In California, totally disabled workers receive two-thirds of their average weekly wage, subject to a maximum. But workers' compensation benefits do not count as taxable income. When workers receive other benefits due to their disability (called double dipping), their total benefits can approach or even exceed pre-disability earnings. This gives them little incentive to return to work. 

Fortunately for employers, most health and disability insurance programs have coordination of benefits provisions. These provisions prevent overinsurance by reducing the benefits the policy will pay by amounts the claimant receives from other sources, including workers' compensation.

Possible sources of overinsurance include the following:

 

Group long-term disability policies: The typical disability policy provides a monthly benefit equaling 60 percent of the employee's pre-disability wages, subject to a maximum. If your organization offers group disability income insurance, make sure your plan includes a coordination of benefits provision. Most (but not all) individual disability policies also contain coordination of benefits provisions.

Social Security disability insurance (SSDI): Social Security pays disability benefits only for total and permanent disability. Individuals can receive both SSDI and workers' compensation benefits, but Social Security will reduce the amount of any SSDI benefits by amounts received from workers' compensation. The combined total of workers' compensation and SSDI benefits cannot exceed 80 percent of the worker's average current earnings.

Unemployment benefits: California requires a person to be physically able to work and ready and willing to immediately accept work to receive unemployment benefits. That would usually eliminate someone on workers' compensation.

Sick leave: Many employers allow employees to use sick leave, vacation leave and personal leave to supplement their workers' compensation benefits. Make sure your plan documents prohibit a worker who is claiming workers' compensation benefits from receiving more than his/her pre-disability pay.

State disability: In California, workers can receive both workers' compensation and state disability insurance benefits for the same period of time only in limited situations. State disability may pay the difference if workers' compensation benefits are less than the disability benefits the worker is eligible for.

Auto insurance: Personal auto policies often contain personal injury protection (PIP). PIP pays the insured's medical bills, loss of income and other costs related to an auto accident, regardless of fault. You might be able to deduct the amount of PIP benefits from workers' compensation benefits. Your workers' compensation insurer's claims department will know the applicable laws.

Lawsuits: Workers' compensation law prevents workers from suing employers for workplace injuries. However, they can sue a third party (someone besides the employer or a co-worker) who causes or contributes to their injury — such as the manufacturer of defective equipment that causes injury.

Unlike the workers' compensation system, the tort system allows a lawsuit's prevailing party to receive compensation for pain and suffering, property damage, loss of monetary support, loss of consortium, disfigurement and sometimes punitive damages, in addition to lost time. When an employee on workers' compensation collects damages or settlements, the employer's insurer or the can "subrogate," or claim a credit against damages or settlements received. Subrogation prevents an injured worker from collecting for the same injury twice.

 

Other employment: People who work under the table at physically demanding jobs while claiming workers' compensation for an injury are going beyond double dipping and committing fraud. If you suspect fraud, contact your insurer. For more suggestions and other information on improving safety in your organization, please contact the PCOC Insurance Program department of EPIC at (877) 860-7378 or, email us @ ProPest@epicbrokers.com.