A Safeway employee breaks his leg in 2010 with 10 weeks of TTD, is a max earner, recovers fully, and has no permanent impairment. How should indemnity be reserved?

A Safeway employee breaks his leg in 2010 with 10 weeks of TTD, is a max earner, recovers fully, and has no permanent impairment. How should indemnity be reserved?

• A. $6000
• B. $7500
• C. $9866.90
• D. $16000

Answer: (C)

The key idea is that indemnity reserves for a temporary total disability claim are driven by the weekly indemnity rate and the duration of TTD. In California, the weekly TTD benefit is two-thirds of the average weekly wage, but it cannot exceed the court-approved maximum weekly benefit. If the employee is a max earner, the TTD payment each week will be limited to that maximum weekly amount, not the full two-thirds of AWW. In this scenario, the injury would generate 10 weeks of TTD at the maximum weekly indemnity. The maximum weekly indemnity is $986.69, so the total potential indemnity exposure is 10 weeks × $986.69 = $9,866.90. Since there is full recovery and no permanent impairment, there are no additional indemnity payments anticipated beyond those 10 weeks, so the indemnity reserve should be $9,866.90.

The key idea is that indemnity reserves for a temporary total disability claim are driven by the weekly indemnity rate and the duration of TTD. In California, the weekly TTD benefit is two-thirds of the average weekly wage, but it cannot exceed the court-approved maximum weekly benefit. If the employee is a max earner, the TTD payment each week will be limited to that maximum weekly amount, not the full two-thirds of AWW.

In this scenario, the injury would generate 10 weeks of TTD at the maximum weekly indemnity. The maximum weekly indemnity is $986.69, so the total potential indemnity exposure is 10 weeks × $986.69 = $9,866.90. Since there is full recovery and no permanent impairment, there are no additional indemnity payments anticipated beyond those 10 weeks, so the indemnity reserve should be $9,866.90.