Jeffrey P. Gale, P.A. // Why Reasonable Carrier-Paid Attorney’s Fees Are Reasonable and Necessary

ISSUE: Whether section 440.34 Florida Statutes, recently modified by the Florida Supreme Court in Castellanos v. Next Door Company, et al. (Fla., 2016), should be amended to eliminate insurance carrier-paid reasonable attorney’s fees.

DISCUSSION: In 2009, the Florida Legislature barred judges of workers’ compensation claims (JCC) from awarding reasonable carrier-paid hourly fees to the lawyers of injured workers who were successful in securing benefits for their clients. The legislature limited the allowable fee to the following statutory formula: 20 percent of the first $5,000 of the amount of the benefits secured, 15 percent of the next $5,000 of the amount of the benefits secured, 10 percent of the remaining amount of the benefits secured to be provided during the first 10 years after the date the claim is filed, and 5 percent of the benefits secured after 10 years. Section 440.34(1) Florida Statutes.

Because most of the day-to-day workers’ compensation benefits are of low value, the attorney’s fee under the statutory formula for the successful prosecution of a claim for such benefits is correspondingly low. For example, the formula fee for securing the authorization of a $1,000 MRI is $200.

In Castellanos v. Next Door Company, et al. (Fla., 2016), the Florida Supreme Court declared unconstitutional, as a violation of due process under the Florida and United States constitutions, the provisions of 440.34 restricting fees to the statutory formula. The ruling allows workers’ compensation judges to award reasonable fees based on an hourly rate. After seven long years injured workers have a fighting chance to receive all benefits that are due and owing. Unfortunately, there are some individuals within the business community who seek to reverse the effects of the Castellanos ruling through legislative action.

The carrier-pays provisions of section 440.34(3) which open the door to the reasonable hourly rates are triggered by the following limited circumstances: (1) the successful prosecution of a medical-only claim; (2) the successful prosecution of a claim after the carrier has denied the benefit; or (3) the successful prosecution of a claim after the carrier has denied that an accident occurred.

Hence, whether a carrier ever becomes obligated to pay a reasonable hourly fee is a matter entirely within its control.

Once the carrier denies a benefit, the claimant’s attorney becomes obligated to invest substantial time and money to handle the claim competently. Invariably, the formula fee was well below the usual and customary fee — between $275 and $450 an hour depending on jurisdiction and case difficulty — paid to lawyers for performing similar services in other areas of law.

OTHER FORMULA FEE AWARDS (1000s of cases were negatively impacted by the unconstitutional statute. These are just a few examples.)

Murray v. Mariner Health, 994 So. 2d 1051 (Fla., 2008). The successful employee’s attorney received a formula fee of $684.84 for eighty hours of reasonable and necessary time, which equated to an hourly rate of $8.11. (The carrier paid its attorney $16,050 (135 hours at $125 an hour) in the unsuccessful effort to resist paying benefits.)
Castellanos v. Next Door Company, et al. (Fla., 2016). The employee’s successful attorney was awarded a formula fee amounting to $1.53 per hour for 107.2 hours of work determined by the Judge of Compensation Claims (JCC) to be “reasonable and necessary” in litigating a complex case.
Perez v. Univision Network LP/Sentry Claims Service, 184 So. 3d 653 (Fla. 1st DCA 2016). $1,562.15 formula fee for 128.9 of legal work = $12.12 an hour.
Diaz v. Palmetto Gen. Hosp./Sedgwick CMS, 146 So. 3d 1288 (Fla. 1st DCA 2014). $1,593.47 formula fee for 120 hours of legal work = $13.27 an hour.
Ferrer v. Truly Nolen of Am., Inc., 164 So. 3d 700 (Fla. 1st DCA 2015). $135.02 formula fee for 35 hours of legal work = $3.86 an hour.

The Florida Supreme Court long ago observed that allowing a claimant to “engage competent legal assistance” actually “discourages the carrier from unnecessarily resisting claims” and encourages attorneys to undertake representation in non-frivolous claims, “realizing that a reasonable fee will be paid for [their] labor.” Ohio Cas. Grp. v. Parrish, 350 So. 2d 466, 470 (Fla. 1977).

