Judgment Day - What if it is Tomorrow?

The coming judgment day, may mean a change in the way Florida's economy looks. It may be an outcome loved by some, or loved by none. It is very difficult to predict. The Florida Supreme Court has demonstrated that it is willing to find a way, perhaps not different from the manner in which water that falls on the plains inevitably, inexorably, finds a way to reach to the sea. Florida has watched several cases challenge the sufficiency of workers' compensation. 

The market has witnessed Padgett. This was also known as Florida Workers' Advocates v. Florida. It had other names also, as the original parties were named, but later dropped from that suit. As I noted previously, the name is not as important as what we learn. In that case a Circuit judge was convinced to enter an order essentially finding the whole of Florida workers' compensation unconstitutional. The decision did not withstand appellate review. Essentially, the Third District Court of Appeal concluded that due process is a two-way street in Florida. Each side in a dispute is entitled to notice of the issues, and there has to be a meaningful opportunity to be heard. As that did not occur there, the case was reversed. It would be hoped that due process is a simple enough concept for all of our trial courts. 

After the Supreme Court declined to review Padgett, there was a great deal of discussion about Stahl v. Hialeah Hospital. This, we were all assured, was "the" case. This would be the stage upon which the modern Florida workers' compensation law would be displayed, revealed, and pilloried. But, having accepted jurisdiction of this case in 2015, the Florida Supreme Court dismissed its review without comment on April 28, 2016. Almost two years after the trial judge's ruling, the case had run its course. 

When the Supreme Court recently concluded in Westphal v. St. Petersburg that Florida's 104 week cap on temporary total disability benefits is unconstitutional, discussion again returned to overall sufficiency of the system. WorkCompCentral reported that the claimant's bar expresses hope that its next challenge, Gearheart v. Securitas Security Services will meet with more success in the courts. This particular challenge regards the presumptive effect of expert medical advisor (EMA) opinions. The EMA process is fraught with curiosities and complexities. But, it is a process beloved by some. It has survived despite a variety of issues and criticisms.

In a broader context, an attorney interviewed by WorkCompCentral prognosticated that there are "many other challenges (to the workers' compensation law) already out there," and "there's going to be many more challenges." The attorney contends that the law is fraught with deficiency and will be systematically disassembled by the high court which has "finally recognized the Legislature took away too many benefits." 

There are few who will offer an opinion on what the Florida Supreme Court may do. It has demonstrated that review may be very slow (the opinion in Westphal required more than two years after oral argument - recently at a conference it was suggested that Westphal is the "elephant in the room" and that its gestation was consistent with all elephants - two years. A humorous aside). Some suggest that the Court's analysis may not conform to expected constitutional review. This is an observation also offered by some who have studied the Court's analysis in Castellanos v. Next Door Company, in which the Court inferred that any limitation stated in any Florida statute is, without being so labelled, a presumption and thereby unconstitutional. Some doubt that the Court will apply such an analysis consistently to other statutes, but the potential remains. 

And thus, the curiosity permeates the market. There are those who wonder what role the intermediate appellate courts will play in the analysis. The procedural history of Westphal is discussed often, with some contending that the First District's seemingly vacillating analysis of Oswald, Hadley, Westphal (panel) and Westphal (en banc) does not portend "fair winds and following seas." I would suggest that perhaps being an appellate court is perhaps not as easy as it might look from our "outsider" perspective. Perhaps better days are to come?

But what if the system critics reach their grail, or the nadir depending on perspective. What if an appellate court is convinced of the ultimate failure of the "grand bargain?" Padgett at least taught that this will happen only with all parties on notice. Logic may suggest that, "on notice," evidence would be elicited by both sides of such a dispute? Should a court reach that outcome, after evidence presented by both sides, might the ultimate conclusion be that exclusive remedy fails?

I heard an attorney speak recently at a conference. He explained that the point, from his perspective, is that an employee should ultimately not be bound to the workers' compensation system. He explained that the employee/employer relationship is not balanced and that the employee lacks bargaining power. So, he said, in the event of an injury or illness the employee should be able to accept workers' compensation or proceed to sue in tort. He explained that this "employee choice" is the only "fair" outcome in what is undeniably an unfair world. 

