§ 8.01 Personal Injury Claims
| Jurisdiction | United States |
| Publication year | 2021 |
§ 8.01 Personal Injury Claims
[1]—Settlements or Judgments Obtained During Marriage
[a]—Kitchen Sink States
In kitchen sink states,1 divorce courts can divide all property owned by either spouse at the time of divorce, regardless of when or how it was acquired. All funds obtained during marriage relating to a personal injury claim therefore could be divided at divorce.2 Even in a kitchen sink state it would appear that an injured spouse should still be able to successfully argue that a portion of the recovery should not be divisible, to the extent that award replaces post-divorce wages.3
The New Hampshire Supreme Court has concluded that, because New Hampshire is a "kitchen sink" state, a divorce court should treat all of a personal injury recovery as marital property, even if to some degree it compensates for pain and suffering or lost wages after divorce.4
In an Indiana case, the court held that, under the kitchen sink approach of Indiana, the pain and suffering component of the husband's personal injury settlement could be divided at divorce, but not the portion of the recovery allocable to lost wages after divorce.5
South Dakota, normally a "kitchen sink" state, has accepted the majority "analytical approach" to personal injury damages whereby the only portion of the recovery that is divisible is the portion to reimburse the marital estate for lost wages during marriage or for medical expenses paid with marital funds.6
[b]—Marital Property States
Most states now permit divorce courts to divide only marital property.7 Courts in these states must determine whether personal injury recoveries are marital property.
[i]—States with Express Statutes
Some state statutes expressly provide whether personal injury recoveries are separate or marital property, with most such statutes designating personal injury recoveries as separate property.8 (A New York case has held that, all portions of the recovery, even the portion of the recovery that compensates for lost earnings during marriages, should be considered separate property.)9 Many provide that pain and suffering compensation is separate property, but any recovery for lost earnings during marriage is marital property.10 California is the only state that provides that personal injury recoveries are marital property, but even this statute provides that such recoveries are generally to be awarded at divorce to the injured spouse.11
In Arkansas, personal injury damages are marital property, except any damages attributable to permanent disability or future medical expenses.12
An Ohio case held that the husband's recovery during marriage for defamation was marital property, because the damage award replaced lost wages during marriage.13
Of course, even if personal injury awards are characterized as separate property by statute, it is possible that the character can be transmuted into marital property through later action.14
[ii]—States without Express Statutes
The property division statutes of most marital property states do not expressly characterize personal injury recoveries.
[A]—The Unitary Approach
Maryland has concluded that, because a personal injury claim is uniquely personal to the injured spouse, all of the personal injury recovery is the separate property of the injured spouse.15 This has been referred to as the "unitary" approach.
[B]—The Mechanistic Approach
Other states have applied different approaches. Some courts have attempted to look to the respective statutory definitions of marital property and of separate property. Such statutes normally include in the definition of separate property (1) property acquired before marriage and (2) property acquired after marriage by gift or inheritance. When characterizing property acquired during marriage by means other than gift or inheritance, courts in these states have been forced to consider whether this definition of separate property is exhaustive. Two different types of characterization analyses have begun to evolve. An implied exclusion analysis sometimes has been utilized. (This approach is sometimes referred to as the "mechanistic" approach.) Under this view, the statutory examples of separate property are perceived to constitute a complete list of the separate estate; any other types of property accumulated during marriage therefore are marital property.16 Other courts have focused upon the marital partnership underpinnings of the marital property system. Under this "analytic" approach, property is characterized as marital property only if it is a fruit of the marital partnership or replaces something that would have been marital property.17
The implied exclusion approach has frequently been utilized to characterize personal injury recoveries. This mechanical characterization approach is unwise. Among other reasons, there is no guarantee that the conclusion reached will be in accordance with the marital partnership underpinnings of the marital property system. Most courts utilizing this approach have concluded that all components of a personal injury recovery are marital property, since personal injury recoveries are not expressly listed as separate property in the property division statute of the rendering state.18 Of course, even if it is considered marital property, the court could decide to award it all to the injured spouse.19
In such a state, it could become important when a cause of action is said to arise. If it arises before the cut-off date for accruing marital property, it would be marital; if it accrues after that date, it would not be.20
The implied exclusion approach has also been used to justify the opposite conclusion, at least as to the portion of the award that compensates for pain and suffering. A personal injury pain and suffering award has been perceived as compensation for damage to the injured spouse's body, health, and personal security, which have been considered things the injured spouse owned at the time of marriage. Although personal injury awards are not expressly listed as separate property in the property division statutes of these states, the statutes specify that separate property includes property owned at the time of marriage, and funds received in exchange for such property. Some courts have concluded that, under the implied exclusion approach, the pain and suffering award should be considered separate property, since it is a payment for something the spouse owned at the time of marriage.21
[C]—The Analytic Approach
Other courts have rejected the implied exclusion approach, and have attempted to characterize personal injury recoveries consistently with the marital partnership theory, which underlies the marital property system. These courts have inquired whether the recovery is a fruit of the marital partnership, or replaces something that would have been a fruit of the marital partnership.22 Under this analysis, the portion of the recovery that represents lost earnings during marriage, and medical expenses paid with marital funds, should be a marital asset, since these amounts repay the marital fund for funds expended or lost.23 However, courts applying this analysis have decided that the portion of the recovery that compensates for lost earnings after divorce or pain and suffering should not be included in the marital estate, even if the recovery is paid to the spouse during marriage24 (as a result, a personal injury recovery can contain both marital and non-marital components).25 A recovery for lost wages after divorce should not be included in the marital estate, because the post-divorce wages would not have been a part of the marital estate.26 Under the "analytic" approach, it has been emphasized that pain and suffering are "personal" to the injured spouse and should be separate.27
If the recovery is solely for pain and suffering, under the analytic view the proceeds would be 100% the separate property of the injured spouse. For that reason, a Mississippi court held that a recovery for defective breast implants should be considered 100% separate.28 Damages awarded for invasion of privacy were held to be that spouse's separate property.29
An Alaska case is an interesting example of an analytic approach. At the time of divorce, the husband had filed tort claims relating to the Exxon Valdez oil spill. He alleged both lost income during marriage and a diminution in value of his separate property salmon fishing permit. The court held that the component of the recovery for lost income would be marital property, whereas any damage for diminution in value of the permit would be separate.30
In another Alaska case, the Alaska Supreme Court held that the non-injured spouse's loss of consortium claim was her separate property, and damages the injured spouse received for "pain and suffering" and "loss of enjoyment in life" were his separate property.31
The Nebraska Supreme Court has said that, under the analytic approach, compensation for pain and suffering and loss of post-divorce income should not be included in the marital estate, while compensation for medical expenses paid during marriage and lost wages during marriage should be so included.32
A Mississippi court has made similar distinction.33
Similarly, a Maryland appellate court has distinguished between the portion of the recovery for lost wages during marriage and medical expenses paid with marital funds, which should be included in the marital estate, and any recovery for pain and suffering and lost post-divorce earnings, which should be the injured spouse's separate property.34
An Alaska court agreed that, if medical expenses were paid with marital funds, the recovery for medical expenses should be considered marital.35
In Arkansas, to be separate property, the claim must be for a degree of personal disability.36
A Missouri case held that the recovery was the injured spouse's separate property because the settlement check stated that the payment was for "bodily injury."37
The scope of marital...
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