The Issue The issue is the amount payable to Respondent, Agency for Health Care Administration ("Respondent" or "AHCA"), in satisfaction of Respondent's Medicaid lien from a settlement received by Petitioner, from a third party, pursuant to section 409.910, Florida Statutes (2017).
Findings Of Fact On May 1, 2009, Toresco, who was then 18 years old, was involved in a car accident. In the accident, Toresco suffered severe personal injury, including numerous fractures and a closed head injury resulting in brain damage. Toresco is now permanently disabled, has limited use of her left arm and leg, and cannot walk without assistance. Toresco's accident occurred when she turned her vehicle left in an intersection, in front of a 3000-pound truck. The truck hit her vehicle's passenger side, and her vehicle went over a concrete curb and into two palm trees. After the accident, Toresco was in a coma for approximately two months and suffered skull fractures and brain damage. Toresco's injuries included kidney failure, hemorrhages, and cognitive loss. She was fed by a feeding tube. Toresco lost full use of her right side due to a brain injury. She is no longer able to work, horseback ride, dance, or participate in many of the activities she had participated in before the accident. Toresco's medical care related to the injury was paid by Medicaid, and the Medicaid program provided $116,549.10 in benefits associated with her injury. The $116,549.10 represented the entire claim for past medical expenses. Toresco brought a personal injury lawsuit against the driver/owner of the truck that caused the accident to recover all of her damages associated with her injuries. McCullough, a 23-year civil trial attorney with the law firm of McCullough and Leboff, P.A., in Davie, Florida, represented Toresco in her personal injury action. He was her third attorney handling the case and took over from the two previous attorneys because of the difficult liability issues in the personal injury action. During the pendency of the personal injury action, AHCA was notified of the action, and AHCA asserted a $116,549.10 Medicaid lien against cause of action and settlement of that action. McCullough handled the case through settlement. The personal injury lawsuit was settled for the lump-sum unallocated amount of $750,000.00. AHCA has neither filed an action to set aside, void, or otherwise dispute the settlement nor started a civil action to enforce its rights under section 409.910. AHCA, through its Medicaid program, spent $116,549.10 on behalf of Toresco, all of which represents expenditures paid for Toresco's past medical expenses. The formula at section 409.910(11)(f), as applied to the entire $750,000.00 settlement, requires payment in the full amount of the $116,549.10 Medicaid lien, and AHCA is demanding payment of $116,549.10 from the $750,000.00 settlement. Toresco has deposited the section 409.910(11)(f) formula amount in an interest-bearing account for the benefit of AHCA, pending an administrative determination of AHCA's rights; and this constitutes "final agency action" for purposes of chapter 120, Florida Statutes, pursuant to section 409.910(17). At the final hearing, Petitioner presented, without objection, the expert valuation of damages testimony of her Florida trial attorney, McCullough. McCullough practices exclusively personal injury law and always represents individuals who are injured. The majority of his cases involve automobile accidents. McCullough's expertise also encompasses evaluation of personal injury cases. He stays abreast of all State of Florida jury verdicts by reviewing jury verdict reporters and discussing personal injury verdicts and valuations with other attorneys in his geographical area. At hearing, McCullough explained that as a routine part of his practice, he makes assessments concerning the value of damages suffered, and he detailed his process for making those assessments. McCullough credibly made clear the process he took to develop an opinion concerning the value for the damages suffered in Toresco's case. McCullough testified that he reviewed Toresco's automobile report, medical records, Life Care Plan, Economist Report, and met with his client, Toresco, numerous times. McCullough testified that prior to the accident, Toresco was a champion horseback rider, and she spent most of her time at the stables. The accident "tremendously affected her" because she is unable to work, ride horses, and participate in daily activities due to her injury from the automobile accident. McCullough analyzed how the accident occurred and detailed that Toresco turned left in front of a 3000-pound truck, which hit the passenger side of Toresco's car and pushed her into two palm trees. Toresco was found to have significant head injury, with facial fractures, and a closed head injury when she was taken to the hospital. McCullough testified that the brain damage from the head injury caused Toresco to lose use of her full right side. McCullough further testified at hearing that the medical care related to the accident was paid by Medicaid in the amount of $116,549.10, which constituted Toresco's claim for past medical expenses. McCullough explained that Toresco sued the individual driver and driver's company because even though Toresco turned left in front of the driver's vehicle, if the driver had not been moving at a rate of speed above the speed limit, Toresco would not have been as seriously injured because she would not have been hit squarely in the middle of the vehicle. A slower lawful speed would not have resulted in as significant of an injury, or the truck might have even missed