Resolution:
If a workflow server goes down and restarts within the timeout period (workflow API timeout), workflow service agent will not notice and work as if nothing had happened.

If a workflow server goes down and restarts after the timeout period, the workflow service agent will get the error message: Service not available. The connection to the workflow server is lost, and then you need to restart the process again if it involves any workflow activities.

NOTE - The "Operation Time Out" in the Advanced tab of "Workflow Server Connection" is where you can set the Workflow API timeout.