The characterization of an asset as community property can be significant. In a proceeding for the dissolution of marriage or legal separation, a family court generally must divide the community property equally if the spouses cannot agree in writing or in open court to a different division. Money from a personal injury settlement is different. Even when such money is community property, it is a “species unique” in family law in that the court need not divide it equally, but may instead assign all of it to the injured party.
But even to attorneys, the word ‘may’…does not mean ‘must’… That means a California family court can still divide your community personal injury settlement equally if the “interests of justice” require the court to assign the settlement in “such proportions as the court determines to be just.” The court must consider each party’s economic condition and needs, the time that has elapsed since the recovery of the money or the occurrence of the injury, and any other factors.
Personal Injury Settlements: The Exception to the “Equal Division” Rule
Money that you have received or will receive as a settlement of a claim for personal injury damages is a form of community property if the cause of action (a legal obligation the plaintiff seeks to enforce against the defendant) for such damages arose during marriage and before separation. The fact that you might receive the settlement money after separation is irrelevant. Conversely, the settlement money is your separate property if the cause of action arose before marriage or after separation.
Importantly, a “personal injury” can include both a bodily injury and an “affront or assault to the emotional well-being of a person” – what the law calls “non-economic damages.” Thus, sexual harassment and certain employment torts are personal injuries. Legal malpractice is a personal injury if it causes non-economic damages. Money from the settlement of those injuries is a form of community property – and it can wind up in your spouse’s hands if you do not choose the right family law attorney.
The Exception to the Exception: Workers’ Compensation Settlements
But the settlement of an industrial injury, i.e., an injury that occurs during the course and scope of employment, is another ball of wax. Generally, the exclusive remedy for industrial injuries is workers’ compensation – i.e., cash payments for permanent disability and the like. Even if you receive a lump-sum permanent disability award during your marriage and before separation, however, the award is community property only to the extent that the purpose of the award is to compensate for your loss of earnings before separation.
That can be cold comfort when the substantial purpose of a permanent disability award is to compensate for loss of earnings during the marriage. In Marriage of Ruiz, Mrs. Ruiz was injured on the job and received a lump-sum permanent disability award of $250,000 before separation. The trial apportioned $71,311 to Mrs Ruiz as her separate property but $103,033 of the award to the community. In other words, the trial court awarded the husband $51,516.50 (half of $103,033) – not bad for a non-injured person.
If you have received or will receive an injury settlement, whether for personal injuries in a civil case or disability in a workers’ compensation case, do not add insult to injury by picking the wrong family law attorney. Call an expert Los Angeles family lawyer at Laurent Legal today to protect your settlement.