Commentary: Florida Supreme Court Hints at How It May Decide Constitutionality of Florida Comp Act

In a decision handed down last Thursday [Morales v. Zenith Ins. Co., 2014 Fla. LEXIS 3555 (Dec. 4, 2014)], the Supreme Court of Florida may well have tipped its hand on how it would rule if, and when, the controversial Padgett case reaches the high court’s docket. Readers will recall that in August 2014, Circuit Court Judge Jorge E. Cueto found that the Florida Workers’ Compensation Law, as amended effective October 1, 2003, did not provide a reasonable alternative remedy to the tort remedy it supplanted and that it was, therefore, unconstitutional [see Florida Workers’ Advocates, et al. v. State of Fla., Case No. 11–13661 CA 25 (11th Judicial Circuit, Miami-Dade County, Aug. 13, 2014)(hereinafter “Padgett”)].

Although the constitutionality of the Florida Act was not at issue in Morales, dicta in the Supreme Court’s opinion indicates that it will not likely affirm Judge Cueto’s decision, should Padgett reach the high court. As I argue below, Padgett stands on such unstable procedural ground that the Third District Court of Appeals will likely reverse Judge Cueto without a meaningful discussion of the case’s merits and if Morales is any indication as to the sentiments of the Supreme Court of Florida, in the unlikely case Padgett got beyond the Third District Court of Appeal, Judge Cueto’s decision would have very short “shelf-life.” And yet a problem larger than Padgett looms within Florida. In spite of the shortcomings in Judge Cueto’s decision, in spite of is procedural stance, Padgett points to an unsettling problem—that steady erosion of injured employee’s workers’ compensation recovery rights in the Sunshine state has produced a climate in which many injured workers would rather jettison the existing system in spite of the fact that the alternative would be to reintroduce a fault-based system. Perhaps the Florida legislature should step to the forefront, do its job, debate the respective rights and remedies of all the constituencies and not require the state courts to legislate from the bench.

Factual Background and Procedural Posture of Morales

Morales was crushed to death by a palm tree while working for a landscaping company (the “employer”). His widow entered into a settlement agreement with the employer and the insurer (“Zenith”) that provided coverage under two policies: one for workers’ compensation and a second for other employer liability. Under the terms of the settlement agreement, Ms. Morales elected the consideration described in the agreement as the sole remedy with respect to the insurance coverage that Zenith provided to the employer.

In a separate wrongful death lawsuit, which was ongoing when the parties entered the settlement agreement, Morales’ estate alleged that the employer’s negligence caused the worker’s death and obtained a default judgment against the employer for $9.525 million. After Zenith refused to pay the tort judgment, the estate sued Zenith in state court under the employer’s employer liability policy, alleging that Zenith had breached the policy. Zenith removed the case to federal court, and the federal district court held that the policy’s workers’ compensation exclusion barred the estate’s suit and, therefore, entered summary judgment in Zenith’s favor.

Certified Questions

On appeal, the 11th Circuit concluded that Florida Act was sufficiently unclear so as to justify certification of three questions of law to the Supreme Court of Florida [see Morales v. Zenith Ins. Co., 714 F.3d 1220, 1234 (11th Cir. 2013)]:

1. Does the estate have standing to bring its breach of contract claim against Zenith under the employer liability policy?
2. If so, does the provision in the employer liability policy which excludes from coverage “any obligation imposed by workers’ compensation … law” operate to exclude coverage of the estate’s claim against Zenith for the tort judgment?
3. If the estate’s claim is not barred by the workers’ compensation exclusion, does the release in the workers’ compensation settlement otherwise prohibit the estate’s collection of the tort judgment?

Standing

The Florida high court quickly dispatched the first question, concluding that under Florida law, a judgment creditor had standing to bring suit against a liability insurer that may have coverage for the judgment. The court, therefore, answered the first certified question in the affirmative.

Workers Compensation Exclusion

As to the second question, the Florida court observed that, as the 11th Circuit had explained, ultimately, an insurer’s liability depended on whether the insured’s claim was within the coverage of the policy. In determining whether a claim was covered by an insurance policy, the Florida high court, citing earlier state precedent, said it was obliged to enforce “a clear and unambiguous” provision pursuant to its plain language, regardless of “whether it is a basic policy provision or an exclusionary provision.” The court noted that the Zenith policy clearly excluded coverage for “any obligation imposed by a workers’ compensation … law.”

The court continued that the workers’ compensation exclusion barred coverage of claims arising from bodily injuries for which the employer was required to pay benefits under workers’ compensation law—i.e., claims that were covered by the workers’ compensation insurance portion of the policy. That is to say, the employer liability insurance was a “gap-filler” that provided protection to the employer in those situations in which the employee had a right to bring a tort action despite the provisions of the workers’ compensation statute.

