Lawsuit Proceeds Accruing During Marriage Were Marital Property

Property division during a divorce proceeding can become extremely contentious, and the conflict can be heightened by the high emotions of a divorce. Under Pennsylvania law, all property acquired by either party during the marriage is presumed to be marital property. There are exceptions to the marital presumption defined by statute, but determining the appropriate application of those exceptions can also lead to disputes.

For example, if one spouse is engaged in a personal injury suit, are the proceeds of that lawsuit considered marital property if the couple is divorced before the case is settled? The Pennsylvania Supreme Court case of Focht v. Focht provides an answer.

A serious injury . . . and a separation

On April 1, 1999, the husband sustained a serious injury in an accident at a "raceway" amusement center. Approximately two weeks later, the husband and his then-wife retained an attorney to represent them in their respective claims of personal injury and loss of consortium. The couple filed suit on September 8, 2000, and the case was settled on November 23, 2004, for a total of $410,000.

Between the dates of the accident and the settlement, specifically on August 1, 2001, the parties separated by mutual consent. The husband filed a divorce complaint in February 2004, and a divorce decree was entered on January 23, 2009.

During the divorce proceedings, the money was determined to be subject to equitable distribution with 25 percent going to the wife and 75 percent to the husband. This division was appealed to the Superior Court which concluded that the settlement proceeds should not have been included in the marital estate because the settlement in the negligence suit had been reached after the parties' final separation. The wife appealed.

When did the lawsuit "accrue" under the law?

The Pennsylvania Supreme Court explained that one of the exceptions to the presumption of marital property involved 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. The key question was the interpretation of the meaning of the word "accrued."

The Supreme Court held that there was no question that the husband's cause of action in negligence accrued during his marriage. The accident occurred during his marriage, and he became aware of his serious injuries and of the raceway's negligence during his marriage, as shown by the fact that he retained counsel and filed suit against the raceway during his marriage. All of these events occurred one to two years before the parties' final separation.

Thus, because the husband's cause of action accrued during the marriage, before the parties' final separation, proceeds from the settlement of the suit were marital property, and the marital property exception did not apply.

Division of marital assets

If you are contemplating a divorce, recognize that division of the marital assets may be a cause for contention and may require trade-offs. Because the process can become complex depending on the circumstances, you should seek an attorney experienced in divorce proceedings, who will seek creative solutions, but who will also be willing to litigate to defend your interests, if necessary.

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