her. McCullough further stated that the defense's position was that Toresco was liable for her own injuries because she turned in front of the vehicle, and, ultimately, the case hinged on a battle of engineering experts and accident reconstructionists. McCullough explained that during the mediation of Toresco's case, the damages were presented to the defendant. He detailed how the economic damages were outlined for the defendant, including the $116,549.10 for past medicals and noneconomic pain and suffering of around $7,000,000.00. Ultimately, the case settled during mediation with the liable third parties for $750,000.00. McCullough opined that the settlement was not the full value of Toresco's damages and that the settlement only represents about ten percent of the full measure of her damages. McCullough's testimony was uncontradicted and compelling. McCullough explained that he based his valuation of Toresco's economic damages on the life care plan, which included the following claims: past medical expenses of $116,549.10; lost earnings of $68,106.00; future lost earnings of $976,186.00; and future medical expenses $2,154,509.00. He added the past medicals, past lost wages, future lost wages, and future medical expenses together, which totaled $3,300,000.00. Based on his training and experience, McCullough also credibly testified that the noneconomic damages would have significant value under the circumstances and that Toresco's economic and noneconomic damages together have a value that totals between a conservative $7,500,000.00 and $10,000,000.00. McCullough concluded that the low-end conservative number for the value of Toresco's damages is $7,500,000.00. At hearing, Barrett also provided an expert opinion without objection regarding the value of Toresco's case. Barrett is a 40-year trial attorney who has represented plaintiffs in various types of personal injury lawsuits, including automobile accidents. He is a partner with the law firm of Barrett, Nonni, and Homola and handles jury trials. Barrett routinely makes assessments concerning the value of damages suffered by injured parties in his daily practice. He is familiar with reviewing medical records, life care plans, and economist reports. He stays abreast of jury verdicts and routinely runs facts by a listserv group of approximately 25 trial lawyers to get the value of what cases are reasonably worth. Barrett became familiar with Toresco's injuries after he reviewed the exhibits in this case, the report and patient summary, life care plan, economist report, and mediation summary. Barrett determined that Toresco's medical damages were severe, and she was largely at fault when she turned left in front of the vehicle that struck her. Barrett detailed how severe Toresco's injuries were by explaining that she was in a coma in the hospital for about two months and suffered kidney failure because of the brain damage and that "it affected her almost in every way." Barrett also explained that before the accident, Toresca was athletically built, a competitive equestrian and dancer, and was a working senior in high school, but she will never be able to work, ride a horse, dance, or do things young women do again. Barrett explained that the evidence supports over $3,000,000.00 in economic damages. He testified that he relied on the economist who had calculated the present value of Toresco's future medical expenses, lost past and future income, and claim for past medical expenses for a total of $3,315,350.00. Barrett further opined that "[Toresco's] future and past pain and suffering and mental anguish, loss of enjoyment of life was worth $6,000,000.00" in noneconomic damages. Barrett added the economic and noneconomic damages and determined the total would have a value between approximately $8,000,000.00 and $10,000,000.00 with an average around $9,000,0000.00. He credibly concluded that Petitioner's total conservative value of damages is $7,500,000.00. Barrett went on to explain that the $750,000.00 settlement was very conservative and did not fully compensate Toresco for the full value of her damages. Instead, he opined that the settlement only covered a ten-percent recovery of the conservative value of her damages, $7,500,000.00. Barrett further explained that each element of damages should be reduced to ten percent of the amount attributable to each element, and if ten percent was applied to the $116,549.10 claim for past medical expenses, the amount is $11,654.91. The evidence demonstrates that the total conservative value of the damages related to Toresco's injury was $7,500,000.00 and that the settlement amount, $750,000.00, is only ten percent of the total value. The $750,000.00 settlement does not fully compensate Petitioner for the total value of her damages. Petitioner has established by unrebutted uncontested evidence that the $750,000.00 settlement amount is ten percent of the total value ($7,500,000.00) of Petitioner's damages. Using the same calculation, Petitioner correctly established that applying ten percent to $116,549.10 (Petitioner's amount allocated in the settlement for past medical expenses) results in $11,654.91, the portion of the Medicaid lien owed. Petitioner proved by a preponderance of the evidence that Respondent should be reimbursed for its Medicaid lien in a lesser amount than the amount calculated by Respondent pursuant to the formula set forth in section 409.910(11)(f).
The Issue The issues in this enforcement proceeding are whether Respondent failed to comply with Sections 440.10, 440.05, and , Florida Statutes (2003),1 and, if so, whether Petitioner correctly assessed the penalty for said failure.
