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Florida Court Overrules Comp Attorney Fee Law

Insurance industry observers said the ruling will likely would drive up workers’ compensation premiums.

October 31, 2008
Related Topics: Workers' Compensation, Medical Benefits Law, Health and Wellness, Compensation, Latest News
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The Florida Supreme Court has ruled in favor of a workers’ compensation claimant requesting higher attorney fees as part of her award, effectively overruling a 2003 law passed to limit attorney fees in such cases.

Insurance industry observers lamented the decision and said it likely would drive up workers’ compensation premiums.

In overruling the state's 1st District Court of Appeal, the Supreme Court found in Murray v. Mariners Health/ACE USA that awarding attorney fees based strictly on a formula in Florida law limiting the fees to a percentage of the settlement sometimes results in unreasonably low attorney fees. One example is cases where the benefits awarded are small but the legal issues involved are complex, meaning the claimant must hire an experienced attorney to perform substantial work; a percentage-based approach would produce inadequate fees for the attorney, the court said.

The Murray case represents such a case, the court found.

Emma Murray was a nursing assistant who was injured while lifting a patient. She suffered a uterine prolapse and eventually had to have a hysterectomy. Mariner Health and ACE USA initially denied benefits, but lost in court. The question of how much the insurer should pay Murray for attorney fees also went to court, centering on revisions to workers’ compensation law that the Florida Legislature passed in 2003. That legislation eliminated hourly attorney fees, requiring attorneys' compensation be a percentage of the award.

Proponents say that hourly attorney fees are abused by lawyers who drag out cases to increase their pay, driving up systemwide costs. The cost of litigated claims was 40 percent higher in Florida than other states before the 2003 changes, according to the American Insurance Association.

Critics argue that the changes leave some workers’ compensation claimants unable to obtain adequate representation in cases in which the insurer wrongfully denies benefits, because the legal complexities require an experienced attorney, but the percentage-based formula eliminates the possibility of recovering adequate compensation for lawyers.

In the Murray case, the formula dictated that the insurers pay the claimant $684 for attorney fees, which amounts to about $8 per hour. Experts testified that attorneys for such cases in that region typically charge $200 per hour, the court said. Mariners Health and ACE USA paid their attorney a little over $16,000 at a rate of $125 per hour.

The Supreme Court ordered the respondents to pay Murray $16,000 for attorney fees, amounting to a $200-per-hour rate.

The high court did not rule that the 2003 statute was unconstitutional, as Murray alleged. Rather, the court found that the 2003 statute created an ambiguity by simultaneously calling for "reasonable" attorney fees and requiring the use of a formula that in some cases produced an unreasonable result. The court essentially ignored the required formula—because it would render the provision for "reasonable" fees meaningless, it said—in deciding attorney fees in the Murray case.

In a statement, American Insurance Association officials criticized the decision and said it would lead to an inevitable rise in workers’ compensation premiums.

"The 2003 legislative reforms rescued what was a failing workers’ comp system," Cecil Pearce, the association’s Southeast region VP, said in the statement. "Today's decision in Murray vs. Mariners Health/ACE USA is an unfortunate setback for a workers’ comp system that has seen significant improvement since 2003, including rate reductions of over 50 percent for Florida businesses."

Filed by Zack Phillips of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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