If a spouse is injured and subsequently sues and receives a legal settlement or judgment, is the resulting monetary award marital property in Pennsylvania? The Supreme Court of Pennsylvania weighed in on this issue last year.
In the case of Focht v. Focht, decided November 23, 2011 by the Supreme Court of Pennsylvania, Husband sustained an injury at the Family Grand Prix Raceway. He and his then-wife retained an attorney and filed a lawsuit. However, the parties separated prior to the settlement of the personal injury case. As part of the personal injury claim, Wife had also filed a loss of consortium action, which means that she sought compensation for how the accident affected her and her relationship with Husband. Accordingly, both Husband and Wife were plaintiffs in the lawsuit.
When the case finally settled, Husband received approximately $231,000.00 and Wife received approximately $14,000.00 for her part of the claim. However, the parties received these monies well after they separated. Therefore, the question arises whether the settlement proceeds are “non-marital.”
In its analysis, the court quoted Pennsylvania’s equitable distribution statute:
[M]arital property does not include . . . any payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation, regardless of when the payment was received.
Accordingly, the result in the case hinges on the interpretation of the word, “accrued.”
The Pennsylvania Supreme Court held that because the cause of action accrued during the marriage and before the parties separated, the lawsuit settlement proceeds were marital property, even though the parties received the funds well after the date of separation.
Unfortunately, in this case it appears that Husband spent almost the entire settlement. He purchased a home, then took a mortgage against it. Subsequently, the bank foreclosed upon the home. By the time this case wound its way through the system, Husband had very little money left.
If you or your spouse have a lawsuit pending (or a cause of action to file a lawsuit), consult with an attorney so that you can preserve your rights during equitable distribution, which could potentially mean freezing the proceeds.