Four crew members of the Acadien II died when the ship capsized and sank while being towed by a Canadian Coast Guard vessel.
The ship's rudder was damaged off the coast of Cape Breton Island on March 28, 2008.
As the vessel was being towed back to land by the Canadian Coast Guard's William Alexander Ice Breaker, it hit a massive piece of ice, capsized and sank.
Four of the Acadien II's crew died that night.
The settlement between the families and survivors and the federal government is confidential.
The group had been asking for $4 million in damages.
It argued the Coast Guard had been negligent in its rescue operation.