Thursday, November 13, 2014

Oh! To Be An Attorney!

Florida’s Office of the Judges of Compensation Claims will release its report to the state legislature in a few days as required by law. Chief Judge David Langham had primed the pump, so to speak, by blogging about initial findings on attorney fees in the state.

After his first report he discovered anomalies in the data which led him to investigate, and eventually correct the error. One of the reporting third party administrators had been using an incorrect query and consequently had erroneously inflated defense attorney expenditures by a few million dollars.

The corrected numbers are posted now on Judge Langham's blog.

The corrected numbers reflect that attorneys in Florida for fiscal 2012-13 were paid a combined total of $382 million; claimant attorneys got $142 million and defense attorneys about $240 million.

The total amount of fees being paid attorneys has been on the decline in the state since SB 50 had passed severely restricting claimant fees, and the assumption from participants in the system is that had a similar effect on defense fees.

In contrast, the California Workers' Compensation Insurance Rating Bureau last reported gross total attorney fees in California for 2012 was about $1.223 billion. Applicant attorneys got $450 million of that gross, and the defense was paid about $773 million.

Fees in California have been growing at about 8 % per year since just a couple years after Schwarzenegger's SB 899 sharply curtailed the benefits upon which most applicant attorney fees are based.
Indemnity claims in CA with an attorney are 78% of all claim costs. 

I was curious about how California stacked up against Florida - both states are known for being particularly litigious in workers' compensation.

A walk around the exhibit floor at the annual Workers' Compensation Institutes conference in August impresses one with all of the defense firm exhibits (and parties).

California lawyers on the other hand each have their own conferences, and even still defense firms will exhibit at some of the other employer or carrier based conferences in the state.
In contrast to FL, CA defense fees have continued to grow.

So while this is not a scientific study, and in fact I'm not even comparing apples to apples because the dates of the data collection are different, and there are other serious issues with this analysis that any competent high school statistician could tear apart, it is interesting nevertheless in terms of seeing where a big part of the money goes.

One comparison is just how big of a market are we really talking about.

For instance, California's gross written premium for 2013 according to the WCIRB was about $14.8 billion; the national gross written premium according to the National Council on Compensation Insurance was about $41.9 billion (includes state funds and private carriers).

So California represents about 35% of the total gross written premium of the entire nation.

According to NCCI's last report Florida's total gross written premium for 2013 is $3.21 billion, or 7.7% of national gross.

If we compare attorney fees as reported above to gross written premium, then for every premium dollar collected in California, twelve cents went to attorneys.

In Florida that ratio is 8.4 cents; a difference of about 30%. In other words, if you're going to be a lawyer in workers' compensation, California is about thirty percent more lucrative than Florida.

If we compare how much goes to defense representation as opposed to injured worker representation, the ratio is very close.

In California the ratio is 1.72. In other words for every applicant attorney dollar the defense spent a dollar and seventy two cents.

In Florida the ratio is 1.69; a very similar ratio.

Defense attorneys will defend (pun intended) their fees because work comp is "long tail" so they are working on cases that may be years old, or that they need to deal with issues that claimants don't such as resolving unsettled medical expenses.

Whatever - the point is that there is a lot of work available for attorneys, particularly defense attorneys, in workers' compensation. Just look at WorkCompCentral's job ads!

Sometimes I wonder if I should have stayed the course and remained a defense attorney instead of founding WorkCompCentral.


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