Findings Of Fact Based upon observation of the demeanor and candor of each witness while testifying; documentary materials received in evidence; evidentiary rulings made pursuant to Section 120.57, Florida Statutes (2004); and stipulations of the parties, the following relevant and material facts, arrived at impartially based solely upon testimony and information presented at the final hearing, are objectively determined: At all times material, Petitioner, Department of Financial Services, Division of Workers' Compensation (Department), is the state agency responsible for enforcement of the statutory requirements that employers secure the payment of workers' compensation coverage requirements for the benefit of their employees in compliance with the dictates of Chapter 440, Florida Statutes. Employers who failed to comply with Chapter 440, Florida Statutes, are subject to enforcement provisions, including penalty assessment, of Chapter 440, Florida Statutes. At all times material, Respondent, St. James Automotive, Inc. (St. James), is a corporation domiciled in the State of Florida and engaged in automobile repair, with known business locations in Pine Island and St. James City, Florida. Both locations are owned by Richard Conrad (Mr. Conrad). On or about August 5, 2004, a Department investigator conducted an "on-site visit" at the St. James location on Pine Island Road, Pine Island, Florida. The purpose of the on-site visit was to determine whether or not St. James was in compliance with Chapter 440, Florida Statutes, regarding workers' compensation coverage for the workers found on-site. The investigator observed four individuals working on-site in automotive repair functions. One employee, when asked whether "the workers had workers' compensation coverage in place," referred the investigator to the "owner," who, at that time, was at the second business location at 2867 Oleander Street, St. James City, Florida. The investigator verified the owner's presence at the St. James City location by telephone and met him there. Upon his arrival at the St. James City location, the investigator initiated a workers' compensation coverage check on two databases. He first checked the Coverage and Compliance Automated System (CCAS) to ascertain whether St. James had in place workers' compensation coverage. The CCAS system contained current status and proof of workers' compensation coverage, if any, and record of any exemptions from workers' compensation coverage requirements filed by St. James' corporate officers. The CCAS check revealed no workers' compensation coverage filed by any corporate officers of St. James. The second system, the National Council on Compensation Insurance (NCCI), contained data on workers' compensation coverage in effect for workers (employees) in the State of Florida. NCCI similarly revealed no workers' compensation coverage in effect for St. James' Florida employees. The investigator discussed the situation and findings from both the CCAS and NCCI with Mr. Conrad who acknowledged and admitted: (1) St. James had no workers' compensation coverage in place; (2) St. James had made inquiry and arranged for an unnamed attorney to file exemptions from workers' compensation coverage on behalf of several St. James employees, but the attorney never filed exemptions; and (3) Mr. Conrad subsequently attempted to file the exemptions himself but was unsuccessful-- "because names of exemption applicants [employees] did not match the corporate information on file for St. James, Inc., at the Division of Corporations." When offered the opportunity by the Department's investigator to produce any proof of workers' compensation coverage or exemption from coverage, Mr. Conrad was unable to do so. At the conclusion of the August 5, 2004, on-site visit, and based upon a review of the CCAS and NCCI status reports and Mr. Conrad's inability to produce proof of workers' compensation coverage or exemptions, the investigator determined that St. James was not in compliance with requirements of Chapter 440, Florida Statutes. The investigator then issued a Stop Work Order on St. James' two business locations. The Stop Work Order contained an initial assessed penalty of $1,000, subject to increase to an amount equal to 1.5 times the amount of the premium the employer would have paid during the period for which coverage was not secured or whichever is greater. Mr. Conrad acknowledged his failure to conform to the requirements of Chapter 440, Florida Statutes, stating5: I guess you could say--I first of all, I am guilty, plain and simple. In other words, I did not conform. Subsequent to issuing the August 5, 2004, Stop Work Order, the Department made a written records' request to Mr. Conrad that he should provide payroll records listing all employees by name, social security number, and gross wages paid to each listed employee.6 Mr. Conrad provided the requested employee payroll records, listing himself and his wife, Cheryl L. Conrad, not as owners, stockholders or managers, but as employees. Pursuant to Section 440.107, Florida Statutes, the Department is required to link the amount of its enforcement penalty to the amount of payroll (total) paid to each employee. The persons listed on St. James' payroll records received remuneration for the performance of their work on behalf of St. James and are "employees" as defined in Subsection 440.02(15), Florida Statutes. Review of the payroll records by the Department's