Supreme Court Ruling on Compensation Notification Requirements for Sole Proprietors

The Supreme Court of Pennsylvania has ruled that sole proprietors are not obligated to notify their workers' compensation insurers of workplace injuries within 120 days to qualify for benefits. This landmark decision, delivered on March 26, 2026, overturns a previous ruling by the Commonwealth Court. It significantly impacts how insurance policies are managed for sole proprietors who operate as both owners and sole employees of their businesses.

The case centered on David Heater and his contracting business, "David W. Heater." Heater was covered by a workers' compensation policy with Erie Insurance Property & Casualty Company. He claimed to have sustained an injury on September 28, 2015, while engaged in roofing work. However, Erie Insurance did not learn of the incident until February 2017. Initially, Erie's denial of his claim was based on timing and other circumstances, yet the insurer did not cite the 120-day notification requirement.

Heater formally filed his claim in September 2018. A workers' compensation judge initially ruled in favor of Erie, referencing the 120-day notification window. However, the Workers' Compensation Appeal Board overturned this decision, arguing that Heater's awareness of his injury met the notification criteria. Despite this, the Commonwealth Court suggested insurers should be classified as "employers" for the notice statute, further complicating the case.

Led by Chief Justice Todd, the state's Supreme Court analyzed the statutory language, clarifying that Section 311 of the Workers' Compensation Act requires notice solely to the "employer," as defined by Section 103, excluding insurers. The decision highlighted that Section 401's mention of insurers pertains exclusively to Article IV of the Act, not to Section 311. This interpretation means notification can be provided either to an employer or an insurer, not necessarily both. Consequently, Heater's awareness of his injury satisfied the requirement.

This ruling prevents insurers from leveraging the 120-day notice defense against sole proprietors, revealing potential gaps in regulatory compliance. To address these issues, the Court suggested insurers could incorporate prompt-notification requirements within policy contracts. Such contractual stipulations remain separate from legislative mandates, allowing insurers to better handle late-reported claims through policy terms, particularly for sole proprietors in Pennsylvania.