Divorce & Annulment Article


What Happens to Personal Injury Proceeds During Divorce?

The period of time between filing for divorce and actually getting divorced is a land field of potential issues when it comes to property issues in divorce. The general rule is that money earned after the service of the petition for dissolution is separate property not subject to division upon divorce. But, if money isn’t earned but is instead awarded pursuant to an insurance policy, it may be community property subject to division upon divorce. The type of award, and purpose of the insurance will determine whether the insurance payout is community or separate property.

Disability insurance.
Disability insurance is usually paid out to cover medical expenses, general expenses or lost wages. If the policy was purchased during the marriage and the injury happened during the marriage, Arizona courts have held the proceeds are community property.

Unemployment Insurance/ Workers Compensation
The same logic can be applied to unemployment insurance or workers compensation claims. Insurance for losses to the community, like wages, are community property.

Car or Fire Insurance

Was the underlying car or structure community or separate? If your separate car was in an accident and you receive money to replace the vehicle, the funds are arguably separate funds. If the marital home is burned down and a check is issued to replace the home, the funds are likely community and subject to division.

Personal Injury Funds
If a personal injury to one spouse results in medical expenses and lost wages to the community, the recovery of these expenses are community property. However, if a spouse is being compensated for their personal pain and suffering or the loss of a limb or other personal loss, this recovery will be treated as separate property, and not divisible upon divorce.

This is true even if an injury happens after the service of a petition for dissolution. The community continues to exist until an actual divorce.

In general, all property acquired by either husband or wife during a marriage is community property. The exceptions are for gifts and inheritance. Insurance proceeds are not gift or inheritance, so the basic question begins with what are the insurance proceeds compensating?
 
If the funds are compensating you for a loss to your body, you brought your body into the marriage and are entitled to it upon divorce. Your spouse has no claims to your award for pain and suffering.

This means an attorney must make a very careful analysis of the complaint, the judgment and the terms of any personal injury settlement or the terms and purpose of the insurance policy. Additionally, you may want to make a careful accounting of the medical expenses and lost wages to the community and argue anything above and beyond the loss to the community is a personal loss for the individual who suffered the loss.

This can be a very tricky area and the arguments should be carefully crafted in your favor. Consider consulting with an experienced attorney on issues related to insurance or personal injury proceeds.

Contributing Attorney:
Billie Tarascio litigates family law and domestic violence cases at Modern Law.

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QUESTIONS

  • My husband and I were married in 2000. We separated in 2001 and have no lived together or been in a relationship ever since. He was deported to Mexico. How can I file? He agreed to sign and get papers notarized in Mexico immediately. Would they be valid in Arizona?
  • Was married in VA and Nikki's recently found out that my husband is still married to one of his previous wives in VA. Can I get an annulment here on the grounds for bigamy and fraud?
  • If a couple married for 14 years and live in the same house in case of divorce who owns the house if the house was bought before the marriage by one of the spouse?
  • My Divorce Decree was supposed to be filed on August 16th 2013 and I don't see the electronic online file minutes. Where can I find out if they were filed properly and ontime?
  • My wife kicked me out by threatening to call the cops on me and tell them im violent. I left because she was the one slapping me. How do I get my items? Do I still have to pay rent due on 5th? Kicked out on the 1st.
  • what if husband lives in another state and i wish to obtain divorce?
  • I married in 2001 when i turned 21 to a man i really didnt know he ended up having another family in mexico he left me a month later never heard from him again i believe hes in mexico how can i file for a divorce
  • He wants a divorce, I don't. What do I do?
  • WHERE CAN I GET DIVORCE PAPERWORK ONLINE.
  • I am an American citizen and got married in India. I been staying away from my wife for almost 2 years. To file for divorce do I have to file in India or here to be valid?

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