Property Division in Divorce: Personal Injury Awards

Property Division in Divorce: Personal Injury Awards

Personal injury awards are paid to injury victims to compensate for personal injury, pain and suffering, lost wages, loss of future earning capacity, loss of consortium (i.e., loss of companionship), medical expenses and damages to property when the loss occurred due to another’s negligence. In a divorce, a question might arise as to whether such awards can be considered as separate property or marital property, i.e. joint property of the spouses. There are two primary methods by which courts typically classify such awards as marital or separate property, i.e. the analytic approach and the mechanistic approach.

The “analytic method” separates personal injury awards into two categories. The first category of award focuses on lost wages, medical expenses, and pain and suffering. Such awards are considered as being part of the marital assets and re subject to division in a divorce, while the remaining portion of damages is treated as separate or non-marital property of the injured spouse. This may include loss of future earning capacity and pain and suffering. However, with respect to damages for loss of consortium, because both spouses may make a claim for such damages, any loss of consortium compensation awarded to a spouse is separate property. Regarding property damage, a court will take into account the nature of the property damaged before deciding whether it is community or separate property.

In utilizing the “mechanical method,” the award is treated as marital or non-marital property depending on the time of the accrual of the claim. It is clear that when the award was received prior to marriage, it is considered separate property, and when received during the marriage, it is considered marital property. Once it has been established as marital property, then the court can proceed to distribute it equitably based on many factors, including those used in the analytic approach, such as the purpose of each element of damages.

There is yet another method known as “unitary approach,” which considers any personal injury award as “personal” and the separate or non-marital property of the injured spouse, not subject to division in a divorce.

Most community and equitable distribution states have adopted the analytic approach. California treats all personal injury awards as community property, while other states have enacted specific laws on the classification of personal injury awards. New York law provides that compensation for personal injury is a spouse’s separate property.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.