September 1999 Volume 87 Number 9 Page 494

Practice Tips

Distribution at Divorce of Personal Injury, Workers' Compensation, and Disability Awards

By Debra DiMaggio and Cindy Huang

The authors note that several Illinois courts have distributed awards for strictly personal damage (i.e., pain and suffering) disproportionately to the injured spouse on divorce even when the cause of action arose during marriage.


Causes of action arising during marriage that may result in a personal injury award, an award of workers' compensation, or disability benefits are properly characterized marital property. However, that does not necessarily mean half; or any portion; of the award will go to the spouse who did not suffer the injury.

The ultimate goal is equitable distribution. ``Equitable'' is not necessarily quantitatively equal. Courts will attempt to arrive at a just result, which may mean that the distribution of property is not half-and-half.

Under the so-called analytical approach first articulated in the influential New Jersey case Amato v Amato, 180 NJ Super 210, 434 A2d 639 (1981), the award or compensation is partitioned into two elements of damages. Payments to the injured spouse for lost earning capacity, lost wages, and medical expenses accrued during the marriage are marital property, while payments compensating for noneconomic and strictly personal losses, such as disfigurement, loss of limb, pain and suffering, and disability, are nonmarital property or, alternatively, marital property with a grossly disproportionate award to the injured spouse. This is in contrast to the strict ``accrual'' approach, under which the timing of the injury (pre- or post-marriage) controls completely.

Furthermore, allocating a disproportionate share, or perhaps all, of an award to the injured spouse is appropriate when that spouse is in a diminished physical state, especially when he or she does physical work as does a professional athlete, miner, firefighter, ballerina and the like.

For the most part, Illinois courts seem to have adopted the analytical approach laid out in Amato. DeBow, discussed below, is the leading decision to adopt the Amato analytical approach and was the first Illinois case to use the Amato reasoning. Increasingly, other Illinois courts have followed suit. This article will examine the treatment and distribution of personal injury awards, workers' compensation, and disability benefits in marital dissolution actions over the last 10 years.

Personal injury awards

Pursuant to 750 ILCS 5/503(b)(1), the property distribution section of the Illinois Marriage and Dissolution of Marriage Act (IMDMA), ``all property acquired by either spouse after the marriage and before a judgment of dissolution of marriage or declaration of invalidity of marriage, including non-marital property transferred into some form of co-ownership between the spouses, is presumed to be marital property.''

Personal injury awards are marital property if the injury occurred during the marriage. An action based on such injury is not included in any of the statutory exceptions defining non-marital property set forth in IMDMA section 5/503(a), and there is a rebuttable presumption that the chose in action constitutes a marital interest. The manner of apportioning such an award, however, has been the subject of litigation.

Pre-Amato Illinois case law

A personal injury judgment was deemed to constitute marital property in In Re Marriage of Burt, 144 Ill App 3d 177, 494 NE2d 868 (4th D 1986). In Burt, the injured spouse obtained a personal injury claim settlement that arose from an automobile ac accident that occurred during the pendency of the parties' divorce proceedings. The court was faced with choosing between making the injured spouse whole for his pain and suffering or ensuring that his family would be properly taken care of, because there was not enough money to do both.

The court looked to section 5/503(d)(8) of the IMDMA, which expressly directs courts to consider ``the age, health,...employability,...and needs of each of the parties'' along with the opportunity of a spouse to secure future income. The court held that this alone gave it permission to take into account the disability of the injured spouse and award a larger portion of marital property, including the proceeds of a cause of action, to that spouse.

However, because the injured spouse's medical bills had been paid and an annuity to provide for his old age had been established, the court found that support considerations predominated and awarded the injured spouse's wife half of the settlement, relying on Gan v Gan, 83 Ill App 3d 265, 404 NE2d 306 (5th D 1980). (In Gan, the court held that providing support for the injured spouse's family can be better accomplished by including the entire cause of action in the marital estate.)

Post-Amato Cases

In In Re Marriage of DeBow, 236 Ill App 3d 1038, 602 NE2d 984 (5th D 1992), a personal injury judgment was distributed disproportionately to the injured spouse. He had secured a $3.4 million jury verdict against East St. Louis for injuries he sustained while in prison there. The award appeared to qualify as marital property under section 5/503 because he was married at the time of his injury.

