opinion inWestphal v. City of St. Petersburg, 194 So.3d 311 (Fla. 2016). In Westphal, the Supreme Court determined that a maximum 104-week
duration for temporary total disability benefits did not present a
reasonable alternative to tort litigation for a person such as the
plaintiff, who had not yet reached maximum medical improvement but was
denied permanent total disability. The Supreme Court concluded that the
limitation on temporary total disability benefits unconstitutionally denied
the plaintiff’s right of access to the court. This had the effect of
restoring Florida’s pre-1994, 260-week limitation of temporary total
disability benefits.
[4]
NCCI estimated the impact of Westphal as a 2.2% statewide average
increase in rates. NCCI amended its rate filing to take both Castellanos and Westphal into account. The resulting
proposed rate increase was 19.6%.
After the public hearing, on September 27, 2016, the OIR issued an order to
NCCI indicating that the rate filing would not be approved with the
proposed 19.6% increase but could be approved with certain adjustments
resulting in the rate increase being reduced to 14.5%. NCCI responded to
the order by amending the filing on October 4, 2016, to meet the
stipulations set forth by the OIR. On October 5, 2016, the OIR approved the
NCCI filing with a statewide average increase of 14.5%. The proposed
effective date of the filing was December 1, 2016.
Trial Court Invalidates Rates Based on Sunshine Law Violations
During the rate filing process, an attorney and owner of a law firm that
purchases workers’ compensation insurance made public records requests
seeking information about the NCCI rate filing. He then sought to enjoin
the public hearing scheduled by the OIR to discuss and receive testimony
regarding the rate filing. The attorney alleged that NCCI violated
Florida’s Sunshine Laws by failing to provide notice or a meaningful
opportunity to participate in the “committee meetings” where its rate
proposals were discussed and by failing to provide the attorney with
requested information pertaining to the development of the rate filing. The
attorney also argued that OIR somehow abdicated its responsibility to act
upon the rates and improperly delegated ratemaking authority to NCCI. The
trial court held the evidentiary hearing on the attorney’s complaint after
the OIR approved the rate increase, but before its effective date. The
trial court concluded that both NCCI and OIR violated portions of Florida’s
Sunshine Laws, invalidating the filing. NCCI and the OIR appealed the
order.
Appellate Court Reverses Trial Court’s Findings and Upholds Rate
Increase
The First District Court of Appeal (“First DCA”) in National Council on Compensation Insurance v. Fee, No. 1D16-5408
& 1D16-5146, 2017 WL 1908370 *1 (Fla. 1st DCA May 9, 2017),
reviewed the trial court’s order invalidating the rate approval. The First
DCA’s decision to reverse the trial court’s order turned on unique aspects
of Florida’s insurance and public records laws.
The court observed that the Florida Insurance Code requires the OIR to
review rate filings under statutory standards prohibiting excessive,
inadequate, or unfairly discriminatory rates. The ultimate decision rests
with the agency head or Insurance Commissioner. Insurers may file rates
with the OIR, or may be members of a licensed rating organization that
files rates on their behalf. The First DCA traced the history of workers’
compensation ratemaking, finding that prior to 1991 the responsibility for
developing NCCI’s rates fell upon NCCI’s Classification and Ratings
Committee. The committee was disbanded in 1991, and in Florida the
responsibility for developing NCCI’s rate filings rests with a single
actuary (subject to peer review and other assistance). This actuary
ultimately is responsible for preparing rate filing documents for
submission to OIR even though the actuary enlists certain assistance and
peer review.
[5]
Although the trial court concluded that NCCI violated the Sunshine Laws
because it did not hold open meetings of its “committee” responsible for
developing workers’ compensation insurance rates, NCCI argued on appeal
that no such committee has existed for more than 25 years.
[6]
Its ratemaking responsibility in Florida rests with a single actuary, and
therefore statutory provisions applicable to the ratemaking committees of
rating organizations do not apply. The First DCA agreed, finding that a
NCCI actuary responsible for ratemaking did not constitute a committee as
contemplated by the statute. The First DCA also rejected a position by the
trial court that the review and input of other persons in the ratemaking
process resulted in a violation of the Sunshine Laws because only the
actuary responsible for the filing had the ultimate authority to determine
the rates to be filed with the OIR.
The First DCA reviewed a determination by the trial court that the OIR
violated the Sunshine Law because it essentially delegated ratemaking
authority to NCCI. The First DCA found no evidence in the record to support
this position. NCCI and individual insurers have the ability to file
rates with the OIR, but the OIR retains authority to review and approve or
disapprove the filings. The First DCA therefore concluded that the OIR did
not delegate its agency function to OIR.
[7]
The First DCA also considered an assertion that NCCI should have made
ratemaking documents available to the attorney upon his request. Section
627.291, Florida Statutes, allows persons aggrieved by workers’
compensation insurance rates or rules to seek review of the manner in which
the rates have been applied. They attorney argued this statute gave him the
right to obtain information on the manner in which the rates were made. The
First DCA rejected this argument because the attorneys’ demands for
documents related to NCCI’s proposed filing seeking a rate increase of
19.6%. The OIR did not approve the 19.6% increase, and instead approved an
amended filing seeking a 14.5% increase. The attorney therefore could not
have been aggrieved by the filing that proposed the 19.6% rate increase.
[8]
Finally, the attorney argued, and the trial court agreed, that NCCI was
required to provide documents relating to the rate filing pursuant to a
provision of the Sunshine Laws extending its application to private
entities that “act on behalf of” public agencies. The purpose of extending
access to public records to private entities in these situations is to
prevent public agencies from avoiding requirements of the Sunshine Laws by
delegating responsibilities to private parties. The trial court found that
NCCI indeed was required to make records publicly available because it
purportedly acted on behalf of the state. However, the First DCA pointed
out that the trial court did not apply the factors listed in
News & Sun-Sentinel Co. v. Schwab, Twitty & Hanser
Architectural Group, Inc.
, 596 So.2d. 1029 (Fla. 1992) in making this determination. The basis upon
which the trial court reached its decision was not clear, and the First DCA
determined the decision to be in error.
[9]
In sum, the First DCA disagreed with the trial court with respect to each
of its findings that NCCI and the OIR violated Florida’s Sunshine Laws.
Accordingly, the First DCA reversed the trial court’s final order
invalidating the rate increase. The First DCA remanded the case for
reinstatement of the OIR’s final order dated October 5, 2016, which
approved NCCI’s amended filing providing for a 14.5% statewide average
increase in workers’ compensation insurance rates.
Conclusion
Florida has expansive laws giving the public access to meetings of
governmental agencies and to information in their possession. These laws
sometimes extend to meetings held by, and records in the possession of,
private parties when public agencies have delegated functions to the
private parties. NCCI developed its workers’ compensation 2016 rate filing
in the usual manner and submitted the filing for review by the OIR. The OIR
conducted its own review of the filing and held a public hearing to
consider testimony and input from interested parties. The OIR ultimately
approved a statewide average rate increase of 14.5%. An attorney attempted
to invalidate the filing based upon NCCI’s alleged failure to hold certain
internal meetings in public and to provide requested information about its
rate development process. In addition, the attorney attempted to argue that
the OIR participated in violations of the Sunshine Laws by delegating its
rate review authority to NCCI. Although a trial court agreed with these
arguments, the First DCA disagreed in all respects. The First DCA
determined that NCCI carried out its responsibility to prepare and submit a
rate filing, and the OIR fulfilled its obligation to review and act upon
the filing. As a result, the First DCA reversed the trial court’s final
order and directed that the OIR’s approval of the 14.5% rate increase be
reinstated.