In this attorney's perspective, the workers' compensation system is there to provide no-fault benefits to employees when those benefits are subjectively and individually preferable to a particular worker. The "exclusive remedy," he contends, is present in this bargain only to prevent a "double recovery;" that the workers' compensation remedy should be "exclusive" only in that accepting it might preclude that employee from also seeking tort damages in that case. This analysis fails to consider that such preclusion on "double recovery" already exists in American law; it is called election of remedies and the "exclusive remedy" of American workers' compensation is not required for such limitation and protection. 

If "exclusive remedy" in the broad workers' compensation context does not provide a broader limitation on liability, some would argue that it is of limited or no value to the employer. The argument might be that this "exclusive remedy" is the consideration that workers give in exchange for benefits, whatever benefits, in the "grand bargain," which itself is essentially a contractual  (albeit by operation of law) relationship between employees and employers. 

If we awaken one morning to find that an appellate court has diminished the "exclusive remedy" what effect would that have? One element for consideration might be the contractual relationships involved in workers' compensation. Though a fair few fail to grasp it, workers' compensation as a rule does not create liability for insurance carriers. This is not unique to workers' compensation, but is true also in most insurance relationships. 

Though the insurance carrier is "named" and "served" in workers' compensation proceedings, the law generally makes employers liable for work injuries. It is the employer who is responsible if someone gets hurt, just as it is the motorist who is responsible for their operation of a vehicle. If the insured (employer or motorist) is liable, then some other entity (a carrier) may have to pay the damages. This is referred to in the world of insurance as the "duty to indemnify." It results from a contractual relationship between the employer or motorist and some insurance carrier. It is contractual liability, subject to the terms and conditions of that contract. 

As a rule, general liability policies do not cover employee injuries. These injuries are "excluded" from coverage under the contract, by the terms of the contract. The insurance contract defines what risks are within the policy's coverage. Armed with the knowledge of what risks might result in liability, the insurance company can assess and predict its risk. Understanding its potential risk, and the costs of such risk, the carrier can negotiate a price for this contractual relationship. Exclusion of risks is not uncommon. For example, it is common for property insurance policies to exclude wind or flood damage. If the homeowner desires coverage for these risks, she/he would purchase a separate and particular policy for either or each. 

So, in our paradigm, employers have paid a premium to a worker's compensation carrier to provide coverage, that is indemnification, for injuries to their employees. The "handshake deal" of the "grand bargain" is that people injured by their employment will fore go their common law right to sue in tort, and in exchange they will receive workers' compensation benefits. Some who decry the current state of workers' compensation contend this should mean "any" illness or injury in any way somehow related to work. But, the Devil is in the Definitions. 

It is important to remember that early in the history of North American worker's compensation, such statutory schemes were repeatedly stricken as unconstitutional. Though many people understand and recognize this history, the grounds for those findings are not what is generally expected. The lack of constitutionality stemmed from the fifth amendment due process clause. The court concluded that liability without fault, a critical element of workers' compensation, violated the employers' due process. In 1917, the Supreme Court concluded that liability without fault did not necessarily violate employer due process, in the light of the grand compromise or "grand bargain," that being the counter balancing benefit of exclusive remedy.

With this context, what result would flow from a determination that "exclusive remedy" is unconstitutional? If we awoke one morning to find that is the "new normal," what effects would the marketplace face? It is perhaps easiest to comprehend in the context of an event. An employee is walking through the workplace, trips over a box, and falls resulting in a traumatic injury to her/his knee. 

In the workers' compensation system, the employer might be held responsible for this injury. The employee would be precluded by "exclusive remedy" from suing the employer in tort. If deemed to be compensable, then the employer would owe benefits. The employer would turn to its insurance company and expect, contractually, for that company to pay those benefits. The insurance company would pay the cost, pursuant to its' contractual responsibility; because, the carrier agreed to pay workers' compensation and that is what it would pay.

