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.

Comments:

QUESTIONS

  • I filed for divorce 6yrs ago paid all that money and they say i am still married. My Husband has moved back to morrocco and i dont know how to find him. havent seen him in 6yrs how do i get a divorce from him if i cant find him?
  • I have filed all of my paperwork and was advised to call the default line in 10 business days, yet I do not have a number for that. What do I do?
  • I became disabled during our marriage.After that time,she was able to get a good paying job with benefits incl, profit sharing,retirement,etc.I have become dependent on her income to pay for bills incl. basics.Am I entitled to spousal maintenance?
  • I am out of State and was told I need to petition the judge to accept the parenting class. I do not know what form to use to petition the judge to accept the class.
  • Where can I find past cases in Arizona where Alimony was not granted.
  • MY X OR HUBBY DONT KNOW WHICH CAUSE HE WONT TELL ME IF HE DIVORCED ME 16 YRS AGO AND I DONT KNOW WHERE HE WAS LIVING TO FIND OUT. HE FIRST SAID WE WERE DIVORCED THEN HE SAID WE ARE NOT.
  • I haven't seen or spoken with my husband in 8 years. I think he still lives in New Jersy but am not sure. I've lived in Arizona for 7 1/2 years and want a divorce. We have no children, no property, no finances, NOTHING to divide between us. How do I go about getting this done in the cheapest, most efficient way possible?
  • Is withholding sex to a husband and to deny to have sex again as long as we are married, grounds for a divorce in Arizona.
  • I have been separated from my ex for over 10 years. We tried to get a divorce in 2011 but because he lived in California and I lived in Atizona it got squashed. I now dont know where he is, last I heard he was living in different hotels in California. How do I go about getting a divorce if I dont know where he is at? And dont have a phone number for him. He doesnt communicate with me or my son at all.
  • I have run out of funds trying to Divorce my husband. He has a much higher income than I do. Also he is currently working in China. I have had custody of our 2 kids for 2 years. I filed last year, but he fought it and won. I want something legal to protect me financially .

STORIES

  • He told me that I could actually get all the money I needed by using my home as collateral. . .
  • He told me that I could actually get all the money I needed by using my home as collateral. . .
  • I just helped my mother, age 89, deal with her Medicare HMO. . .

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