Jun 1

Split Decision: How to Divide a Personal Injury Settlement at Divorce

Tags: , , , , ,
In California, you might have to give a piece of your personal injury settlement to your soon-to-be-ex-spouse

In California, you might have to give a piece of your personal injury settlement to your soon-to-be-ex-spouse

Breaking up is hard to do. Breaking up your settlement or verdict in a personal injury lawsuit is even harder. Generally, any property that you acquire during marriage and before separation is community property and thus belongs to your spouse just as much as it belongs to you.1 In a divorce proceeding, a family court will generally divide the community property equally.2 The loss of your personal injury settlement money can hurt worse than your personal injury itself. Luckily, a settlement or verdict for “community estate personal injury damages” (CEPIDs) is subject to special rules of division.3 Here’s a lickety-split guide to splitting your CEPIDs at divorce.

Adding Insult to Injury: How Your Ex Can Swipe Your CEPIDs

CEPIDs are a unique form of community property.4 Whereas a court must divide most forms of community property equally, a court may assign all the CEPIDs to the injured spouse.5 But the court can assign up to half of the CEPIDs to the non-injured spouse if: (1) the funds don’t result from domestic violence by the non-injured spouse; and (2) the assignment would be in the “interests of justice.”6 In deciding whether such an assignment would be in the interests of justice, the court must consider each party’s economic condition and needs, the time that has elapsed since the recovery of the funds or the occurrence of the injury, and any other facts. Talk about adding insult to injury.

Even money from a settlement or verdict in an employment case can be CEPIDs. For example, a pizza delivery driver who gets into a car accident during a delivery might have a workers’ comp claim against his employer’s workers’ comp insurer and a civil action against a third party. If the accident occurs during marriage and before separation, the money from the settlement or verdict will be CEPIDs. But “personal injuries” can result from far more than car accidents, supermarket slips and falls, and exploding Coke bottles. For example, sexual harassment and certain other employment torts are personal injuries to the extent that they result in pain and suffering and other noneconomic injuries.7

Splitting Headache: The Consequences of Hiding a Settlement of CEPIDs from Your Spouse

If you receive a settlement or verdict for CEPIDs after you separate from your spoue, don’t even think about hiding the ball. You have a fiduciary duty to disclose all material facts about the existence, characterization, and valuation of all assets in which the community has or might have an interest.8 The concealment of material facts about CEPIDs is a breach of that duty. Your spouse will then have a “claim” or “action” against you for any breach that “impairs or will impair” her “one-half interest” in the community estate.9 The family court must award her 50 percent, or an amount equal to 50 percent, of any community asset that you failed to disclose or transferred, plus attorney’s fees and costs.10

Even worse, your transfer or failure to disclose any material facts about the existence, characterization, and valuation a community asset requires a court to award your spouse 100 percent, or an amount equal to 100 percent, of that asset if your breach of fiduciary duty rises to the level of malice, oppression, or fraud.11 In one case, the court awarded a husband his wife’s entire $1,336,000 jackpot after she filed for divorce without mentioning that she had won the lottery.12 The wife could’ve avoided this mess by just sharing the good news with her husband – or by picking her husband more carefully. But love goes by haps; some Cupid kills with arrows, some with traps.13

  1. Fam. Code §760. 

  2. Fam. Code §2550. 

  3. Fam. Code §2603(a). 

  4. In re Marriage of Devlin, 138 Cal.App.3d 804, 807 (1982). 

  5. Id. 

  6. Fam. Code §§2603(b); 2603.5. 

  7. Bihun v. AT&T Information Systems, Inc., 13 Cal.App.4th 976, 1005 (1993); but see Holmes v. General Dynamics Corp., 17 Cal.App.4th 1418, 1436 (1993)(holding that a wrongful termination in violation of public policy is not a “personal injury” because it “primarily involves the infringement of property rights”). 

  8. Fam. Code §1100(e). 

  9. Fam. Code §1101(a). 

  10. Fam. Code §1101(g). 

  11. Fam. Code §1101(h); Civ. Code §3294. 

  12. Marriage of Rossi, 90 Cal.App.4th 34 (2001). 

  13. Shakespeare, Much Ado About Nothing, Act III, Sc. 1, lines 105-106. 

Ben Rothman, Esq.

Ben Rothman is a Los Angeles-based attorney practicing in the areas of personal injury, employment, and workers' compensation on a "no recovery, no fee" basis. Call him at (424) 465-2948 for a free, no-obligation consultation.