Does Section 305 of the Workers Compensation Act Bar Claims for Benefits Against an Uninsured Employer?
In the case of Lozado v. Workers’ Comp. Appeal Bd., the Commonwealth Court addressed whether Section 305 of the Workers Compensation Act bars a claim for benefits against an uninsured employer when the employee has elected to pursue a civil action. Section 305(d) provides: “[w]hen any employer fails to secure the payment of compensation under this act as provided in sections 305 and 305.2, the injured employee or his dependents may proceed either under this act, or in a suit for damages at law as provided by Article II.”
In Lozaldo, the injured worker was pursuing both a negligence claim against his employer and a claim for benefits against the uninsured employers guarantee fund. The Workers Compensation Board found that since he had filed a civil action, he was no longer permitted to pursue a claim for workers compensation benefits.
The Commonwealth Court reversed based upon the factual findings that the employee commenced his action by filing a writ just prior to the expiration of the statute of limitations, waited 11 months before filing the complaint, obtained a $50,000 arbitration award by default, appealed the award and then requested a stay of proceedings. Based upon these facts, the Commonwealth Court concluded that the civil action was merely preserving the claimant’s rights given the uncertainty of the issues he had against his employer and the fund. In this situation, the claimant had not waived his right to pursue a claim for workers compensation benefits.
The decision leaves open a lot of questions regarding the “choice” an employee must make when his employer is uninsured. Those issues, which remain open for further litigation are as follows:
- If the workers compensation claim had been filed first would it bar the tort action?
- What conduct in a civil action would constitute an actual election of remedies: Taking discovery, obtaining a verdict or receiving payment?
- If the worker elects to pursue a workers compensation claim, would that bar third-party tortfeasors from joining the uninsured employer in the tort action?
- If an uninsured employer is joined as a third party defendant in a tort action, would that bar the employee from later filing a workers compensation claim?