investigator revealed the listed employees for services performed on its behalf. The employee payroll records provided by St. James were used by the Department's investigator to reassess applicable penalty and subsequent issuance of the Amended Order of Penalty Assessment in the amount of $97,260.75.7 St. James' payroll records did not list the type of work (class code or type) each employee performed during the period in question. Accordingly, the Department's investigator properly based the penalty assessment on the highest-rated class code or type of work in which St. James was engaged, automotive repair. The highest-rated class code has the most expensive insurance premium rate associated with it, indicating the most complex activity or type of work associated with St. James' business of automotive repair. The Department's methodology and reliance on the NCCI Basic Manual for purpose of penalty calculation is standardized and customarily applied in circumstances and situations as presented herein.8 Mr. Conrad, in his petition for a Chapter 120, Florida Statutes, hearing alleged the 8380 (highest premium rate) class code applied to only three of his employees: himself, Brain Green, and William Yagmin. On the basis of this alleged penalty assessment error by the Department, Mr. Conrad seeks a reduction of the Amended Order of Penalty Assessment amount of $97,260.75. Mr. Conrad presented no evidence to substantiate his allegation that the Department's investigator assigned incorrect class codes to employees based upon the employee information Mr. Conrad provided in response to the Department's record request. To the contrary, had he enrolled in workers' compensation coverage or had he applied for exemption from coverage, Mr. Conrad would have known that his premium payment rates for coverage would have been based upon the employees' class codes he would have assigned each employee in his workers' compensation coverage application. In an attempt to defend his failure to comply with the workers' compensation coverage requirement of Chapter 440, Florida Statutes, Mr. Conrad asserted that the Department's investigator took his verbal verification that certain employees were clerical, but neglected to recognize his statement that he was also clerical, having been absent from the job-site for over three years. Mr. Conrad's excuses and avoidance testimony was not internally consistent with his earlier stated position of not conforming to the statutory requirements of Chapter 440, Florida Statutes. The above testimony was not supported by other credible evidence of record. This is critical to the credibility determination since Mr. Conrad seeks to avoid paying a significant penalty. For those reasons, his testimony lacks credibility. Mr. Conrad also attempted to shift blame testifying that--"My attorney did not file exemption forms with the Department," and my "personal attempts to file St. James' exemption form failed--[B]ecause the mailing instructions contained in the Department's form were not clear." In his final defensive effort of avoidance, Mr. Conrad testified that he offered to his employees, and they agreed to accept, unspecified "increases" in their respective salaries in lieu of St. James' providing workers' compensation coverage for them. This defense suffered from a lack of corroboration from those employees who allegedly agreed (and those who did not agree) and lack of documented evidence of such agreement. The intended inference that all his employees' reported salaries included some unspecified "salary increase" is not supported by employee identification or salary specificity and is thus unacceptable to support a finding of fact. St. James failed to produce credible evidence that the Department's Stop Work Order, the Penalty Assessment, and/or the Amended Penalty Assessment were improper. St. James failed to produce any credible evidence that the Department's use of the NCCI Basic Manual, as the basis for penalty assessment calculation based upon employee information provided by St. James, was improper and/or not based upon actual employee salary information provided by St. James. Prior to this proceeding, the Department and Mr. Conrad entered into a penalty payment agreement as authorized by Subsection 440.107(7)(a), Florida Statutes.9 The penalty payment agreement required fixed monthly payments be made by Mr. Conrad and afforded Mr. Conrad the ability to continue operation of his automotive repair business that was, by order, stopped on August 5, 2004.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services, Division of Workers' Compensation, enter a final order that affirms the Stop Work Order and the Amended Order of Penalty Assessment in the amount of $97,260.75, minus any and all periodic payments of the penalty remitted by St. James, pursuant to agreed upon conditional release from the Stop Work Order dated August 5, 2004. DONE AND ENTERED this 4th day of March, 2005, in Tallahassee, Leon County, Florida. S FRED L. BUCKINE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 2005.
The Issue The issue in this case is the amount that must be paid to Respondent, Agency for Health Care Administration (AHCA or Respondent) from the proceeds of Petitioner’s confidential settlement to satisfy Respondent’s Medicaid lien against the proceeds pursuant to section 409.910, Florida Statutes (2019).1
