Dividing property in a Colorado divorce case can be a grueling part of an already emotional ordeal. Adding personal injury claims or settlements can only complicate the process, especially if the settlement is large (even if not a “fortune”). And it’s also an emotional issue – after all, one spouse may have suffered the injury, and will live with it for years to come, and is understandably concerned at having to share the award with the other spouse at dissolution.
Personal Injury Settlements in a Nutshell
When someone gets injured, whether it is a car accident to medical malpractice to a slip & fall, that person can pursue damages against another person, business, or both for the harm suffered. Cases like these are called personal injury, or PI, cases. You’ve probably seen one or two commercials, billboards, or bus ads for PI firms around town.
After an injured person’s treatment is done, a claim for damages is filed with an insurance company. If the insurance company does not offer enough money, a lawsuit may be filed. Very few cases actually get filed, and most will settle during the litigation process. Of the few cases actually filed, only 5% of those cases make it to a jury.
After the case is resolved and the money comes in, that money will be divided to pay any attorneys, any outstanding expenses, and liens before any money will go to the injured party. The actual amount in pocket for the injured party will be less than the overall settlement or award.
A personal injury settlement or award may be compensation for several types of damages including past and future medical costs, past and future lost wages or wage capacity, and pain & suffering. More likely than not, the injured party will receive one lump sum rather than individual payments on each type of damage.
Dividing Personal Injury Awards at Divorce
So long as the injury spawning the case took place during the marriage, a personal injury settlement will be at issue during a divorce case.
In Colorado, the presumption is that all property obtained or acquired during the marriage (absent certain limited exclusions), is considered marital property and subject to division. Even unliquidated claims (meaning the claim was filed and the money has not been received) can and will be divided by the court in a divorce case.
Family law courts have long since held that personal injury settlements follow that presumption with one exception – compensation for post-dissolution wages or suffering are not divisible (the same way that post-dissolution wages are not divisible if earned through work).
The court has broad discretion in determining how the settlement will be divided based on equity, and the court will look at what exactly the settlement was meant to compensate for before making a decision. This is to ensure that any future lost wage compensation is not divided in the divorce.
The amount of money actually available for division will generally be less than the amount of the settlement or award because attorneys fees, liens, and other outstanding debts will be paid out first. The amount remaining (commonly referred to as the “amount in pocket”) after all those payments are made will go to the injured party.
PI Awards vs Child Support or Alimony
Not only can courts assess personal injury settlements as marital property, the court will consider any awards as income for the child support and spousal maintenance. In Fain,1In re: Marriage of Fain, 794 P.2d 1086 (Colo.App. 1990). the court held that when determining financial resources for family support, the court will look at “income from any source” and all financial resources available that are not explicitly excluded under C.R.S. 14-10-114 for spousal maintenance or C.R.S. 14-10-115 for child support.
Even if a personal injury case resolves after a divorce case is finalized, the court will always maintain jurisdiction over child support and spousal maintenance to make modifications. That means that a claim filed after the divorce or a settlement finalized post-decree, can still play a role in a divorce case after the fact as a financial resource of the party.
For more information on the specifics of personal injury awards in a divorce, including a discussion of the case law, the importance of the timing of the injury, see our all-new article in the Colorado Family Law Guide, Personal Injury Awards in a Colorado Divorce.