However, the appellate court, affirming the trial court's decision, determined that the money could not be distributed until the periodic payments made by the tortfeasor to the injured spouse created a $500,000 fund for his care. (Compare this case with Burt, where the money to be used to maintain the health of the injured spouse was already secured.)

Furthermore, the appellate court allocated the assets remaining after the distribution of the $500,000 fund at a rate of 75 percent to the injured spouse and 25 percent to the non-injured spouse. The injured spouse was awarded $500,000 off the top to guarantee his care and received a disproportionate distribution of the balance. The appellate court found that the court below did not abuse its discretion when it took the well being of the seriously injured spouse, who required 24-hour care, into consideration. The appellate court also found that the trial court had a legitimate concern in insuring that the injured spouse receive all necessary medical and rehabilitative care needed to treat him for both his permanent injury and for independent life to the extent such independence was possible.

DeBow bears a striking resemblance to Amato, where it was determined that an award from a personal injury settlement for pain, suffering, and disability was nonmarital property. The personal injury claim in Amato arose from a tubal ligation performed on the injured spouse during the marriage in which she had to undergo four operations over a five-month period. Although her condition was eventually treated, she was left with permanent scarring. She was also subject to extreme pain and discomfort throughout the course of her operations.

The court found in her favor and characterized the personal injury award as nonmarital property, reasoning that

[n]othing is more personal then the entirely subjective sensations of agonizing pain, mental anguish, embarrassment because of scarring or disfigurement, and outrage attending severe bodily injury. Mental injury, as well, has many of these characteristics characteristics. Equally personal are the effects of even mild or moderately severe injury. None of these, including the frustrations of diminution or loss of normal body functions or movements, can be sensed, or need they be borne, by anyone but the injured spouse. Why, then, should the law, seeking to be equitable, coin these factors into money to even partially benefit the uninjured and estranged spouse? In such case, the law would literally heap insult upon injury.

Amato, 434 A2d at 643.

The courts in both DeBow and Amato wanted to safeguard the well being of the seriously injured spouses when making their determinations on the apportionment of the personal injury awards. Although the awards constitute marital property if strictly analyzed under section 5/503, both courts apportioned the awards equitably after due consideration of all relevant factors. Consequently, the purpose of the awards and the nature of the injury were decisive in both cases.

In In Re Marriage of Pace, 278 Ill App 3d 932, 664 NE2d 320 (1st D 1996), the appellate court affirmed the trial court's decision to award 25 percent of the $2 million personal injury settlement of the injured spouse to the wife. The appellate court considered the lower court to have ``taken into account [the husband's] pain and suffering and personal expenses, as well as [the wife's] earning potential'' in reaching its apportionment decision. Id at 323. It did not accept the injured spouse's contention that the award was nonmarital property intended to compensate him for his pain and suffering and rejected the ``analytical approach,'' which would have allocated the award according to purpose, not to the time the claim accrued.

The point during the marriage at which a claim accrues has a bearing upon how a personal injury award will be apportioned. In In Re Marriage of Waeckerle, 219 Ill App 3d 937, 579 NE2d 1275 (5th D 1991), the court determined that the personal injury award at issue constituted separate property. The injured spouse had been involved in two accidents. Prior to the second accident, a judgment of dissolution of marriage was entered.

Pursuant to the judgment, the wife of the injured spouse was to receive ``22% of the net proceeds the Husband receives by way of settlement or otherwise from his claim now pending....'' Id at 1276. However, the court ruled that the cause of action derived from the second accident ``could not have been in the contemplation of the parties'' when they entered into their property settlement agreement because the second accident had not yet occurred. Id at 1278.

The court also noted that there was a separate property right because the aggravation of a preexisting injury by a different tortfeasor from the first wrongdoer was to be considered a separate and distinct tort from the first tort. Since the second tort arose after the judgment of dissolution, the court decided that the personal injury award was non-marital property.