Findings Of Fact Paragraphs 1 through 9 are the facts admitted8 and agreed upon by the parties, and required no proof at hearing. On December 7, 2012, A.F., an eight-year-old female, underwent an initial psychiatric evaluation. Following this assessment, A.F. was started on treatment for Attention-Deficit/Hyperactivity Disorder (ADHD). A.F. was 4 Respondent’s Proposed Final Order provided that “Petitioner presented two witnesses: Andrew Needle, Esq., and Kenneth Bush, Esq.” The undersigned did not hear any testimony from Mr. Needle or Mr. Bush. 5 Respondent’s Exhibit 1, a “Provider Processing System Report,” contained a different “Total Claims” amount than the amount of A.F.’s medical expenses paid by AHCA to which the parties stipulated. Without testimony this exhibit is hearsay, and cannot support a finding of fact. As discussed at hearing, the parties agreed to use the stipulated amount: $261,334.61. 6 Although Petitioner’s PFO recites that Petitioner “did not order a transcript of the proceedings,” a review of the filed transcript shows otherwise. See Hearing Tran, pg. 10, lines 4–7. 7 The Hearing Transcript was electronically filed with DOAH on August 3, 2020; the hard– copy original Transcript was filed with DOAH on August 14, 2020. 8 Statement 3 has been reworded for clarity purposes. prescribed 18mg of the ADHD drug9 that was the subject of the personal injury litigation. On March 30, 2013, at the age of nine, and shortly after her ADHD medication was uptitrated from 18mg to 27mg daily, A.F. attempted suicide by way of hanging with a scarf fastened to her bunk bed. That action detrimentally impeded oxygen flow to A.F.’s brain for a dangerously prolonged period of time, resulting in extensive neurological damage and substantial motor impairment; ultimately leaving A.F. in a permanent vegetative state. Ms. Lopez, on behalf of A.F., brought a product liability and medical malpractice action to recover all of A.F.’s damages related to her prescription of the ADHD drug. This action was brought against various pharmaceutical and medical malpractice defendants. As a result of the alleged medical malpractice and pharmaceutical product liability claims, A.F. suffered a massive hypoxic brain injury. Since this incident and the resulting hypoxic brain injury, A.F. has been in a permanent vegetative state requiring 24/7 skilled nursing care. In 2020, Ms. Lopez, on behalf of A.F., settled her tort action for a limited confidential amount, due to significant liability challenges with her claims; even though she believed that A.F.’s injuries were tens of millions of dollars in excess of the recovery. AHCA was properly notified of A.F.’s lawsuit against the defendants and indicated it had paid benefits related to the injuries from the incident in the amount of $261,334.61. AHCA has asserted a lien for the full amount it paid, $261,334.61, against A.F.’s settlement proceeds. AHCA has maintained that it is entitled to application of section 409.910’s formula to determine the lien amount. Applying the statutory 9 The name of the drug is not being used based on the terms in the confidential settlement. reduction formula to this particular settlement would result in no reduction of the lien given the amount of the settlement. AHCA paid $261,334.61 on behalf of A.F., related to her claim against the liable third parties. The parties stipulated that AHCA is limited by section 409.910(17)(b) to the past medical expense portion of the recovery and that a preponderance of the evidence standard should be used in rendering this Final Order. There were two settlements regarding A.F.’s care and treatment: one with the doctor(s) who allegedly committed medical malpractice; and the second involving the pharmaceutical maker of the ADHD drug prescribed to A.F. Although AHCA was notified when the medical malpractice case was settled, AHCA did not file a lien on any of the recovery from the medical malpractice settlement. Limited information about the medical malpractice settlement was discussed, but the medical malpractice settlement is not considered in this Final Order. Petitioner’s Exhibit 1 is a February 16, 2019, letter (lien letter) from Conduent Payment Integrity Solutions, a subcontractor to Health Management Systems which is an authorized agent of AHCA “to operate the Florida Medicaid Casualty Recover Program.” In addition to directing A.F.’s counsel to review section 409.910, to determine the “responsibilities to Florida Medicaid,” Mark Lyles, Conduent’s case manager and author of this letter also posted the amount of the lien asserted by AHCA: $261,334.61. A.F. lives with her mother, sister, grandmother, and Ms. Lopez’s significant other. Everyone in the household can and does provide care and assistance to A.F. when necessary. Ms. Lopez rarely leaves A.F. in someone else’s care. A.F. is unable to speak and requires total care. Ms. Lopez described the injuries sustained by A.F. Ms. Lopez also detailed the care she has provided and is continuing to provide to A.F. since the event. A.F.’s activities of daily living (ADLs) must be met with assistance in every aspect of her being. When A.F. wakes up each morning: she is given all her medications; her diaper is changed; she is fed via a feeding tube; she is given lung treatments each morning; her trachea tube is cleaned and changed at times; and she is turned or moved every two hours to prevent sores forming on her skin. A.F. is on a ventilator at night and every four hours she is catheterized because she stopped urinating. In October 2019, A.F. started having