If the employee instead sued in tort, the process would be similar. The defendant would be the employer. The employer might have "liability insurance" to cover losses occurring at its premises. A key word is "might" because most employers in the modern age are required to have insurance coverage (or some financially stable substitute) for workers' compensation. This is similar to most states requiring motorists to have auto insurance for liability (for damage caused to others). But, "liability insurance" for businesses is less likely to be mandated. This is perhaps analogous to the "comprehensive" insurance (to repair your own car after an accident) that is available, but purchase of which most states do not require.

Sued in tort, the employer might have liability insurance or might not. If the employer does not have liability insurance, it then faces a lawsuit for a personal injury on its premises (the employee tripping over a box), and it faces that lawsuit alone. Any damages awarded in that lawsuit would be the responsibility of the employer. Ultimately, the costs would come from the company's profits or "bottom line." If the costs were sufficient, the company might be bankrupted thereby. 

If the company had liability insurance, the result might be different. The general liability policy might provide for a legal defense for the employer, and might provide for damages (indemnification). But, it might not. That contract might not cover injuries to employees of the company (the policy holder). Why would an employer company buy a policy with such an exclusion? Because the liability for injuries to employees might be perceived as unneeded, because those liabilities or potential costs are covered by the workers' compensation insurance. The expectations about the future might drive one set of decisions that are less than hoped for in light of a later appellate court interpretation. 

Thus, it is possible that an employer might plan appropriately. It might have workers' compensation (which the law made the company buy) and general liability (which it chose to buy). With this integrated shield against liability, the employer might then find itself liable to the worker for damages. It might turn to the workers' compensation carrier and be told "that is not our responsibility, it is tort, not workers' compensation." Then, turning to the general liability carrier the employer might be told "that is not our responsibility, it is for injury to an employee which is excluded from our coverage (contract)."

Having done what the law requires (purchase workers' compensation coverage) and what is prudent (purchase liability insurance), the employer here might find that it alone remains liable for these injuries. In a marketplace where "exclusive remedy" is sporadic or undependable, employers might find themselves in doubt. Appellate courts are tasked with interpreting the law, and the effect of their decisions operate on all situations covered by a law, now and in the past. Legislative changes to laws operate only in the future. Legislative changes can be assessed and planned for; judicial changes? not so much sometimes. 

The morning we awake to find exclusive remedy unconstitutional might find a great many employers with potential liabilities that are uninsured, or in doubt, and a great many lucky employers (those without a current claim on that morning) on the phone with their insurance brokers (if they could get through). 

What does the world look like on the morning after a conclusion that "exclusive remedy" is unconstitutional? It may be a world in which every Worker's Compensation claim is challenged, by the employers. In the absence of "exclusive remedy" might the courts return to their 20th Century analysis that workers' compensation liability is an unconstitutional, 5th Amendment, "taking" from the employer? If the employer receives no such "exclusive remedy" then will it be held responsible for "no-fault" benefits? History would suggest not, but then some argue that history and precedent are no longer constraints on judicial decisions, citing the failure of stare decisis in the modern world.

It may be a world in which workers compensation benefits, the "quid" for the "quo," are arguably no longer due to any employee injured on the job. A world in which any injured employee would face the solitary potential relief of tort, in a court system that would require proof of negligence; a system in which it might matter greatly whether the employee contributed to her/his own injury (did she/he put the box there, was she/he paying attention to where she/he walked? A myriad of potential questions). 

In that world, will these negligence claims be brought against employers that have no insurance coverage for the resulting damages (did not buy liability insurance), or whose coverage will not pay (employee injuries excluded)? Will damages in such situations bankrupt businesses, businesses that perhaps thought they were protected through their prudent purchase of workers' compensation and general liability insurance?