The formula fee, rarely ever reasonable, worked against these principles. Rather than promoting the amicable resolution of claims, the puny awards actually encouraged carriers to engage in baseless denials. Since 2009, hundreds of fee awards similar to those listed above were entered throughout the state.

Carriers have long enjoyed the upper hand under Florida’s workers’ compensation system. Some examples:

440.02(1). “[I]f a preexisting disease or anomaly is accelerated or aggravated by an accident arising out of and in the course of employment, only acceleration of death or acceleration or aggravation of the preexisting condition reasonably attributable to the accident is compensable.” Not infrequently, a person functioning fine with a preexisting condition is precluded from working because of the industrial injury. However, this statutory section allows carriers to carve out from the total disability the part related to the preexisting condition, even though the preexisting condition alone was not causing any wage loss or need for medical care.
440.02(36). ‘”Arising out of”’ pertains to occupational causation. An accidental injury or death arises out of employment if work performed in the course and scope of employment is the major contributing cause of the injury or death.” Major contributing cause (MCC) means more than 50%. See 440.09(1), below. If the industrial accident is not the MCC, even if it’s 49% of the cause, the employee gets nothing. Zero. This is different than the standard applied in a civil case, which compensates for the portion of the injury related to the accident regardless of the percentages.
440.09(1). “[T”]he accidental compensable injury must be the major contributing cause of any resulting injuries. For purposes of this section, “major contributing cause” means the cause which is more than 50 percent responsible for the injury as compared to all other causes combined for which treatment or benefits are sought.”
440.09(1). “Pain or other subjective complaints alone, in the absence of objective relevant medical findings, are not compensable.”
440.093(1). “A mental or nervous injury due to stress, fright, or excitement only is not an injury by accident arising out of the employment.” There is more to this section, but the long and short of it is that psychiatric conditions receive less consideration than physical injuries.
440.105. Extensive fraud and penalty provisions.
440.12(1). If the injury results in disability of less than 21 days, compensation is not allowed for the first 7 days of the disability.
440.12(2). Regardless of the claimant’s actual wage loss, compensation shall not exceed an arbitrary amount set by statute.
440.13. No second medical opinions.
440.13(1)(h)&(5). The claimant and the carrier are entitled to an independent medical examination. The claimant is required to pay for his or her own examination, costing upwards of $1,000. This is out of the reach of most claimants.
440.13(1)(m)(n)(o)(q)(r)(s) & (6). Various ways the carrier can challenge medical care and charges. Claimant does not have a reciprocal right to challenge the care being provided by the carrier’s hand-selected medical provider.
440.13(2)(c). Carriers choose the initial treating physician and all providers thereafter. Claimants do not have a choice in who is authorized. Time and again, carriers select the same go-to workers’ compensation doctors who dare not bite the hand that feeds them.
440.13(2)(d). “The carrier can transfer the care of an injured employee from the attending health care provider if an independent medical examination determines that the employee is not making appropriate progress in recuperation.” Claimants do not have the same right.
440.13(2)(e). Before a physician’s proposed course of treatment is authorized, the carrier gets to determine whether such treatment is reasonably prudent.
440.13(2)(f). Claimant is limited to one change of physician during the course of treatment for any one accident and the carrier gets to select that doctor. The former authorized doctor then becomes de-authorized.
440.13(3)(c). “A health care provider may not refer the employee to another health care provider, diagnostic facility, therapy center, or other facility without prior authorization from the carrier….”
440.13(3)(i). “[A] claim for specialist consultations, surgical operations, physiotherapeutic or occupational therapy procedures, X-ray examinations, or special diagnostic laboratory tests that cost more than $1,000 and other specialty services … is not valid and reimbursable unless the services have been expressly authorized by the carrier….”
