Why is EDD Paying Benefits on a Denied Claim?

The easy answer. Because they have to.

Denied Claim - Workers' CompensationThis very question came up this week from one of my employer clients who was very frustrated to learn that this had occurred.

Let me explain how this works in California.

There are occasions when an employee claims to have been injured on the job but the investigation reveals that the injury occurred elsewhere or was due to something other than the job. In that case, the claim handler will deny the claim and no disability benefits will be paid by the insurance company. However, the employee may be eligible for benefits under the State Disability Insurance (SDI) plan administered by the State.

How does that happen?

According to the Employment Development Department’s website, disability insurance is a component of the State Disability Insurance (SDI) program, established in 1946, to provide partial wage replacement benefits to eligible California workers who are unable to work due to a non-work-related illness, injury, or pregnancy. Approximately 18.3 million California workers are covered by the SDI program. SDI contributions are paid by California workers through employee payroll deductions. It is like having a short-term disability insurance policy with mandatory premium payments.

You are probably wondering how these benefits would apply to an industrial injury claim. Let me explain.

With the appropriate certificate of disability from a physician, EDD will pay SDI benefits when an employee’s claim for workers’ compensation benefits has been denied. The benefit amount is calculated based upon the employee’s wages and can be paid by the EDD for up to 52 weeks as long as the physician continues to certify the employee as being disabled. These benefits are non-taxable income.

However, before paying any benefits, EDD will confirm with both the employer and the workers’ compensation claim handler that no disability benefits have or will be paid by them. This reduces the chance that there will be duplicate payments or overpayments to the employee.

The question you may be asking is whether or not EDD will try to recover the benefits that they paid. Here is the answer.

If, after the denial, the claim continues to be pursued by the employee or their attorney, EDD will file a lien against the claim for any benefits paid by them. This lien will need to be satisfied in some way by either the insurance company or by the employee. How it is satisfied will depend on the final result of the claim.
The subject of liens will be a topic of a future blog. So, please stay tuned!

As you can see, the workers’ compensation world is a complex one. We help our clients navigate this process and invite you to reach out to us anytime if you need help. Click on the “Contact Us” link.

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