Injury Claims as a Marital Asset?

Injury SettlementIn November of 2011 the Supreme Court in Focht vs Focht changed the law in Pennsylvania.

SITUATION: Injury before Separation, Settlement after Separation

In the Focht case the husband suffered a personal injury at an automotive race track about 2-1/2 years before they separated. The personal injury suit was settled a few months after divorce proceedings were recommenced, with Husband receiving a six-figure settlement and Wife receiving a smaller sum for loss of consortium.

SITUATION: Injury before Separation, Settlement after Separation

Prior to the Focht decision the Supreme Court in Drake v. Drake, dealt with a case where the injury and resulting settlement both occurred prior to separation. Drake involved the settlement of a workers compensation/disability claim for lost wages, so the Court was called upon to decide whether the settlement could be excluded from marital property to the extent that it represented future wages.

The Court affirmed the trial court’s decision holding that none of the exceptions under Section 3501(a) applied to overcome the presumption of marital property. Therefore, the settlement was deemed to be marital property subject to division.

What does this all mean?

The newest family law precedent, Focht, held that Drake was conclusive on the issue presented. However, where the injury occurred prior to separation but the settlement of the claim and payment of the settlement proceeds occurred after separation, the majority explicitly overruled Pudlish v. Pudlish, a 2002 decision of the Superior Court of Pennsylvania.

The Pennsylvania Supreme Court apparently decided that the Superior Court did not correctly interpret Drake when it decided Pudlish, which was published two years after Drake. The crucial issue in all of these cases is when a litigation claim is “accrued.” Keep in mind that the Divorce Code establishes a presumption that all property acquired during the marriage, including litigation claims, are marital property unless excluded by statute. Section 3501(a)(8) excludes any “cause of action or claim which accrued prior to the marriage or after the date of final separation” from marital property.

In Pudlish, the Superior Court held that a litigation claim does not “accrue” until the date of the verdict or settlement. By that standard, it was possible for a personal injury settlement to be separate property of the injured spouse if the case was not settled or litigated to judgment prior to the date of separation.

The Supreme Court in Focht disagreed, explicitly overruling Pudlish in its decision. Instead, the Supreme Court held that a cause of action “accrues” when the plaintiff has a right to file suit. Therefore, in Pennsylvania an injury claim is marital property if the injury occurs after the date of marriage and before the date of separation regardless of when the claim is settled.

This situation can prove to be very complicated. Contact us to sort out or clarify a similar situation you may be facing.

Posted on December 18, 2012, in Uncategorized and tagged , , , . Bookmark the permalink. Comments Off on Injury Claims as a Marital Asset?.

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