I believe the family wants to get workman’s comp for the death along with a settlement from a law suit. If they sue the dealership they lose workman’s . This way they may pick up a settlement AND workman’s comp.
Usually worker compensation gets reimbursed when a third party is responsible for injury or death. The family of the dead employee will get money from the vehicle insurance and possibly the dealership if they can prove negligence. The car owners insurance will fight the case on his behalf.