There is no question the most expensive claims in workers comp have attorney involvement. means they are in general, associated with the claims drive the costs; but there are some misconceptions about workers comp attorneys and their fees in New York.
First, all attorney fees in workers comp MUST be awarded by a judge or the Board. This means attorneys can only receive what the Board decides they should have.
Second, nearly 90% of all claims handled by workers comp attorneys are handled for little profit, or even at an actual loss.
Third, for 63 years, since 1947, the Board has decided to link high attorney fees with permanent disability. The link seems to make sense but, in fact, it rewards the outcomes the Board claims it is trying to avoid — permanent wage loss and permanent disability.
Fourth, the Board awards fees from awards for past periods of disability resulting in new “money moving.”
The above results in the highest fees on claims with the poorest outcomes — ineffective treatment, delays in paying for lost time, permanent loss of a job — all because the Board decides these are the results most worthy of fees.
It is a misconception attorneys lobbied to get the Board to see things this way. Detailed research on the history of Board policy towards attorney fees reveals not a single example of attorney input. The attorneys are, and always have been, “opportunistic feeders,” gravitating naturally to the most profitable claims and services. Those who don’t soon find themselves in charge of a failed charity.
The changes in law creating the high fees claims have always been at the request of carriers. These are changes permitting permanent disability claims to be settled for a lump sum payment, instead of bi-weekly checks paid for years or decades. The lump sum permits carriers, especially the New York State Insurance Fund, to lower the costs on a claim. But a lump sum also provides attorneys with the opportunity for fees many times higher than fees on other claims.
In the 1970s, with a maximum weekly rate of $95, a maximum lump sum was less than $25,000 for a five-year settlement and the fee, set by the Board, was a uniform 10%, or $2,500 maximum.
Currently, the maximum weekly is nearly $740, and the fees can be 15% of the NINE-year settlement being demanded, plus 15% of the future medical payments which now must be part of the settlement. With the new settlements, the max attorney fees will approach $65,000, twenty six times higher than the 1975 maximum.
What role did the attorneys play in these changes? None. What caused the changes? The need to bring closure on permanent disability claims and the New York Board’s historic tendency to close most of the claims with lost time in excess of six months on a finding of permanency.
How much will partners in a successful workers comp practice make in the new environment? It depends entirely on volume — and volume is down. The Board has made changes removing many of the smaller claims from the calendar, which means fewer small claims can turn into major claims, which they often do with naïve carrier handling. However, the much larger fees mean lawyers can concentrate on fewer claims, and pay for correspondingly lower overhead, but still achieve much higher profits with a smaller office staff.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
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