Car Accidents 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

  • My dad was killed by a drunk driver 2 years ago and I heard that I can get $5000
  • If I bring a letter from my insurance company stating all claims have been satisfied to the district attorney will this help reducing my fine
  • I was involved in an accident last year where the at-fault driver was uninsured. After receiving care my health insurance was billed and no liens were put on my auto insurance. I have since settled with auto insurance, but this week I received a collection notice from an attorney saying I owe the provider an amount above the agreed upon rate from my health insurance. When talking to the provider they said AZ law allows them to collect the remaining balance from me with personal injury. Can they hold me liable for the balance above the rate my health insurance has after they have billed them?
  • I was involved in a very minor collision resulting in minimal vehicle damage & no bodily harm. Accident occurred on a private parking lot which cops would not respond to so there is no reports or documentation of either parties accounts an recollection leading up to accident. Insurance information was exchanged and both parties drove away upon learning no police report would be taken. Months following were an unstable time for me and incident slipped my mind. Until this week even I received a collection letter which to the best of my knowledge is a subrogation notice. With my brief research on this, it's my understanding that I've been deemed at fault. And the insurer of other party has issued a payment covering their damage. Which they are now seeking reimbursement through me. Can I dispute or appeal an how is this done? I firmly believe that the fault is that of the other driver or at least not solely of my own, based on design and layout of parkway's as well as location of impact and damage indicated on both vehicles.
  • I was legally separated 12/7/2017 and the divorce was finalized 01/17/2019.During our separation I allowed my ex-wife to use my truck to drive our son around. She was in a car accident 06/2018 shes at fault (the truck had no insurance, we had a verbal agreement she would pay for it and she did But for afew months).Theres now a civil law suit against us for damages+. On this document its says I’m negligent or lending her my car. she says that legally I am at fault for everything because the truck is only under my name. she caused this car accidents but am I responsible since it’s my car?
  • I was in a auto accident(rear ended)insured resides in Az. His Insurance company is located in Ca. I want to take his insurance co. to a Small Claims Court in Az. How do I serve summons to the Insurance Co. since Insurance is located in CA. but it does business in Az.(out of venue)
  • My 16 year old son was taken in a fatal car crash. My ex wife and I have been divorced for years and I had sole custody of my son. She is trying to claim the insurance from the wreck after I had filed my claim. What are the laws on this certain situation?
  • Had a car pulled out in front of me and I hit him broadsided and totaled my motorcycle and have injuries. He was cited and I found out 3 weeks later he has no insurance. What can I do?
  • I was suppose to receive 25,000$ when I turned 18. Well when I turned 18 and tried to see if the money was in my bank account they had told me it was all spent. How would the bank let my parents withdraw my money? I'm the one who sufferd from my car crash, is it against the law for the bank to let my parents withdraw all of that money? Because I never seen a dime.
  • My ex wife was in a car accident in my vehicle and she was at fault. the car had no auto insurance during the accident, now the other parties insurance is suing us. I lend her my car while we where going through a divorce so she could drive our son around. her and i agreed verbal she would cover the insurance (she only did it for a few months apparently and let it laps), i was not aware she did not pay the insurance and was driving with a suspended licence. She is saying i am responsible for the fees is this true?

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