This month’s issue coincides with the beginning of my favorite season: Gator football season. During this time of year, those of us who are of the righteous persuasion (i.e., Gator fans) know that only bad things can come out of Tallahassee. Unfortunately, this year, the same is true for business owners of all persuasions. In April and June of 2016, the Florida Supreme Court issued two opinions that will increase workers’ compensation rates for all businesses in Florida. The purpose of this article is to briefly discuss those decisions, the projected impact to Florida businesses and what businesses might consider doing to help soften the impact to their bottom lines.
The two cases in question were Castellanos v. Next Door Company, et al and Westphal v. City o f St. Petersburg, etc., et al. The Castellanos case determined that a 2003 Florida Statute limiting attorneys’ fees in workers’ compensation cases was unconstitutional. Prior to this case, workers’ compensation rates had fallen by roughly 60 percent from 2003 to 2016, largely as a result of that statute. The Westphal case struck down a 1994 statute that limited temporary total disability payouts by insurers in workers’ compensation claims to 104 weeks. The forecasted impact is an increase in the length of these payout periods to 260 weeks, thereby increasing the claims costs to insurers and employers.
At the time this article was written, the National Council on Compensation Insurance had filed a proposed 19.6 percent rate increase for the state’s consideration as a result of these two decisions. If accepted, the rate increase would apply to all policies in Florida effective October 1. In my opinion, this would just be the beginning of an upward rate trend.
In terms of what a business can do to mitigate the impact of increasing workers’ compensation rates, I offer two suggestions:
1. POLITICAL ACTION:
The Florida Legislature took action in the past to keep workers’ compensation rates low and it now has the opportunity to do so again. I don’t pretend to be a Florida Constitution scholar, but there has to be some way the legislature can prevent Florida from returning to the dubious honor of having some of the highest workers’ comp rates in the country — as we endured in the late ’90s. Be sure the candidates you are supporting understand how this could impact your business and that they commit to doing something to stave off increasing rates in the coming legislative session. Those of you involved in trade associations should also make sure that your associations’ government relations staff are also engaged in these conversations.
2. MANAGE YOUR WORKERS’ COMPENSATION PROGRAM:
In any environment, your claims history matters. In an environment where rates are increasing, that claims experience matters even more. In Florida, the state sets the workers’ compensation rates, so all insurance companies charge the same amount. However, those employers with good claims experience will mitigate some of the higher rates by receiving lower experience modifiers from NCCI (if you don’t know what an experience modifier is, you either pay too little in workers’ compensation to receive a modifier or your agent is doing a bad job for you). Employers have plenty of options in their work comp toolbox to manage this exposure, so be sure you work with an experienced commercial insurance agent to assist in keeping your rates as low as possible.
I am happy to report that the Florida Association of Insurance Agents is already working alongside several business groups to lobby for a change in the coming legislative session to try to prevent all of our business clients from experiencing a sudden and unexpected blow to their profit margins. Together, we can hopefully see that this trouble from Tallahassee is short-lived. Go Gators!
BRIAN SCARBOROUGH is a Principal at Scarborough Insurance, an independent agency that sells all lines of insurance and has been serving the community since 1961. Visit scarins.com for more information.