The court in In Re Marriage of Murphy, 259 Ill App 3d 336, 631 NE2d 893 (4th D 1994), looked closely at the relevant factors in section 5/503. The husband was paralyzed from the chest down by a gunshot wound suffered in the parking lot of a restaurant. The Murphy court awarded the wife of the injured spouse $220,000 from a $1.8 million settlement.

The court considered the permanent nature of his disability and reasoned that no part of the award was actually attributable to the wife. She left the marriage the same way that she entered because she was still ``employed, healthy, [and] able-bodied.'' Id at 898. Furthermore, no fixed amount of the award was dedicated to anticipated medical expenses or future lost wages. Consequently, much like the Amato court, the Murphy court considered the personal nature of the husband's pain and suffering and found that a just proportion did not mean an equal proportion.

Workers' compensation

The distribution of workers' compensation benefits is another source of litigation. Consistent with the treatment of personal injury awards, Illinois courts have historically characterized workers compensation benefits as marital property when th the injury occurs during the marriage.

In In Re Marriage of DeRossett, 173 Ill 2d 416, 671 NE2d 654 (1996), the court classified the workers' compensation award that arose out of a claim that accrued during the marriage as marital property. In so doing, the court rejected the injured spouse's argument that the compensation was payment for his diminished earning capacity, which, he contended, would continue well beyond the dissolution date of the marriage and into retirement.

In re Marriage of Hall, 278 Ill App 3d 782, 663 NE2d 430 (3d D 1996), was a variation on this theme. As in Burt, the court rejected the analytical approach and responded to the facts of the case. In Hall, the marriage was dissolved while the workers' compensation claim was pending. Affirming the trial court's ruling, the appellate court awarded 50 percent of the injured spouse's workers' compensation benefits to the wife, classifying some as marital property.

In reaching its decision, the court considered and weighed the relevant factors in IMDMA section 5/503(d). The wife, already in her mid-50's, had only a ninth grade education, did not have any vocational training, had physical problems, and had not worked in many years. The appellate court found that the trial court carefully considered the relevant factors under IMDMA section 5/503 and thus did not abuse its discretion.

Workers' compensation benefits that were originally nonmarital may be deemed marital property if they have been commingled. The husband in In Re Marriage of Drone, 217 Ill App 3d 758, 577 NE2d 926 (5th D 1991), had a workers' compensation claim which accrued prior to marriage, the proceeds of which were distributed after the marriage. The court found that because the husband deposited the settlement proceeds in a joint checking account, he effectively transmuted the award from nonmarital to marital property, creating a presumption of a gift to the marital estate.

Disability benefits

Like personal injury awards and workers compensation, disability benefits constitute marital property if the injury that led to the disability arose during the marriage. However, the proceeds are seldom divided equally.

In In Re Marriage of Adan, 263 Ill App 3d 566, 635 NE2d 778 (1st D 1994), the wife of the injured spouse was awarded 20 percent of the disability award. The court awarded the balance and future annuity payments to the injured spouse. In doing so, the court noted that a disproportionate award to the injured spouse was equitable as long as the court applied the factors set forth in section 5/503. The court relied specifically on the facts that the marriage lasted fewer than 10 years and, more importantly, that the husband was permanently disabled and could no longer work.

Great weight was given to pain and suffering of the injured spouse in In Re Marriage of Waggoner, 261 Ill App 3d 787, 634 NE2d 1198 (5th D 1994). The court took the analytical approach, stressing that compensation for pain and suffering should be classified as nonmarital property due to its personal nature. Furthermore, it reasoned that because future wages do not constitute marital property, payment for future loss of wages should not constitute marital property.

 

Debra DiMaggio, a member of the ISBA Board of Governors and fellow of the American Academy of Matrimonial Lawyers, is a sole practitioner who concentrates in matrimonial law. Cindy Y. Huang is a graduate of the University of New York at Buffalo School of Law, where she was executive editor of the Journal of Law and Social Policy. This article is an update of Debra DiMaggio's Personal Injury, Workers' Compensation, and Disability Awards in Illinois Divorce Cases, 78 Ill Bar J 506 (October 1990).

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Reprinted with permission of the Illinois Bar Journal, Vol. 89, #9, October 1990. Copyright by the Illinois State Bar Association www.isba.org.