seizures. Ms. Lopez testified that A.F.’s care is mentally and emotionally draining, and very tiring. She further added A.F.’s care is very repetitive and the “best way to describe it [each day] is the movie GROUNDHOG DAY,” (Columbia Pictures 1993); the same thing, every day. A.F. is confined to her hospital bed, a wheelchair, or a chair to which she can be secured. Although Ms. Lopez testified that A.F. is “entitled” to skilled nursing care 24/7, Ms. Lopez has learned how to care for A.F. because “they can’t staff me” with a skilled nurse (presumably referring to a Medicaid standard for care). Mr. Rafferty is a Florida board-certified civil trial lawyer with 26 years’ experience in personal injury law. He concentrates and specializes in pharmaceutical cases, including defective drug cases involving catastrophic injury, throughout Florida and the United States. As part of his ongoing practice, he routinely evaluates the damages suffered by injured clients, and relies on his own experience and his review of other jury verdicts to gauge any likely recovery for non-economic damages. Mr. Rafferty continues to handle cases involving similar injuries suffered by A.F. Mr. Rafferty was tendered and without objection was accepted as an expert regarding valuation of personal injury damages. Mr. Rafferty, along with Nathan Carter as co-counsel, represented A.F. and her mother in the civil litigation. He testified to the difficulties associated with pharmaceutical litigation in general, and then focused on the problematic causation and liability issues related to A.F. and her injuries. Mr. Rafferty met with the family; observed A.F. can no longer perform her ADLs; reviewed all of A.F.’s medical information; evaluated how the medication was uptitrated causing A.F.’s injury; analyzed the causation, liability issues, and fault; developed economic damages figures; and valued non-economic damages. Mr. Rafferty credibly testified regarding the evaluations he made regarding A.F.’s injuries and the pharmaceutical product prescribed. The non-economic damages included A.F.’s pain and suffering, both future and past, her loss of capacity to enjoy life, and her mental anguish. Mr. Rafferty explained the importance of assessing all of the elements of damages A.F. suffered as a result of her catastrophic injuries. Mr. Rafferty’s unrefuted testimony placed the total full value of A.F.’s damages conservatively in excess of $100,000,000.00.10 Mr. Rafferty included A.F.’s pain and suffering, mental anguish, and loss of quality of life, plus the economic damages. Further, using the $100,000,000.00 valuation amount and the confidential settlement proceeds, Mr. Rafferty opined that A.F. recovered only 4.75% of the full measure of all her damages. Mr. Rafferty reviewed Petitioner’s Exhibit 1, and as an experienced trial attorney understood the letter to contain the “lien for past medical” expenses of $261,334.61. Mr. Rafferty added that he routinely uses this type of approach with lien holders in his practice. Mr. Rafferty’s testimony was uncontradicted and persuasive on this point. Mr. Carter is an AV-rated Florida civil trial lawyer with 25 years’ experience in personal injury law, with an active civil trial practice. He has always handled plaintiff’s medical malpractice, product liability, and car accident-type litigation. As a routine part of his practice, he makes assessments concerning the value of damages suffered by injured clients, including the liability, causation, and possible damages. Mr. Carter 10 For ease of discussion, the conservative total amount, $100,000,000.00 will be used. All the witnesses agreed that the economic value of the case was above $70 million and the non- economic damages were at least $30 million. confirmed that it is essential to have every element (liability, causation, and damages) evaluated because these types of cases are expensive in both time and money. Mr. Carter specifically looks at the injuries sustained, who the plaintiff is, how the injuries have affected their life, and the permanency of those injuries. He continues to handles cases with catastrophic injuries. Mr. Carter testified that the injuries suffered by A.F. were “worse than almost, almost any case … handled.” He added that A.F.’s damages were “catastrophic” and “one of the worst damage cases [he had] ever seen.” Mr. Carter was tendered and without objection was accepted as an expert regarding valuation of medical malpractice damages.11 Mr. Carter testified that “as a matter of course, [we] put every lienholder on notice as soon as we learn about them” and “then throughout the case.” Mr. Carter was in regular contact with Mr. Lyles. The medical malpractice case was settled before the pharmaceutical action. After the medical malpractice case was settled, Mr. Carter understood that AHCA would not negotiate on the medical malpractice settlement. When the “entire case” was completed, Mr. Carter notified Mr. Lyles, and then received the lien letter. As an experienced trial attorney he understood the letter to contain the “final lien figure:” $261,334.61. Mr. Carter also met with the family, reviewed all of A.F.’s medical information and records, and evaluated the medication that was uptitrated. Mr. Carter utilized a similar detailed analysis of A.F.’s injuries and her current condition. Mr. Carter also described the severity of A.F.’s injuries that entered into his decision to pursue the civil case and to testify in this proceeding. Mr. Carter