Division of Injury Awards as Marital Property
By William B. Boros
Occasionally, the divorce practitioner is confronted with the issue of one of the parties having received or having a claim to an injury award of a substantial nature. Despite the presumption that property accrued during the marriage is marital, the personal and often profound nature of such injuries argues for different treatment than property acquired by the parties as a result of their marital efforts.
Time of Injury
The simplest issue in the determination the division of the award is the time the injury occurred. In all of the reported cases that I am aware of, compensation was received as a result of a single catastrophic event. Although certain injuries could be a result of an extended process (such as repetitive stress injuries in the work place), there does not appear to be case law regarding such a circumstance.
Analysis of this issue begins with 750 ILCS 5/503 - Disposition of Property. The Act is very specific in its definition of marital property as "...all property acquired by either spouse subsequent to the marriage..." 750 ILCS 5/503(a). This subsection goes on to identify exceptions to the marital property definition, including:
"(2) property acquired in exchange for property acquired before the marriage..."
"(6)property acquired before the marriage;"
In order to be marital property, under the statute, the right of action on which the personal injury settlement is based must occur during the marriage. The mere fact that a party receives a settlement or award during the marriage does not make it marital, since if the injury occurred before the marriage the award is merely being exchanged for a dismissal of the right of action in the injury litigation. However, even if the injury occurred before the marriage, if the settlement or award is subsequently commingled with marital property the normal rules concerning transmutation of assets apply.
Personal Injury and Worker’s Compensation Awards
Courts have distinguished between personal injury and worker’s compensation awards. This distinction seems to highlight the basic problem the trier of fact must confront in dealing with this issue. Generally speaking, a personal injury award is treated as a fixed amount paid to an individual for a single event which occurred in the past. A worker’s compensation settlement, on the other hand, is treated as being more contemplative in nature and as a prospective settlement for lost wages, the concern here being that an individual who has lost the ability to earn wages should not be penalized again by stripping them of the compensation for those wages.
Analytical Analysis
Currently, there is a division of authority in the appellate courts in the method of dividing personal injury awards in divorce cases. The division has been characterized as an "analytical" vs. a "mechanical" approach to analysis. Not surprisingly, the "analytical" school has decided which court decisions reflect analysis and which court decisions are mechanical.
The leading cause setting forth the analytical position is IRMO: Waggoner, 261 Ill.App.3d 787, 199 Ill.Dec. 844 (1994). It should be noted that Waggoner concerns a worker’s compensation claim and that a separate line of cases (most notably IRMO: Dettore, 86 Ill.App.3d 540, 42 Ill.Dec 51 (1980), had previously used the mechanical method to distribute worker’s compensation awards. In varying from this mechanical approach, the Waggoner court noted that the prior cases all involved a temporary total disability claim, while the case before the Waggoner court was a permanent total disability claim.
The Waggoner court’s analytical analysis breaks the award or settlement into two parts: a marital portion consisting of out of pocket expenses such as medical expenses and lost wages; and a non-marital portion consisting of compensation paid for pain and suffering, as well as future lost wages. The main concern identified is that the individual has sustained an extremely personal type of loss which should be considered as separate from the marital estate. In support of this position, the Court cites to various other jurisdictions. The Court avoids reference, however, to the clear language of the statute, except to say that "(t)he mechanical approach is literal". IRMO: Waggoner, 261 Ill.App.3d 787 at 789, 199 Ill.Dec.844 at 846.
The analytical method adds no new clear rules for the finder of fact to follow, but merely changes the order in which they are considered.
Mechanical Analysis
The mechanical position is set forth in IRMO: Gan, 83 Ill.App.3d265, 404 N.E.2d 306 (1980), and IRMO: Burt, 144 Ill.App.3d 177, 494 N.E.2d 868 (1986). The essential element of the mechanical approach is that the only factor determining the classification of the award or settlement as marital or non-marital property is the time of the accrual of the claim. Once classified as marital property, however, this analysis requires a review of the distribution of the property under 750 ILCS 5/503(d)(8) considering the "...age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of the parties." (Emphasis added)
The element of distribution is essential under the mechanical approach. As with any division of marital assets, the court is required to consider the contribution of each party to the "...acquisition, preservation, or increase or decrease in value of the marital or non-marital property..." 750 ILCS 5/503(d)(1). It is at this point that the trial court can, if appropriate, designate the lion’s share of the award to the injured spouse, since it was the injured spouse who contributed it to the marital estate. At the same time, if the personal injury award was the result of grievous bodily injuries, the court can review the future effects of such injuries in making its distribution of the marital assets. In this way the mechanical approach also avoids the creation of a new form of non-marital asset not identified in 750 ILCS 5/503.
Conclusion
At this point the reader may be scratching their head, attempting to discern the difference between the results rendered by the two methods of analysis. Instructive on this point is IRMO: Page, 215 Ill.Dec.923 (1996). The Pace court found the entirety of the bodily injury award to be marital property pursuant to the mechanical approach. Despite this finding, Justice Wolfson, in a special concurrence stated: "I agree with the result reached by the majority because I believe the trial judge actually used the analytical approach in determining when the personal injury settlement was marital property."
The analytical and mechanical methods of analysis both require a consideration of the permanent effects of an injury upon the actual victim and either method can be used to justify a disproportionate distribution of property to the injured spouse.
William B. Boros is a Principal of Cerne & Boris, P.C., Wheaton. He is a member of the DCBA’s Family Law Committee. His practice is concentrated in Family Law. He received both his Undergraduate Degree in 1986 and his Law Degree in 1989 from the University of Illinois - Urbana.
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