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Birmingham AL Collaborative Divorce Law Blog

Friday, April 15, 2016

PERSONAL INJURY AWARDS AND SETTLEMENTS IN DIVORCE

Imagine the following scenarios, all of which happen with more regularity than the public might think:

  1. Husband and wife have been married for nine (9) years, with three (3) small children – seven, five, and two years of age respectively.Husband is diagnosed with cancer, and due to a flagrant and negligent failure to diagnose, the cancer spreads resulting in lengthy chemotherapy and radiation treatments, surgery, and additional treatments.During the treatment, Husband was unable to work or help care for the family, while Wife attempted to hold down her job and care for Husband and the children.An attorney was contacted regarding a possible medical malpractice case, and suit was filed over the misread imaging results.Claims included not only damages for the Husband, but claims for loss of consortium for the Wife (i.e., when a spouse loses the “services” or companionship of their mate, Alabama law provides for claims for that spouse as well).Before the claim is resolved, due to the mounting monetary and emotional stresses, Wife and Husband decide to divorce.What happens to any monies paid from the lawsuit?

     

  2. Wife is in a car crash, resulting in multiple injuries and surgery.She files a claim against the other driver who caused the crash, to recover both personal and property damages.After Wife recovers from her injuries but before any settlement is reached from the crash, Husband and Wife divorce after considering separating for several months.What happens to any monies paid from the lawsuit?

     

  3. Minor child of Wife and Husband is awarded millions of dollars in damages after a lawsuit due to being injured by a defective product.The proceeds of the lawsuit are deposited into two separate accounts: (1) a trust for the minor child for his use when he reaches the age of majority (19 years in Alabama), and (2) a joint bank account for Wife and Husband.Husband and Wife divorce one year later.What happens to all or part of the monies paid from the lawsuit that were placed in the joint account for Husband and Wife?

 

The answer in each of these situations is unfortunately not cookie-cutter, but is highly fact dependent.  The first thing to realize is that in the context of property rights in divorce, Alabama is an equitable distribution state.  What that means is that the division of property, assets, and debts between divorcing parties should be fair and equitable, but not necessarily equal.  There isn’t a bright line, fixed rule for how the courts will divide these items, but rather, the courts are given wide discretion to decide each case on its facts and make a fair and “equitable” decision.  This means that jointly owned property could be divided equally, or one spouse could be awarded a larger share.  Property owned by both spouses during marriage could be awarded to one spouse, or the court could order property to be sold and the proceeds divided (again, equally or not) between the parties. 

      How a personal injury settlement or award is divided creates an even more fact dependent analysis.  In the above scenarios, some considerations could be whether the damages were for pain and suffering, lost wages, loss of companionship, or property.  In Alabama, some courts have held that “personal injury damages” are just that – personal – and belong solely to the individual injured spouse as non-marital (i.e., not subject to division in divorce).  On the other hand, some courts have taken a more “analytical” approach, separating every element of the damages and determining on a line-item basis whether the item is a marital asset (divisible) or non-marital (non-divisible).  This type of approach gives a lot of weight and emphasis to the fairness of the division, but can bog down cases and create a “lost in the weeds” scenario that many courts disfavor.  Finally, some courts take the most simplistic view – if it’s acquired during marriage, regardless of how or by whom, it’s a marital asset and gets divided among the spouses.

So, what does this mean for you if you’re in the midst of a personal injury claim or lawsuit, but you and your spouse are considering or have already begun the divorce process?  Here are three quick tips to put you in a better position:

  1. When settlement is reached, have your personal-injury attorney specifically distinguish what is “personal” versus what is “marital” in the settlement agreement and release (this isn’t a fail safe, but it will create a presumption that should carry weight if challenged in your divorce proceeding);
  2. Be clear, honest, and up-front with your personal injury attorney about the possibility or likelihood of divorce during the litigation process, and connect your personal injury and divorce attorneys so that a coordinated plan can be created to protect you and your dependents; and
  3. Open and maintain a separate bank account to deposit all personal injury proceeds into and do NOT comingle (legal term for “mix with”) the personal injury money with your regular bank funds until all issues of equitable distribution in the divorce are finalized.

 

Finally, you don’t have to be an expert in any of these areas…but you do have to be smart.  First and foremost: contact reputable, capable counsel.  If you are considering divorce or separation, the law firm Nolan Byers can assist you with all of these issues including helping you coordinate your personal injury case with other counsel.  We have extensive experience handling all issues in the domestic legal arena and can help guide you through the process of making you whole.  If you have questions, need advice, or find yourself in any scenario similar to those above, contact the attorneys at Nolan Byers.

 


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