analyzed the causation, liability issues, and fault. He evaluated the economic damages figures and valued non-economic damages 11 Mr. Carter was offered as an expert in medical malpractice damages. His insight in the combined totality of the medical malpractice and pharmaceutical product litigation warranted consideration, but AHCA’s failure to include the medical malpractice settlement precluded any consideration of that settlement. Without a more decisive understanding of what “pretty significant” means, ACHA’s attempt to question Mr. Carter’s knowledge of A.F.’s past medical expenses is unpersuasive. such as pain and suffering, both future and past, loss of capacity to enjoy life, scarring and disfigurement, and mental anguish. Mr. Carter opined A.F.’s damages could have easily been in excess of $100,000,000.00. Mr. Carter further opined that A.F.’s non-economic damages were “very significant” and “could have driven the total value of damages in excess of the $100,000,000.00.” However, Mr. Carter testified he used $100,000,000.00 in order to resolve the Medicaid lien. Mr. Carter used the same mathematical approach he has used in other lien issues: he divided the confidential settlement amount by the conservative full value of damages ($100,000,000.00) and arrived at a recovery of 4.75% of the full measure of her damages. Mr. Carter’s testimony was uncontradicted and persuasive on this point. Mr. McKenna is a board-certified, AV-rated Florida civil trial lawyer with 25 years’ experience in personal injury law, who maintains an active civil trial practice. He has always practiced plaintiff’s work, and has tried between 40 and 50 cases to verdict. In the last 15 years, Mr. McKenna testified that “at least half … focused on … catastrophic cases either from the medical malpractice arena or from general liability trucking arena.” Mr. McKenna has reviewed thousands of personal injury cases relative to damages, and provided a detailed explanation of how he evaluates damages of catastrophic injury cases. He further provided that half of his cases were wrongful death cases and the other half were physical or brain injury cases. Mr. McKenna also provided the various resources he uses to keep abreast of personal injury verdicts and settlements. Mr. McKenna was tendered as “an independent expert attorney as to valuation of damages.” Mr. McKenna was not involved in the underlying civil litigation, but became A.F.’s guardian ad litem, appointed by the trial judge, to offer his “opinions regarding the reasonableness of the potential medical malpractice settlement, and ... the pharmaceutical settlement” which is the subject of this Final Order. Respondent did not object to Mr. McKenna’s tender and he was accepted as an expert in the valuation of damages. Mr. McKenna testified that he reviewed the facts and circumstances of both the medical malpractice and the pharmaceutical sides and the chronologies of A.F.’s medical records. He acquired an “intimate understanding” of A.F’s on going care and treatment in light of the injuries she sustained. Mr. McKenna agreed with Messrs. Rafferty and Carter that the non-economic damages in this case were very significant, and he agreed with their conservative $100,000,000.00 valuation of her total damages. Further, Mr. McKenna testified that the normal course for resolving liens in Florida was to look at the total value of damages in relation to the recovery to get a ratio by which to reduce the lien amount. Based on his past experiences in resolving Medicaid liens, other courts have resolved such liens using the formula from the Arkansas Department of Health & Human Services. v. Ahlborn, 547 U.S. 268 (2006), with the only other alternative formula found in section 409.910. The testimony of Petitioner’s three experts regarding the total value of damages was credible, unimpeached, and unrebutted. Petitioner proved that the confidential settlement does not fully compensate A.F. for the full value of her damages. As testified to by the experts, A.F.’s recovery represents only 4.75% of the total value of her claim. AHCA did not call any witnesses, present any evidence as to the value of damages, or propose a different valuation of the damages. In short, Petitioner’s evidence was unrebutted. AHCA did, however, contest the methodology used to calculate the allocation of past medical expenses, but was unpersuasive. The parties stipulated to the value of the services provided by Florida Medicaid as $261,334.61. It is logical and rational to conclude that this figure is the amount expended for A.F.’s past medical expenses. Applying the 4.75% pro rata ratio to $261,334.61 equals $12,413.39, which is the portion of the settlement representing reimbursement for past medical expenses and the amount recoverable by AHCA for its lien. Petitioner proved by a preponderance of the evidence as set forth in section 409.910(11)(f) that AHCA should be reimbursed at the lesser amount: $12,413.39.
The Issue The issues for determination are, first, whether a lesser portion of Petitioner's total recovery from a third-party tortfeasor should be designated as recovered medical expenses than the share presumed by statute; if so, then the amount of Petitioner's recovery to which Respondent's Medicaid lien may attach must be determined.
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, in Tallahassee, Leon County, Florida S CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of August, 2015.
