When a Workers’ Comp Settlement Isn’t the End: Lessons from Nelson v. Smith

May 2025

When an employee settles a workers’ compensation claim, many employers breathe a sigh of relief, believing the matter is behind them for good.  The recent Court of Appeals decision of Nelson v. Smith offers important reminders for employers and business owners about the potential for civil liability following the settlement of a workers’ compensation claim.

The Facts:
The plaintiff worked for Cortech Solutions, Inc. in a building owned by the company’s president and secretary/treasurer in their individual capacities. Other commercial tenants, in addition to Cortech, also occupied the building. Over the years, the Cortech office flooded on numerous occasions, and the plaintiff alleged chronic health issues due to mold exposure. He filed a workers’ compensation claim, which Cortech settled with a clincher agreement. In addition to the workers’ compensation settlement, the plaintiff executed a general employment release.  In the release, he agreed “to resolve all current and future disputes concerning Plaintiff’s employment with Cortech…along with all of its affiliates and subsidiaries…”   

Later, the plaintiff filed civil claims against the president and secretary-treasurer for negligence, gross negligence and punitive damages.  The plaintiff alleged that the president and secretary-treasurer were personally subject to civil liability in their capacity as landlords who allegedly failed to maintain safe premises.

Outcome:
The trial court dismissed the plaintiff’s case based on their determination that the workers’ compensation clincher and release agreements barred any further claims by plaintiff.  The Court of Appeals reversed and held the following:

• Workers’ Comp Exclusivity Did Not Apply: Defendants were not being sued for negligence as employers, but as landlords. The individual property owners were a separate entity, outside the exclusive coverage of the Workers’ Compensation Act.
• The Release Was Limited: The general release covered disputes related to plaintiff’s employment, not injuries tied to landlord conduct. As individual property owners, the defendants were not considered “affiliates” of Cortech and were not protected by the release.

Nelson v. Smith reminds us that in certain circumstances even well-meaning employers can become subject to additional liability outside the Workers’ Compensation Act.