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

  • How is spousal support(alimony)figured?
  • 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?
  • Can my exwife ask for any assets or property (ei. furniture, vehicle) after our divorce was final a year ago? She took guns, TVs, and jewelry before divorce was final and wanted nothing else.
  • I am the wife of a retired service member that I receive 50% of the community property pension. Do I have to pay taxes on the payment?
  • I am currently covered by my spouses insurance coverage and our divorce has not been filed yet. ARS 20-1377 and 20-1408 state that I may continue to be covered under his health insurance policy. I have contacted the health care company and NO ONE is able to assist me with this. I've looked online for answers and there are none. How to I apply for a conversion policy?
  • How do I know if my marriage is a covenant marriage?
  • 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 husband left and took all furniture and appliances/electronics. Long story short, the only things he left me are all the household/child expenses. He left over a month ago and has not helped or contacted me. We own a home and there is a joint tenancy deed between my mom, me, and my husband. What is the difference between a joint tenancy deed and community property?
  • I am legally divorced, I was a stay at home mom. I have just started working pt, but do not have enough money to get a lawyer. Will his income be counted as mine, even though I have no access to it. I'm wondering if I qualify for free legal assistance. We are not agreeing on custody.
  • How can my ex-husband file court papers changing the custody orders made with our divorce, stating that i can not take my son out of the county they live in. hes not even his son. its a long story and i need help getting my kids back.

STORIES

  • I just helped my mother, age 89, deal with her Medicare HMO. . .
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