Tag: Commercial

Florida Supreme Court Ruling May Increase Workers’ Compensation Premiums

A recent decision by the Florida Supreme Court may soon have employers paying substantially more for workers’ compensation insurance. In Castellanos v. Next Door Company, the Court ruled that Florida’s mandatory workers’ compensation attorney fee schedule is unconstitutional. In response to this ruling, the National Council on Compensation Insurance (NCCI) proposed increasing Florida’s workers’ compensation rates by 17.1%.

Under Florida Statute 440.34, attorneys who successfully secure workers’ compensation benefits for injured clients may be awarded attorneys’ fees. However, any attorney fee award, which is based on the amount of workers’ compensation benefits secured, must equal:

  • 20 percent of the first $ 5,000;
  • 15 percent of the next $ 5,000;
  • 10 percent of any remaining benefits that will be provided during the first 10 years after the claim is filed; and
  • 5 percent of any benefits secured after 10 years.

In Castellanos, the Florida Supreme Court considered whether this mandatory fee schedule is constitutional.

Marvin Castellanos suffered an injury on the job. The workers’ compensation insurance company refused to authorize the medical treatment recommended by its own designated doctor and raised twelve affirmative defenses to avoid paying compensation. After a final hearing, the Judge of Compensation Claims (JCC) ruled entirely in Mr. Castellanos’ favor.

Mr. Castellanos’ attorney spent 107 hours working on the case and requested an award of attorneys’ fees calculated at $350 per hour. Despite finding this request to be reasonable and warranted, the JCC was required to follow Florida’s mandatory fee schedule. Based on the actual value of the benefits secured, Mr. Castellanos’ attorney was awarded fees in the amount of $164.54, or $1.53 per hour.

The Court noted that the mandatory fee schedule does not consider the reasonableness of a fee and does not permit the review of grossly inadequate or grossly excessive fees. “Without the ability of the attorney to present, and the JCC to determine, the reasonableness of the fee award and to deviate where necessary, the risk is too great that the fee award will be entirely arbitrary, unjust, and grossly inadequate.” Accordingly, the Court ruled that Section 440.34 is unconstitutional.

As a result, the statute’s immediate predecessor, which was construed to provide for a “reasonable” award of attorney’s fees, was essentially revived. Though the statutory fee schedule remains the starting point for calculating fees, claimants must now be allowed to present evidence to show that its application will result in an unreasonable fee.

Though the Court emphasized that its ruling does not mean that claimants’ attorneys will receive a windfall, insurance companies disagreed. On May 27, 2016, NCCI, which is a licensed rating organization authorized to submit workers’ compensation insurance rate filings on behalf of Florida insurance companies, submitted a proposed rate increase to the Office of Insurance Regulation (OIR).

According to NCCI, the first year impact of Castellanos will be a 15% increase in overall Florida workers compensation system costs. (The total proposed rate increase of 17.1% includes factors that are not related to Castellanos.) NCCI proposes applying the increased rates to new and renewal policies that are effective on or after August 1, 2016. NCCI also proposes applying the increased rates to all policies in effect on August 1, 2016 on a pro-rata basis through the remainder of the term of these policies.

If NCCI’s proposal is approved, Florida would have the highest workers’ compensation rates in the Southeast. The OIR plans to hold a public hearing regarding NCCI’s proposed rate increase in the coming months, so stay tuned.

Even if the OIR approves all or part of NCCI’s proposed rate increase, there are ways to lower workers’ compensation insurance costs, such as promoting employee safety and maintaining a safe work environment.

Please contact us if you would like more information about controlling workers’ compensation insurance costs.

Additional information is also available in our weekly Risk Management Newsletters.

Does Your Business Need a USDOT or MC Number?

The Department of Transportation’s (DOT) Federal Motor Carrier Safety Administration (FMCSA) monitors and ensures compliance with motor carrier safety and commercial carrier regulations. Contrary to what many believe, 18-wheel trucks aren’t the only vehicles covered by FMCSA regulations. Depending on its operations, any business may be required to have a USDOT Number, an MC Number, or both.

USDOT Number

USDOT Numbers are unique identifiers used by the FMCSA when collecting and monitoring a company’s safety information, compliance reviews, crash investigations and inspections. A business involved in interstate commerce must have a USDOT Number if it owns a vehicle that:

  • Is used in transporting material found by the Secretary of Transportation to be hazardous and transported in a quantity requiring placarding (whether interstate or intrastate);
  • Has a gross vehicle weight rating or gross combination weight rating, or gross vehicle weight or gross combination weight, of 4,536 kg (10,001 pounds) or more, whichever is greater;
  • Is designed or used to transport more than 8 passengers (including the driver) for compensation; OR
  • Is designed or used to transport more than 15 passengers, including the driver, and is not used to transport passengers for compensation.

Interstate commerce means trade, traffic or transportation in the United States that is:

  • Between a place in a State and a place outside of such State (including a place outside of the United States);
  • Between two places in a State through another State or a place outside of the United States; OR
  • Between two places in a State as part of trade, traffic, or transportation originating or terminating outside the State or the United States.

In addition to FMCSA regulations, some states also require a USDOT Number to operate or register commercial motor vehicles, including Florida, Georgia, New Jersey and North Carolina.

MC Number (Operating Authority)

The FMCSA also issues various kinds of Operating Authority that dictate the type of operations a business may run and the cargo it may carry. This is known as an MC Number. Unlike USDOT numbers, which identify carriers operating in interstate commerce, MC Numbers identify carriers transporting regulated commodities for hire in interstate commerce.

An MC Number is generally required for businesses that:

  • Operate as for-hire carriers transporting goods or passengers for compensation;
  • Transport passengers in interstate commerce; or
  • Transport federally-regulated commodities or arranging for their transport, in interstate commerce.

Since there are different kinds of Operating Authority, a business may need more than one MC Number. And, different Operating Authorities may have different insurance requirements. For example, Motor Carriers of Passengers are required to have bodily injury and property damage insurance. The minimum required coverage is $5,000,000 if a company has any vehicles with a seating capacity of 16 or more passengers (including the driver); otherwise, the minimum required coverage is $1,500,000.

The FMCSA may impose penalties and assess fines for failing to have a required USDOT or MC Number. Businesses may face additional penalties in those states that have their own registration requirements. In Florida, for example, the failure to obtain a USDOT Number can result in a $500 fine.

Please contact us if you would like more information about complying with the various operating and insurance requirements governing your fleet or operations.

Additional information is also available in our weekly Risk Management Newsletters.