Vargas: The Subsequent Injuries Fund Wanted Credit for Her Social Security. It Had to Prove Why She Got It.

Nancy Vargas drove a bus in Santa Barbara for 25 years. When a foot injury pushed her combined disability to 100 percent, she qualified for benefits from California’s Subsequent Injuries Benefits Trust Fund. The Fund agreed. But she was also receiving $940 a month in Social Security Disability Insurance (SSDI), and the Fund claimed a credit, meaning a reduction of its own benefits, for most of it. It offered a simple formula and no document stating why Social Security had paid her. The Court of Appeal held in Subsequent Injuries Benefits Trust Fund v. Workers’ Compensation Appeals Board, No. B333633 (Cal. Ct. App. July 15, 2024), modified on August 13, 2024, that the Fund bears the burden of proving that credit. It had not.

A bus driver, a settlement and a formula

Under the rules applied in Vargas, the Fund, often called SIBTF, paid additional compensation to workers whose industrial injury combines with pre-existing disabilities to produce permanent disability of 70 percent or more. The version of Labor Code section 4753 applied there required that compensation to “be reduced to the extent of any monetary payments received by the employee, from any source whatsoever, for or on account of such preexisting disability or impairment.”

Vargas injured her foot in March 2018 stepping off the driver’s pedestal. She settled with the transit district in December 2020, with an agreed 26 percent permanent disability. While her workers’ compensation case was pending, she applied to the Fund. She listed pre-existing problems with her back, upper extremities, left knee and right ankle. She had applied for Social Security disability in January 2018, before the foot injury.

The Fund was added as a defendant in her case in July 2021. It stipulated, meaning formally agreed, that she had a pre-existing labor-disabling disability, that the foot injury caused 26 percent permanent disability and that her combined disabilities left her 100 percent disabled. The only fight was the credit.

At trial in May 2023, there was no live testimony. Vargas offered medical reports. The Fund offered a Social Security award letter and 1099 forms. The letter said the agency considered her disabled as of April 18, 2018. The Fund’s argument was arithmetic. As the modified opinion describes it, the Fund proposed a credit equal to 74 percent of her Social Security benefits, which was the stipulated 26 percent subtracted from her 100 percent Social Security award.

The workers’ compensation judge found the Fund had not met its burden. The Workers’ Compensation Appeals Board, which reviews those judges’ decisions, denied the Fund’s request to reconsider. The Board noted that the award letter and later statements “did not describe the basis of the benefit.” As the Board put it, “[w]hat is before the court without assumptions does not establish credit and therefore no credit was awarded.” The court granted review.

The party claiming the reduction proves the reduction

The court started with Labor Code section 5705, under which the burden “rests upon the party . . . holding the affirmative of the issue.” Applicants first show they qualify under section 4751. Next, the Fund “must then show it is entitled to reduce the applicant’s subsequent injury benefit under section 4753, and, if so, the ‘extent’ it may reduce those payments.” Each side has to meet its burden by a preponderance of the evidence, meaning more likely than not.

The Fund argued that the words “shall be reduced” relieved it of that burden. The court said no, and pointed out that section 4751’s similar words, “shall be paid,” do not relieve applicants of their own burden. Credit for Social Security is available when the payments are based on a prior injury. The opinion cites Subsequent Injuries Fund v. Industrial Accident Commission (Hanson), 217 Cal.App.2d 322 (1963), for that rule and for the statute’s purposes, which include preventing double recovery. Vargas does not change that. It decides who has to show the connection.

The Fund’s policy arguments did not move the court

The Fund said applicants have better access to information about why they receive disability payments. The court was not persuaded. The Fund can use discovery, the formal process for obtaining information and documents before trial, and that includes discovery about Social Security benefits. The court cited Angell v. Subsequent Injuries Benefits Trust Fund, 86 Cal.Comp.Cases 419 (2021), a Board decision it described as one in which a workers’ compensation judge properly ordered an applicant to disclose information about those payments.

The Fund then pointed to conserving government money. That aim, the court said, is “balanced, if not outweighed,” by Labor Code section 3202’s command that workers’ compensation law be liberally construed, meaning read broadly to extend benefits to injured workers, and the Fund should take any concerns about administering the statute to the Legislature or a rulemaking body.

The Fund also cited Hanson to argue that the Board must reduce benefits unless an applicant proves the Social Security award rested solely on the later injury. The court read Hanson differently. As the court described it, a hearing officer there took evidence and attributed 68 percent of the Social Security payments to pre-existing disability. Hanson confirmed the Fund’s right to seek credit, the court said, but it “did not hold the Fund was presumptively entitled to credit unless the applicant could prove otherwise.” In other words, the Fund does not win the credit automatically.

A 26 percent settlement says little about Social Security

The Fund’s formula rested on the idea that a 26 percent rating implies 74 percent of Social Security must be for something else. The court said “This is not so.” The Fund was joined six months after the settlement, and the court declined to give it “a presumptive SSDI credit based on a rating negotiated in a different context with a different party.”

The court also rejected the Fund’s reliance on her medical history. Vargas had many pre-existing conditions and applied for Social Security months before the foot injury. But those facts, the court said, do not establish that she received the benefits primarily for pre-existing disabilities. The agency’s letter said she became disabled on April 18, 2018, a date the court noted fell “less than three weeks after her March 2018 injury.” The medical evidence on her earlier problems came from reports prepared long after the award letter. No exhibit stated the basis of the award.

The record the Fund never built

In our reading, the court’s last paragraph is a roadmap. The Fund joined almost two years before trial and five months after the Board decided Angell, where, as the court described it, the Board said the Fund was seeking discovery “in order to meet its burden of proof regarding the section 4753 credit.” There was “no record here of the Fund deposing Vargas or seeking her SSDI application materials.” It declared itself ready for trial, agreed to proceed without live testimony and did not ask for more discovery in its post-trial brief. The court’s conclusion: “Having assumed it need not carry the issue, it did not shepherd the evidence required to prevail on the merits.” The court affirmed and awarded Vargas costs. It later denied rehearing, with no change in judgment. After the appeal, the Board asked the parties to agree on costs or submit an itemization. Neither party responded. In its January 9, 2025 order, the Board denied costs and returned the case to the trial level.

What this means for your Fund claim

For a claim being handled now, check which rules apply first. Legislation effective in July 2026 added Labor Code section 4758, which preserves the earlier benefit and credit framework for specified claims. Those include claims with a trial date set before June 1, 2026; the section also lists other qualifying filing and pretrial histories. Vargas went to trial in May 2023. Your application and pretrial records matter when deciding whether that earlier framework governs your claim.

These steps are our practical reading of Vargas for a claim governed by that earlier framework.

• Do not concede a percentage. In our reading, a rating negotiated with the employer does not, by itself, establish why Social Security paid. Ask the Fund what evidence supports any number it proposes.
• Expect discovery next time. In our reading, Vargas points the Fund toward a deposition and Social Security application records. In our view, applicants should review those records early, because the application itself may identify the conditions that were claimed.
• Keep the dates straight. In our reading, the onset date in the award letter helped Vargas because it fell close to her industrial injury, and a different date could point the other way.
• A credit is still possible. The court confirmed the Fund can reduce benefits for payments made for pre-existing disability, and the amount turns on the “extent” it proves. In our experience, other parts of a Fund claim, like the 70 percent threshold, have their own proof problems. Our guide to rating and the Fund’s threshold addresses one.

For representation on a Fund claim, see our California workers’ compensation practice.