Monday, April 8, 2013

Did The Westphal Court Get It Right?

On Friday I said that what the First District Court of Appeals in Florida was saying in the Westphal case was that the "value" in the workers' compensation promise to injured workers was missing.

The National Council on Compensation Insurance (NCCI), Florida's official rate-making agency, announced Friday that the Westphal decision is going to cost $65 million in annual workers' compensation costs and could also produce indirect costs that can't yet be calculated.

Here we go again - swinging the discussion back to costs...

In defense of NCCI, their job is to estimate costs so that carriers and self-insureds can perform proper financial planning.

But the announcement of an annual increase of $65 million creates the illusion that there's something wrong with what the 1st DCA did.

Based on the Florida Department of State, Division of Corporations data, there are about 2 million active businesses in the state as of March 2013. I say about because the list includes entities that may or may not actually be doing business due to entity relationships, replication of business names, etc.

What this means is that the Westphal case will cost each employer an additional $32.50 per year, if that risk was evenly spread out against all employers in the state.

You and I know that is not the case. Some employers will pay more because of higher payrolls and risks, and some employers will pay less, if anything at all.

The point is that while $65 million sounds alarming, it isn't.

Also, the methodology in which NCCI used to make its estimate may, or may not, be appropriate.

NCCI reviewed average TTD durations in other states and analyzed lost-time claims filed with the Florida Division of Workers' Compensation in which no permanent disability benefits were paid.

Because Florida law requires that injured workers be rated for impairment six weeks prior to expiration of their TTD benefits, NCCI also examined Florida TTD claims in which workers received at least 98 weeks of benefits and concluded those claims represent about 7% of all TTD benefits paid in Florida.

NCCI said that, if the Westphal ruling had been in effect, those claimants would have seen a 70% increase in indemnity payments.

NCCI also said injured workers who currently receive TTD benefits for shorter durations may delay returning to work, while those with less severe injuries may receive greater total awards as a part of future settlements.

So there is quite a bit of "guesstimating" in NCCI's calculations - the real answer of course can't be known prospectively.

The unfortunate timing of NCCI's analysis however is that it may have an undue influence of the court.

The 1st DCA has agreed to rehear the Westphal case en banc - which means that all of the justices in the court get to weigh in on the opinion.

The 1st DCA should not concern itself with the cost of its opinion. It should concern itself ONLY with whether a correct legal analysis was performed and a correct conclusion was reached.

We all know that sometimes the courts will bend the law to reach a certain outcome or conclusion, but most of the time the courts are most concerned with whether the law was followed.

In this case it is the supreme law of Florida - that state's constitution.

After my Friday opinion published I received criticism from some in the insurance industry that the court in Westphal should not be legislating from the bench, and that there are other systems such as private disability plans (STD/LTD), Family Medical Leave Act (FMLA), etc. that have in place benefit duration caps, so too should work comp.

My answer was a) most work comp systems do have caps, and b) those other systems are completely different from workers' compensation.

Workers' compensation in many states is generally a constitutionally guaranteed right to the people. Neither STD, LTD nor even FMLA have any constitutional affiliation whatsoever.

The Westphal court said that the gap created by the 104 week cap on temporary total disability (TTD), with no exceptions, until the claimant is otherwise determined to have reached maximum medical improvement (MMI) and ready to have a final benefit determination violates Article 1, Section 21 of the FL Constitution.

That section says, "The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay."

The Westphal court, noting earlier binding precedence, said that provision of the constitution must be construed broadly. Accordingly, because Westphal was put into a position of having no remedy during the period when his indemnity ceased and being declared MMI and eligible for permanent disability indemnity (PD) there was an unconstitutional delay in the administration of his rights.

The court noted that the employer, not Westphal, held all the cards relative to medical treatment and as a consequence held all the cards relative to timely provision of benefits and adjudication of disputes (Westphal page 8).

"Under chapter 440, Westphal was then required to refrain from working and go without disability pay or wages—and wait. Westphal had to wait until the E/C’s authorized doctors opined that he had reached maximum medical improvement, with no guarantee that such a day would ever come. But, even once he fully recovered, Westphal could not, under normal circumstances, recover disability benefits for the indeterminate waiting period."

We must remember that workers' compensation is NOT STD, LTD or FMLA. None of those programs are guaranteed to the People. None of the programs are exclusive remedy. None of those programs are mandatory.

Workers' compensation is guaranteed to the people, is exclusive, is mandatory (unless you're in Texas and perhaps soon Oklahoma).

The court in Westphal isn't dealing in "fairness" - they are dealing with that state's constitution.

The three elements of government, executive, legislative and judicial, exist uniquely to America because they theoretically provide a balance - if the executive or legislative branches overstep their bounds the judicial is there to redraw the borders.

And visa versa. The 1st DCA is not legislation from the bench, it is a check on the excess of the legislature (or executive as the case may be).

En banc, the 1st DCA must concern itself ONLY with the interpretation of the law as it applies to Mr. Westphal, a St. Petersburg firefighter who suffered severe injuries in 2009 and whose TTD benefits ran out before he reached maximum medical improvement.

THAT is the issue before the court. Not whether their ruling will increase some Florida's business another $32.50 per year.

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