The Issue The issues in this case are whether Respondent violated chapter 440, Florida Statutes, and Florida Administrative Code Chapter 69L-6, by failing to maintain workers' compensation coverage for its employees, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner, Department of Financial Services, Division of Workers' Compensation, is the state agency responsible for enforcing the requirement that employers in the State of Florida secure the payment of workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondent, Door Depot of Palm Beach, Inc., is a Florida for-profit corporation engaged in the sale and installation of doors, which is encompassed within the construction industry.2/ Ms. Morris is Respondent's owner and sole corporate officer. Failure to Secure Workers' Compensation Coverage As a result of a public referral, Petitioner initiated an investigation to determine whether Respondent had the required workers' compensation coverage for its employees. Michelle Jimerson, a Compliance Investigator employed by Petitioner, researched Petitioner's Coverage and Compliance Automated System ("CCAS") internal database regarding workers' compensation coverage and compliance, and determined that Respondent did not have current workers' compensation coverage and had not previously secured coverage. Ms. Jimerson's research further revealed that Ms. Morris, as Respondent's sole corporate officer, had a current workers' compensation exemption covering herself, and that she had maintained such exemptions since August 2002. On May 11, 2011, Ms. Jimerson conducted an on-site visit to Respondent's place of business. At that time, Petitioner issued a Request for Business Records to Respondent, seeking copies of payroll documents; bank statements; business tax receipts; check stubs and check ledgers; names of subcontractors; records of payments or disbursements to subcontractors; contracts; and proof of workers' compensation coverage for, or exemptions held by, the subcontractors. Respondent produced the requested records. From a review of the records, Ms. Jimerson determined that Respondent had contracted with three subcontractors, Breeze Image, Inc.,3/ Mike Jacobs, and Ross Whitehouse, to provide construction industry services (specifically, door repair and installation work), between April 22, 2011, and May 10, 2011. Ms. Jimerson's review of Petitioner's CCAS database revealed that none of these subcontractors was exempt from the workers' compensation coverage requirement during the period in which they contracted with Respondent to provide construction industry services, that none had secured workers' compensation coverage for themselves, and that Respondent had not secured workers' compensation coverage for them during this period. Because Respondent came into compliance with chapter 440 during Petitioner's investigation and before initiation of this enforcement action, Petitioner did not issue a Stop-Work Order.4/ Nancy Morris testified on Respondent's behalf. She admitted that Respondent had not secured workers' compensation coverage for these subcontractors. She credibly testified that she had asked if they were exempt from the workers' compensation coverage requirement, that they had told her they were, and that she had believed them. Penalty Assessment On May 24, 2011, Petitioner issued to Respondent a Request for Production of Business Records for Penalty Assessment Calculation, seeking copies of payroll documents; bank statements; business tax receipts; check stubs and check ledgers; names of subcontractors; records of payments or disbursements to subcontractors; contracts; and proof of workers' compensation coverage for, or exemptions held by, the subcontractors. Respondent produced the requested documents. Using these documents, Petitioner's Penalty Calculator, Teo Morel, calculated the penalty assessment for Respondent. Section 440.107(7)(d)1., establishes a formula for determining the penalty to be assessed against an employer who fails to secure workers' compensation as required by chapter 440. Specifically, the penalty is one and a half (1.5) times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation within the preceding three-year period, or $1000, whichever is greater. Petitioner has adopted a penalty worksheet for calculating the penalty prescribed by section 440.107(7)(d)1. See Fla. Admin. Code R. 69L-6.027. Ms. Morel used the worksheet in calculating the penalty to be assessed against Respondent. Specifically, Ms. Morel identified the subcontractors for which Respondent had not secured workers' compensation and identified the applicable construction industry classification NCCI Manual code for each (here, classification code 5102). For each subcontractor, she identified the periods of noncompliance for the preceding three-year period as required by section 440.107(7)(d)1., determined the subcontractor's gross payroll amount and divided that amount by 100, then multiplied this amount by the NCCI Manual rate applicable to the 5102 classification code. This calculation yielded the workers' compensation premium Respondent should have paid for each subcontractor, had Respondent complied with chapter 440. The premium amount was then multiplied by 1.5 to determine the total penalty amount to be assessed. Pursuant to the information Respondent provided, and performing the statutorily prescribed calculation, Petitioner initially calculated the total penalty to be assessed as $20,266.59. Respondent subsequently provided additional business records consisting of raw job worksite notes. These documents showed that the subcontractors were paid a total contract amount for each job. However, the notes did not indicate the cost of materials per contract, and Respondent was unable to provide records containing this information. Because the cost of materials for each contract was indeterminable, pursuant to Florida Administrative Code Rule 69L-6.035(1)(i), Petitioner assumed that the materials cost constituted 20 percent of each contract, deducted this amount from each subcontractor's gross payroll, and recalculated the premium amount. As a result, the total penalty assessment was reduced by 20 percent, to $16,213.30. Respondent disputes the amount of the amended penalty assessment on the basis that materials costs for each contract constituted more than 20 percent of each contract's amount. However, Ms. Morris was unable to provide any evidence substantiating the cost of materials for each contract. Ms. Morris credibly testified that if Respondent is required to pay the assessed penalty of $16,213.30, it likely will be forced to go out of business. Ms. Morris fully cooperated with Petitioner throughout its compliance investigation leading to this enforcement action against Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of law, it is hereby RECOMMENDED that Petitioner enter a Final Order determining that Respondent violated the requirement in chapter 440, Florida Statutes, to secure workers' compensation coverage; imposing a total penalty assessment of $16,213.30; and providing that Petitioner will execute with Respondent a Payment Agreement Schedule for Periodic Payment of Penalty, pursuant to Florida Administrative Code Rule 69L-6.025, under which Respondent shall make a down payment to Petitioner of ten percent of the total assessed penalty amount, which is $1,621.33, and shall repay the remaining penalty in 60 consecutive monthly installments. DONE AND ENTERED this 30th day of January, 2012, in Tallahassee, Leon County, Florida. S Cathy M. Sellers Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 2012.
