On April 28, 2016, the Supreme Court of Florida ruled in Castellanos v. Next Door Company, et al., that the statutory fee calculation in section 440.34, Florida Statutes (2009), was unconstitutional and violated injured workers’ due process rights under both the Florida and United States Constitution. Or, in non-legal speak, the amount that the insurance companies must pay to the lawyers who defend workers’ rights is unconstitutional, and it harms the workers’ ability to get fair treatment under the law.
How was it unconstitutional?
In 2003, the Florida legislature modified attorney fee payments made to attorneys who were successful in obtaining benefits that were owed to workers pursuant Florida law. These payments were to be made by the insurance carriers, but the fee calculation was capped based on the amount of the benefit obtained with no consideration of the amount of work and time invested by the attorney.
This resulted in patently unfair fees. For example, in the case of Castellanos, an attorney who fought for benefits for the injured worker received a payment resulting in $1.53 per hour for 107.2 hours of work by the attorney. The Castellanos decision found that the legislative and insurance industry requirement that injured workers’ attorneys work for as little as $1.53 per hour was unreasonable.
Keep in mind that both prior to Castellanos, and now in fact, the insurance companies were (and are) free to hire and pay their attorneys any amount agreed to in contract. In fact, in the 13 years after claimant attorneys’ fees were limited, the amount of fees paid to claimant attorneys annually only dropped by 3%. However, the amount paid to the attorneys for the insurance carriers increased from 51% to 63.73% of the total fees paid. Meanwhile, the amount paid to attorneys representing injured workers dropped from 49% to 36%.
The insurance companies are fighting benefits harder than ever and making it financially difficult, if not impossible, for attorneys to help injured workers.
The Reaction from the Insurance Industry
In the wake of the Castellanos decision, the insurance industry has cried “Armageddon”. Immediately after the decision was released, there was a call for a legislative remedy and a warning that a workers’ compensation premium hike request is on the way for Florida employers.
The insurance industry is crying foul, not because more fees will be paid, but because injured workers are now armed with a tangible threat to hold the insurance carrier accountable for their failure to pay legitimate benefits. The playing field has been leveled, and to insurance companies, that is Armageddon.
Are “greedy” lawyers driving up premiums?
The insurance companies have mastered the propaganda message that greedy attorneys are driving up premiums. That is simply not true. The insurance industry spends millions on advertising this lie.
What the insurance industry fails to mention is that attorneys only get paid when the insurance carrier fails to provide benefits required by law.
It will not cost them a dime if they provide the benefits recommended by the doctor they choose (a topic for another day – but yes, insurance companies always get to choose the doctors in workers’ compensation) unless they deny those benefits without good reason. Injured workers’ attorneys only get paid under Castellanos if the insurance company denies a benefit for more than 30 days and is later forced by a judge to provide the benefit.
When does Castellanos effect the insurance companies?
So, if insurance companies follow the law and pay benefits to which injured workers are entitled to in an even somewhat timely matter, Castellanos will have no effect on them. If the judge finds the claim for benefits had no merit, the injured worker’s attorney will not get paid.
So, what the insurance industry is really saying is that it is not fair that they should be held accountable to pay legitimate claims that they have wrongly failed to pay.
If the insurance industry really wants to put a dagger in the heart of injured workers’ attorneys (instead of in the back of the injured workers) the way to do it is simple: pay legitimate claims. If they deny a frivolous claim – no attorneys’ fees. If they pay a legitimate claim timely – no attorneys’ fees. Do the right thing and Castellanos is a moot point.
The reality is that it would cost the insurance industry much more money to provide benefits as required by the law. Insurance companies believe that many injured workers won’t question their denial, won’t contact an attorney, and won’t fight for their rights.
If you have any questions about an on the job injury, or any other accident suffered at work, call Michles & Booth immediately to set up your free initial consultation and make sure your rights are protected.