I have discussed this with some of the best legal minds I know Several have reassured me that none of this can come to pass. One assured me that any finding of the statute being unconstitutional would apply only "prospectively."  That is, only to accidents that occur after this judicial declaration that "exclusive remedy" is unconstitutional. Thus, businesses could, upon hearing of the judicial destruction of "exclusive remedy," find appropriate coverage for future claims. That is an interesting analysis which puts much faith in the foresight and comprehension of appellate courts. 

Should a court reach such a conclusion, and apply its analysis only prospectively, some would certainly argue that such a decision would be constitutionally infirm itself. The equal protection clause of the 14th amendment to the United States Constitution clearly suggests that people will be treated equally under the law. In that context is it constitutional (or perhaps is it right) that an injured worker suffering a Wednesday accident, might be treated differently than the exact same injury occurring moments after the Thursday release of the Supreme Court decision eliminating "exclusive remedy?" 

Some will argue that equal protection is not really effective in this context, but is instead limited to disparity in protection based on suspect classifications. that is a valid point and worthy of discussion. It is certainly conceivable that a court's decision might be limited in scope, apply only to the future claims and cases. Whether that outcome would be fair or equitable, however, is certainly debatable. In a situation in which an appellate court strives to determine fairness, and the equities of "exclusive remedy," will it work that in a manner unfair and inequitable to others?

In this example, an insurance carrier might elect to pay worker's compensation benefits for the Wednesday injury, but deny such benefits to the injured worker on Friday, placing the employer in an uncomfortable, and unanticipated, peril.

Would the courts sort out the various questions of contract law, tort liability, and "exclusive remedy?" Undoubtedly yes. The American court system excels at solving problems. There will be those who quibble with my use of "solving." I am not suggesting the courts will be "right" or "wrong," predictable or not. But as we preach in teaching constitutional law, "the Supreme Court is always right because it is last, it is not last because it is always right." Thus, whether everyone agrees with the final court's decision, it will nonetheless be the correct decision as there is no further appeal to be filed. 

Some argue that because of this, the final court has to be exceedingly careful and introspective before rendering decisions. There is a perspective that such decisions must be constrained and focused, following the law and avoiding the siren call of doing equity. There is another perspective that the appropriate role of an appellate court is to make the world fair, and to work equity despite what the law says. Each perspective, and a spectrum of variations between them, has adherents, champions, and critics. 

What the American court system does not excel at is solving problems quickly, and uniformly. In the vast expanse of Florida's 67 counties, a multitude of court decisions regarding the various tort and contract implications of the fall of "exclusive remedy" is not only possible, but practically unavoidable. The appeals necessary to homogenize the various trial decisions would be prosecuted in each of the five district courts of appeal spread throughout the state. Ultimately some of those would come to the Florida Supreme Court. The process would undoubtedly take years. 

In the meantime, general liability policy could be changed to cover the potential employer risks for employee injuries. Pricing those policies might prove difficult, but certainly not impossible. Though this reaction would be quicker than the courts, it would not likely be an instantaneous reaction. Thus there is it least some probability for a period of insurance industry uncertainty and questions.

Could the Florida legislature intervene in the situation? Most believe it could. Could the Florida legislature draft a Worker's Compensation statute, in response to such a court decision, which brings "exclusive remedy" back to the fore. Certainly. Would it do so quickly? Some argue that it would not necessarily act rapidly. It is important in this context to remember that any legislative change would act prospectively only. Thus, the accidents and claims occurring in the time between a court declaration striking "exclusive remedy" and a legislative remedy might nonetheless face some of the questions posed above. 

It would be a strange day upon which to awaken. The day we awaken to find that "exclusive remedy" is not exclusive. The day we awaken to find that equity in the micro sense has risen to work havoc on contract and statutory law in the macro sense. 

Thinking of that day, this morning, I was reminded of Aragorn's speech in The Lord of the Rings. Rallying his troops, he says "a day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship. But it is not this day." Paraphrasing, "a day may come when the predictability of precedent and judicial integrity fail, when doubt and questions challenge all precepts and beliefs of employer liability and responsibility. But it is not this day." 

That said, what if it is tomorrow? That said, what will be done today to prepare for the potential of such a storm?