As Court Rulings Push Costs Higher, Florida Looks for a Rate…Decrease

Nancy Grover

Boca Raton, FL ( – Florida employers waiting for the other shoe to drop following landmark court decisions are getting a reprieve. Looks like yet another rate decrease is in the offing.

As reported recently, NCCI has filed a proposed -5.4 percent rate decrease with state regulators. If approved, it would follow reductions of -13.8 percent in January 2019 and -9.5 percent in 2018. Most of the data included in the analysis relates to policies that went into effect after the 2016 Florida Supreme Court rulings.

“Those cases, Castellanos v. Next Door Company, et al. and Westphal v. City of St. Petersburg, et al. brought about retroactive changes to claimant attorney fee and benefit levels. In response, the Office of Insurance Regulation approved a +14.5% rate increase effective December 1, 2016,” NCCI wrote in its latest rate filing. “Since that time, favorable loss experience has more than offset the combined cost increases that have emerged from those Court decisions.”
Florida, like most NCCI states is seeing “unprecedented results,” NCCI said. “The combination of underwriting discipline, moderating severity, declining frequency and adequate reserves has resulted in five straight years of combined ratios under 100% (below 100% is indicative of an underwriting profit).”
While the positive factors are expected to continue, NCCI also noted that the full impact of the court decisions, mainly Castellanos, “will still not materialize for several years to come as workers compensation insurance is a ‘long-tail’ line that often involves a long period of time for claims to be resolved.”

Castellanos Impact

As part of its most recent filing, NCCI took an in-depth look at the potential effects of the Castellanos decision. The analysis included input from insurers, the change in plaintiff attorney fees, and changes in loss experience. The results clearly showed the decision is having an impact.

“Consistent with the information obtained in past years, most of the carriers interviewed specifically said they have experienced claim cost increases after the Supreme Court’s decision, while a minority of carriers have not been materially impacted by the decision,” NCCI said. “Increases in claimant attorney fees were reported by all carriers interviewed. In addition, the carriers once again underscored the fact that litigated claims generally tend to take longer to close and are costlier when compared with non-litigated claims. Some carriers reported that litigated claims now represent a relatively larger portion of their book of business versus their experience prior to the Castellanos decision. These comments are relevant in that historical loss development patterns may not be reflective of future loss development.”

Additional increases in system costs may be likely, as carriers determine how to function in the current environment. “For example, carriers reported that over the last couple of years, claimant attorneys have increasingly become involved with claims that went without representation prior to the Castellanos decision,” the filing states. “While the impacts of the Castellanos decision can be observed, they have been more than offset by the continued improvement in loss experience.”

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