The court continued that the estate did not have the right to bring a tort action against the employer; its exclusive remedy was under Florida’s Workers’ Compensation Law. Despite not having the right to do so, the estate had filed the civil action against the employer and secured a default judgment.

The court noted the estate’s reliance upon Wright v. Hartford Underwriters Ins. Co., 823 So. 2d 241, 243 (Fla. 4th DCA 2002), but found that decision was inapposite. In Wright, rather than base its liability contention on the employer’s negligence, as was the case with Morales’ estate, the plaintiff had based his allegations on the alleged gross negligence of a co-employee, for which the employer would be vicariously liable. The high court said that in Wright, the complaint “implicated a statutory exception to workers’ compensation immunity and allowed Wright to pursue a civil remedy.” The Morales’ estate’s complaint contained no such implication. The Florida Supreme Court said the estate’s tort judgment arose from an injury that plainly fell within the exclusivity of Florida’s Workers’ Compensation Law and therefore within the coverage provided by the employer’s workers’ compensation policy.

Given the mutually exclusive nature of workers’ compensation and employer liability coverage, the court said Zenith had no obligation under the employer liability policy to pay the tort judgment. The court, therefore, also answered the second certified question in the affirmative.

Release

As to whether the release in the workers’ compensation settlement agreement precluded the estate from collecting the tort judgment from Zenith, the Florida high court held that it did. The court noted that it was undisputed that the settlement agreement complied with Florida’s Workers’ Compensation Law and had been approved by the judge of compensation claims. The court added that the fact that the estate subsequently obtained a tort judgment against the employer that should have been prohibited by both the release and workers’ compensation immunity did not somehow prevent Zenith from enforcing the remedy Ms. Morales elected. It, therefore, answered the third certified question in the affirmative.

Having answered all three certified questions in the affirmative, the Supreme Court returned the case to the 11th Circuit.

What, If Anything, Does Morales Tell Us About Padgett? Is the Florida Comp Act Unconstitutional, as Amended, or Not?

Bizarre Procedural Posture

It should initially be noted that the Morales court made no mention of Padgett at all. That it did not do so may be the first hint that the high court doesn’t take Padgett seriously. There is ample reason for this. For example, a number of critics of Judge Cueto’s decision have argued, inter alia, that the decision never should have been entered in the first place, due to the case’s bizarre procedural posture.

In spite of the fact that Judge Cueto listed the “State of Florida, Office of the Attorney General” as the “respondent” in the case caption, neither the State of Florida nor the Florida AG’s office were parties. Indeed, Judge Cueto acknowledged as much. Moreover, long before Cueto’s decision, the defendant-employer had withdrawn the exclusive remedy/immunity defense and had been dismissed from Count IV of the complaint, which had raised the constitutional issue. With no party contesting the issue, the Intervenor-Petitioners’ adversary was only “an empty chair.” To quote from the Attorney General’s “response” to a an earlier “show cause” order issued by Cueto:

The complaint was a mere petition to the court to pass upon the validity of an act of the legislature. There were no adversaries, and being none, there was no actual controversy. In that situation there was no jurisdiction for adjudicating the constitutionality of the enactment.

Judge Cueto Ruled Against “the empty chair”

In his August order, Judge Cueto did not address the AG’s jurisdictional argument, but quickly moved forward to side with the Intervenor-Petitioners in striking down the entire Florida Act. After all, the Intervenors’ arguments were much stronger than the silence offered by the empty chair. Following the entry of Judge Cueto’s summary decision, the Florida AG’s office interceded to appeal the order, as it had a right to do. There was some thought that the Third District Court of Appeals could pass the issue along directly to the state Supreme Court, but on October 16, 2014, the high court denied “the suggestion” pursuant to Florida Rule of Appellate Procedure 9.125. Apparently, the notion of the high court was that several cases were already pending that might, directly or indirectly, dispose of Padgett. Morales was one of those pending cases.

There is a certain level of irony in the failure of the Morales court to mention Padgett. By that I mean that just as the Florida Workers’ Advocates and WILG had argued against an empty chair, the Morales court proceeded as if the FWA/WILG arguments had been offered up by an empty suit. To my mind, this is the first hint that Judge Cueto’s Order is not being taken seriously by the high court.

Constitutionality of Florida Act Was Not At Stake in Morales

Notwithstanding some of the language within the Morales opinion regarding the exclusive remedy defense allowed to employers, Morales doesn’t dispose of Padgett, one way or the other, since the constitutionality of neither the exclusive remedy provision of the Florida Act nor the Act itself was at issue in Morales. Yet the high court provides subcutaneous hints within its discussion of the second certified question even if Padgett had firm jurisdictional standing, Judge Cueto’s decision would still be given short shrift.