440.13(4)(c). “An employee who reports an injury or illness alleged to be work-related waives any physician-patient privilege with respect to any condition or complaint reasonably related to the condition for which the employee claims compensation…. [U]pon the request of the employer, the carrier, an authorized qualified rehabilitation provider, or the attorney for the employer or carrier, the medical records, reports, and information of an injured employee relevant to the particular injury or illness for which compensation is sought must be furnished to those persons and the medical condition of the injured employee must be discussed with those persons…. Any such discussions or release of information may be held before or after the filing of a claim or petition for benefits without the knowledge, consent, or presence of any other party or his or her agent or representative.”
440.13(5)(e). “No medical opinion other than the opinion of a medical advisor appointed by the judge of compensation claims or the department, an independent medical examiner, or an authorized treating provider is admissible in proceedings before the judges of compensation claims.” This provision makes it difficult and expensive for injured workers to present unbiased medical testimony. With regard to medical advisors selected by the JCC, see 440.13(9) below for the negative issues. With regard to IME doctors, the cost is prohibitively expensive for most injured workers. Finally, nearly all authorized treating doctors are hand-picked by the carrier and know better than to testify against the carrier if they wish to continue receiving WC cases. For the most part, injured workers are being seen by the same handful of workers’ compensation doctors selected time and again by the carriers.
440.13(9). This is the so-called super-doc provision. The EMA can override the opinion of the treating doctor. “The opinion of the expert medical advisor is presumed to be correct unless there is clear and convincing evidence to the contrary as determined by the judge of compensation claims.” This section effectively abolishes the authority of workers’ compensation judges to engage in the time-honored practice of weighing evidence. Making matters worse is that every EMA doctor is a treating workers’ compensation provider and does IME work for carriers. EMA doctors know who butter their bread.
440.13(12) & (13). These sections sanction the creation of a Workers’ Compensation Fee Schedule for reimbursement rates to medical providers. Since reimbursement rates are notoriously low, many of the most competent doctors refuse to accept workers’ compensation cases.
440.13(5). Limits the types of factors medical providers may rely on to determine the extent of an injury.
440.15(1). This section makes it virtually impossible for injured workers to qualify for permanent and total disability (PTD) benefits. The workers’ compensation PTD standard is more arduous than permanent total disability standards found in every other arena, such as private disability insurance, Social Security Disability, and State of Florida disability (for government employees). Moreover, workers’ compensation PTD benefits end at age 75 no matter what.
440.15(3). Known as Impairment Benefits, this is the alternative to PTD benefits. The benefit is of limited duration (on average, a few months) and has no connection whatsoever to actual wage loss resulting from the industrial injuries. Due to the difficulty qualifying for PTD benefits, this is the category into which most injured workers fall after reaching maximum medical improvement (MMI; 440.02(10)).
440.15(6) & (7). If the carrier claims that work is available within the limitations assigned by the carrier-selected doctor, indemnity benefits will be denied while the employee refuses or is unable to perform the job. Frequently, the job requirements exceed the medical limitations. While the issue is being sorted out, which can take six months to a year, the carrier refuses to pay indemnity benefits.
440.15(9). This section caps the amount of combined income an injured worker may receive from workers’ compensation and Social Security Disability. Shockingly, the workers’ compensation carrier gets to take the offset for any amount over the allowed maximum rather than the taxpayers.
440.16. Compensation for death “shall not exceed $150,000.”
440.20(4). Allows the carrier 120 days to investigate its obligations without running afoul of the attorney’s fee provision of 440.34(3)(b).
440.34(2). An offer of settlement provision that allows only the employer, and not the claimant, to make an offer to settle.
440.34(3). Discussed at length above.
440.39(2). “If the employee or his or her dependents accept compensation or other benefits under this law … the insurer shall be subrogated to the rights of the employee or his or her dependents against such third-party tortfeasor, to the extent of the amount of compensation benefits paid or to be paid….” This means is that injured workers must repay workers’ compensation carriers.

