How Are Proceeds From a Personal Injury Lawsuit Divided in a New York Divorce?

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People can experience a lot of hurt during the course of a marriage. People can also suffer actual physical injuries from car accidents, medical malpractice or other incidents that can result in the filing of a personal injury lawsuit.

When one spouse receives an award of damages or a settlement from a personal injury suit during the course of a marriage, how are those proceeds treated during a divorce?

In New York, property is divided pursuant to equitable distribution principles. Most property acquired during the course of a marriage is deemed to be “marital property” and thus will be divided between the parties.

Separate property, however, will not be equitably divided. Broadly defined, separate property is property acquired before marriage or by bequest, devise, descent or gift from a party other than the spouse during the marriage. It also includes damages for personal injuries.

New York Domestic Relations Law Section 236B1(d)(2) specifically provides that compensation for personal injuries received during the course of a marriage are deemed to be the separate property of the injured spouse.

There is an important nuance to this general rule, however. Awards in personal injury cases can be comprised of many elements. Damages can be awarded to compensate a plaintiff for the costs they incurred due to the injury, such as medical bills; compensation for pain and suffering; and punitive damages designed to punish the defendant and deter such conduct in the future. These damages are the plaintiff’s separate property.

But personal injury awards also can include compensation for lost wages and earning capacity. If such damages are part of the award or settlement, those amounts will be treated as marital property and will be equitably divided. This makes intuitive sense, since the wages that would have been otherwise earned would be marital property as well.

If you have questions or concerns regarding property division or any other matters pertaining to divorce, please give New York divorce and family law attorney Daniel Clement a call at (212) 683-9551 or fill out our online form to arrange for a consultation. We look forward to assisting you.

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