For one thing, if there were serious questions about the constitutionality of the Florida Workers’ Compensation Act, wouldn’t the Morales court have at least hinted that as such? For example, wouldn’t the court have said something like the following?

We recognize that the Federal Court of Appeals has not asked this Court to pass upon the constitutionality, from a state law standpoint, of the exclusive remedy provisions of the Florida Workers’ Compensation Law, nor the Law itself. Our opinion here is limited to the answers we provide regarding the three certified questions. We take judicial notice, however, that the constitutional issue is currently before this Court in other cases (and before other intermediate appellate courts as well). With this decision, we are not offering any holding on the constitutional issues raised in those other cases, particularly since those issues are not at issue here and have neither been briefed nor argued.

Morales Assumes Exclusive Remedy is an Appropriate Defense

Instead, the Morales court simply stated, “In this case, the estate did not have the right to bring a tort action against [the employer].” The court went on to cite § 440.11(1), Fla. Stat. (2014) and Eller v. Shova, 630 So. 2d 537, 539 (Fla. 1993), as standing for the proposition that workers’ compensation is the exclusive remedy available to an injured employee as to any negligence on the part of that employee’s employer, so long as the employer has not engaged in any intentional act designed to result in or that is substantially certain to result in injury or death to the employee. Do we honestly think the Court is going to “unsay” all that in favor of Padgett, a case that lacked a defendant? I think not.

If, as Padgett suggests—indeed, holds—the Florida Act is unconstitutional, the Morales estate should have been able to sue the employer in tort and Zenith would have faced liability under the term of its employer liability policy. The Morales court would not have answered the second certified question in the affirmative, or at least would have included some discussion of the point, if there were any question about exclusivity.

What’s Next? Has the Pendulum in Florida Swung Too Far In Favor of Employers?

As I said publicly several weeks ago when, along with my long-time colleague, Lex Larson, author of Larson’s Workers’ Compensation Law, and Deborah G. Kohl, Massachusetts claimant’s attorney, author of LexisNexis Practice Guide Massachusetts Workers’ Compensation, and a former president of WILG—one of the Padgett Intervenors—I spoke at the 23rd Annual National Workers’ Compensation and Disability Conference in Las Vegas, while Florida’s 4th DCA will likely overturn Padgett on procedural grounds, the question remains, has Florida law swung so far in the employer’s direction that it is fundamentally unfair?

So, perhaps the question isn’t so much, “will Padgett be overturned?” but rather, could a real defendant, with a skilled attorney in the counsel’s chair, successfully defend a constitutional onslaught in Florida? The answer may not be as clear as one might imagine. In Las Vegas, Lex offered conference attendees the following hypothetical:

If, as a substitute for the rights that an injured worker had at common law, the relevant state passed a Workers’ Compensation Act that contained an exclusive remedy provision and further, that the act contained a coverage clause that virtually guaranteed that any claim filed would be successfully established by the claimant, but also provided that the disability payout per claim would be limited to $1 per injury, is there any serious question that such an Act would be stricken down?

No one, of course, is suggesting that the Florida Act is that draconian. But, as Lex and I ponder, has the series of statutory amendments to the Florida Act in recent decades eroded the employee’s side of the “grand workers’ compensation bargain” so much that it is no longer fair? That issue was not at state in Morales. If Padgett is decided on procedural grounds, we’ll get no answer as to the fairness of the Florida Act from a reversal of Judge Cueto. It isn’t, however, a rhetorical question. It deserves debate, not among judges, but among Florida’s legislators.

Throwing Out the Baby With the Bath Water

A secondary question to Florida claimants and their attorneys: are the interests of injured workers really helped by Padgett? Recognizing, as Judge Cueto notes, that in a comparative negligence state, like 2014–2015 Florida, rather than a contributory negligence state, like Florida prior to 2003, some fault on the part of the employee won’t defeat the entire tort claim. But is reintroducing a fault-based system really what Florida’s employees want? Is that really what FWA and WILG want? Anecdotally, we understand now that some 60% of all workers’ compensation systems are not for disability indemnity, but rather for medical care. Do we really want a system in which, because of comparative negligence rules, an injured and partially negligent employee is faced with significant outlays of medical care because we’ve thrown out the “old” no-fault comp system that would have paid them?

Judge Cueto through the baby out with the bath water. In isolated instances, where there is clear liability on the part of the employer and little, if any, negligence on the part of the injured employee, the injured employee may come out just fine. For many other injured workers, that won’t be the case.