Some business and carrier representatives are declaring that the Castellanos decision will open the floodgates to “unbridled hourly rate attorney’s fees.” (This quote is attributed to Tom Feeney, CEO of Associated Industries, in the newspaper article, Workers-comp rates could jump in Florida.) The claim is patently false … and this is why:

WHY CASTELLANOS DOES NOT PERMIT “UNBRIDLED HOURLY RATE ATTORNEY’S FEES”

Section 440.34(1), Florida Statutes provides that “A fee, gratuity, or other consideration may not be paid for a claimant in connection with any proceedings arising under this chapter, unless approved by the judge of compensation claims or court having jurisdiction over such proceedings.” Accordingly, every attorney’s fee, especially those awarded under Castellanos, must be approved by a JCC. It is a crime for an attorney to accept any fee not approved by a JCC. See § 440.105(3)(c), Fla. Stat. Hence, the JCC is the gatekeeper of all claimant attorney’s fees.
JCCs are constrained by well-defined, longstanding guidelines in awarding fees. The guidelines have been established to assure that fees are reasonable rather than “unbridled.” An award of fees which fails to rely on the guidelines will, as a matter of law, be reversed on appeal. The guidelines are contained here: 4-1.5(b) of the Rules Regulating the Florida Bar; Lee Eng’g & Constr. Co. v. Fellows, 209 So. 2d 454, 458 (Fla. 1968) (applying Canon 12 of the Canons of Professional Ethics, the predecessor to rule 4-1.5(b); Florida Silica Sand Co. v. Parker, 118 So. 2d 2 (Fla. 1960); Section 440.34, Florida Statutes.
Fee hearings are adversarial proceedings presided over by a JCC. Each side is represented by legal counsel and evidence is presented. Rulings must be supported by evidence and can be appealed to the Florida First District Court of Appeal and, in some instances, the Florida Supreme Court.
JCCs are appointed and reappointed by the Governor for a term of four years. Section 440.45, Florida Statutes. Every sitting workers’ compensation judge in the state today has been appointed or reappointed by a Republican Governor. (Jeb Bush, 1999-2007; Charlie Crist, 2007-2011; Rick Scott, 2011-2019), making them a conservative group. Only a foolish JCC would consider awarding “unbridled hourly rate attorney fees.” Not only would the award be reversed on appeal, but the judge would be looking for a new job come reappointment time.
Castellanos fees do not accrue unless the carrier wrongly denies benefits and the claimant is successful in securing the benefits through legal proceedings with the help of a lawyer. See section 440.34(3)(a), (b) & (c), Florida Statutes. This means that carriers have near total control over whether a Castellanos fee is ever owed. This point is never mentioned by those who oppose Castellanos.

In support of their phony claim regarding unbridled fees, the enemies of Castellanos will be waiving around attorney fee awards entered since the decision was rendered on April 28, 2016. While the fee awards are relatively large, what the opponents won’t be saying is that the large awards are the product of carriers taking advantage of the formula fee system by forcing needless protracted litigation. Castellanos blew up in their faces.

These are some of the fee awards based on Castellanos (this part will be updated as new awards are issued):

Every JCC, defense attorney and insurance adjuster with whom I have discussed the fee formula issue over the past seven years readily agreed that it was blatantly unfair. Castellanos evens the playing field. Carriers have already become more cooperative and agreeable in providing benefits, which is a good thing and a return to the original goal of the workers’ compensation system to effectuate the quick and efficient provision of benefits. Castellanos puts the system back on that path. As long as carriers abide by the letter and spirit of the law, they need not worry about being hit with large attorney fee awards. Do the right thing and all will be well.

PERSPECTIVE: The following comments were made by a lawyer member of Florida Workers’ Advocates in response to recent misrepresentations from groups who oppose Castellanos. His remarks hit the nail on the head.

The industry comments are disgusting. The system was working extremely well? For whom? Definitely not injured workers. And this is about squabbling over pennies? No, this is about denial and underpayment of claims on a grand scale — and abuse of injured workers and their families — that will now stop (at least temporarily while industry conspires to find a new way to avoid bearing the costs of work accidents).

I don’t imagine I would go to a final hearing over $1.00, but I might over $100.00. $100.00 is not the dream case I am hoping to litigate, but if an Employer/Carrier clearly underpaid $100.00 in benefits, they need to pay those benefits, period. If a carrier wants to take in premiums for covering workers’ compensation losses, it should hire and train employees who have the ability to adjust claims properly, and create a culture of accountability for correct payment of benefits, not just a culture that stresses pushing claims to closing by any means necessary.

If you steal property worth $100.00, what’s your argument with the judge when you get caught, it’s not a big deal? Try walking out of a retail store with $100.00 worth of goods that you failed to pay for and see what happens.

If an insurance company steals a “minute” $100.00 from 10,000 individual injured workers by underpaying claims, what’s that called? In Florida, that’s no big deal, it’s a minute issue. Just a $1 million profit for an insurance company, stolen out of the pockets of injured, hard-working people.

And on case after case for the clients who walk through my door, the underpayments and inappropriate denials aren’t about $100.00 in benefits, either. It’s thousands or tens of thousands of dollars per case.

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Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.

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