North Carolina Court Clarifies Workers’ Compensation Settlement Rules

JDSUPRA Online Article – November 11, 2015 – North Carolina workers compensation settlement release

On May 21, 2025, the North Carolina Court of Appeals issued a decision that’s already shaping how employers, insurers, and attorneys approach workers’ compensation settlements and release agreements.

In Nelson v. Smith (No. COA 24-646), the Court clarified that a settlement release will not protect everyone involved unless it is written with precision. The ruling is a powerful reminder that clear language can make the difference between closing a claim — and facing a new lawsuit years later.

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The Case Behind the Decision

The plaintiff worked for Cortech Solutions, Inc., where he was allegedly exposed to extensive mold in the workplace. Over time, he developed a serious pulmonary condition. He filed a workers’ compensation claim, which Cortech settled for $25,000 through a Compromise Settlement Agreement approved by the North Carolina Industrial Commission.

As part of the deal, the employee signed a General Release Agreement, promising to resolve all current and future disputes involving his employment with Cortech and its affiliates.

However, a few years later, the employee filed a civil negligence lawsuit — this time against the owners of the building where Cortech operated. Those owners, Mr. and Mrs. Smith, also happened to serve as Cortech’s president and treasurer.

The trial court dismissed the case, but on appeal, the Court of Appeals reversed the dismissal and allowed the lawsuit to proceed.

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Why the Court Reversed the Dismissal

The Court rejected both arguments made by the defendants.

1. The Exclusivity Rule Didn’t Protect the Landlords

The defendants argued that the Workers’ Compensation Act’s exclusivity rule shielded them from civil liability. This rule usually prevents employees from suing their employers for work-related injuries outside the workers’ comp system.

However, the Court disagreed. It explained that the Smiths were being sued as property owners, not as company officers acting within their employment roles. Therefore, they were not the plaintiff’s employer under the law.

2. The Release Didn’t Cover the Right People

Next, the defendants claimed the general release should have protected them. But the Court found the release too narrow. It only covered Cortech and its officers acting in their official capacities — not in other roles, such as property owners or landlords.

The Court also emphasized that the Smiths were never named individually in the release and that it did not mention Cortech’s landlords. As a result, the Court concluded that the release didn’t protect them from the plaintiff’s new claims.

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What This Means Going Forward

The Nelson v. Smith decision delivers an important message: specificity matters. If a settlement or release isn’t written to include every party and every role, someone may still face legal exposure later.

Here’s how this affects different stakeholders:

For Employers and Insurers

When drafting a Compromise Settlement Agreement, list every possible entity that could face liability — including parent companies, subsidiaries, affiliates, or trade names. That ensures the exclusivity provision applies across the board.

For Attorneys

Use precise and inclusive wording. A General Release should name:

• Individual officers and directors

• Property owners

• Third-party administrators or insurers

• Any affiliated entities

Add language that covers individuals “in their official or individual capacities” to close loopholes like the one in this case.

For Workers and Advocates

This ruling also protects employees by confirming that a release cannot be stretched to cover people or entities not specifically included. It reinforces fairness and accountability on both sides.

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Why the Case Matters

This case highlights how small details can have big consequences in workers’ compensation settlements. A narrowly worded agreement can leave employers exposed and create confusion about who’s truly protected.

At the same time, the decision strengthens transparency for injured workers, ensuring that they don’t unknowingly sign away rights that extend beyond their employment relationship.

Ultimately, Nelson v. Smith encourages everyone in the system — from employers and insurers to workers and attorneys — to communicate more clearly and draft more carefully.

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RescueMeds’ Perspective

At RescueMeds, we see firsthand how precision and transparency protect both workers and providers. Just as clear settlement language prevents disputes, clear communication and fair reimbursement protect patient access.

We believe that every stakeholder — from the injured worker to the local pharmacy — benefits from a system built on clarity, fairness, and accountability.
The Nelson v. Smith decision reinforces that principle and reminds us all that details matter in every part of workers’ compensation.