A unique situation arises when one party in a divorce proceeding is expecting to receive, or already has received, a personal injury or worker’s compensation award. This post seeks to answer two of the most common and fundamental questions regarding awards of this nature.
Is it marital?
Where the underlying claim for the personal injury or worker’s compensation award accrued during the marriage, the resulting award is considered marital, regardless of when the settlement is reached, or when the award is paid. In order to determine the date on which the underlying claim accrued, the court essentially will use the same date that would be used to determine whether the Statute of Limitations has run. That is to say, the date on which the client knew or should have known of the injury, and the action could have been maintained to a successful conclusion, is when the claim accrues. This date is relatively easy to identify with injury cases but can be more difficult to establish in relation to occupational diseases. Occupational diseases can take time to manifest into an injury, and the date on which the client knows, or should know, of the injury can be difficult to determine. If the accrual date is during the marriage and prior to separation, then it is likely the court will treat the award as marital. However, this does not mean the award will be treated the same as any other marital asset, for purposes of equitable distribution. The court will divide the award according to the factors discussed below.
How do they divide a PI settlement/award?
The court has broad discretion when dividing a personal injury or worker’s compensation award between the injured and non-injured spouses. The court will consider for what the award is compensating, in determining the appropriate division. For instance, if the award is compensating the spouse for wages alone, the court is more likely to treat same more like income that one receives from a job, than like a marital asset, such as a marital residence. Conversely, if the award is compensating the spouse for pain and suffering, the court is more likely to treat same more like a marital asset than like income. In addition to considering the purpose for the award, the court will consider the injured spouse’s ability to earn future wages, when determining the appropriate proportion to be divided between the spouses.
It is possible that the injured spouse could receive the entire award, if the court determines that his or her age, vocational skills, employability, access to benefits and overall health require that he or she receive the whole benefit of that award. On the other hand, it also is possible that the non-injured spouse could receive a substantial portion of the award, if the court determines that is proper in order to effectuate an equitable division of the marital estate. For instance, if the award represented a replacement of wages that would have been earned during the marriage and prior to separation, and the injured spouse’s ability to work has not been permanently and severely affected, the non-injured spouse may receive half or more of the award.