In a prior post, I went over the definition of “separate property” in New York. Under that definition (Section 236(B)(1)(d) of New York’s Domestic Relations Law, if you need to look it up), one of the things that is separate property in divorce in New York is damages received by a spouse for their personal injuries.
In this post, I’m going to go over that same question — namely, is money received for personal injuries separate or not — for California. California and New York are similar politically, but remember that when it comes to divorces, California is a community property state and New York is not. Does that affect the answer?
In short, yes. Money received for personal injuries sustained during the marriage is community property in California, but it is not automatically subject to division in the way community property typically is in a divorce. There are three California statutes that apply here, all of which are in the California Family Code.
The first is section 780 of the California Family Code which provides the following. This entire statute is important, but I’ve put the super important parts in bold.
“Except as provided in Section 781 and subject to the rules of allocation set forth in Section 2603, money and other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for such damages, is community property if the cause of action for the damages arose during the marriage.”
From this, the general rule is that compensation for personal injuries sustained by one of the spouses during the marriage is community property, unless provided otherwise by sections 781 and 2603 of the Family Code. Those two sections just happened to be the other two statutes that apply here that I mentioned earlier.
Section 781 of the California Family Code has several subparts so it’s a bit long, but it provides:
“(a) Money or other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for those damages, is the separate property of the injured person if the cause of action for the damages arose as follows:
(1) After the entry of a judgment of dissolution of a marriage or legal separation of the parties.
(2) While either spouse, if he or she is the injured person, is living separate from the other spouse.
(b) Notwithstanding subdivision (a), if the spouse of the injured person has paid expenses by reason of the personal injuries from separate property or from the community property, the spouse is entitled to reimbursement of the separate property or the community property for those expenses from the separate property received by the injured person under subdivision (a).
(c) Notwithstanding subdivision (a), if one spouse has a cause of action against the other spouse which arose during the marriage of the parties, money or property paid or to be paid by or on behalf of a party to the party’s spouse of that marriage in satisfaction of a judgment for damages for personal injuries to that spouse, or pursuant to an agreement for the settlement or compromise of a claim for the damages, is the separate property of the injured spouse.”
Section 781 is not a complicated statute, despite it being somewhat long. If I had to summarize section 781, I’d say it provides some exceptions to when personal injury damages are separate property instead of community property as provided for under section 780. Hopefully it is obvious, but these exception under section 781 should not be a surprise as they are consistent with other principles that govern community property. For instance, community property rights end when the parties separate (see section 771 of the California Family Code) so, hopefully, it should not be surprising that money for personal injuries arising after the divorce is done (e.g. Section 781(a)(1)) or after the parties have separated (e.g. Section 781(a)(2)) is the injured spouse’s separate property. Section 781(b) goes over reimbursements that the non-injured spouse would be entitled to which should also not be surprising if you keep in mind that a spouse is generally entitled to reimbursement for community expenses they pay for with their own separate property. Section 781(c) is, in my opinion, not related to Sections 781(a) and (b), but nonetheless, 781(c) provides that if Spouse A has suffered personal injuries caused by Spouse B and sues Spouse B for it, the damages paid to A by B or on B’s behalf is A’s separate property.
The third statute that is relevant here is section 2603 of the California Family Code which provides:
“(a) “Community estate personal injury damages” as used in this section means all money or other property received or to be received by a person in satisfaction of a judgment for damages for the person’s personal injuries or pursuant to an agreement for the settlement or compromise of a claim for the damages, if the cause of action for the damages arose during the marriage but is not separate property as described in Section 781, unless the money or other property has been commingled with other assets of the community estate.
(b) Community estate personal injury damages shall be assigned to the party who suffered the injuries unless the court, after taking into account the economic condition and needs of each party, the time that has elapsed since the recovery of the damages or the accrual of the cause of action, and all other facts of the case, determines that the interests of justice require another disposition. In such a case, the community estate personal injury damages shall be assigned to the respective parties in such proportions as the court determines to be just, except that at least one-half of the damages shall be assigned to the party who suffered the injuries.”
Section 2603(a) introduces the term “Community estate personal injury damages” which, in a nutshell, encompasses money received by an injured spouse for personal injuries the claim for which arose during the marriage. The money referred to here is specifically that money which is not somehow separate property under section 781. If that definition hasn’t confused you, section 2603(b) is perhaps the essence of the answer to the question “Are personal injury damages divided in a California divorce case?”
Section 2603(b) provides that the default is to give money received for personal injuries to the spouse that was injured. For example, Spouse A and B are married. If Spouse A was injured in a car accident during the marriage and received $1 million in damages for those injuries, that $1 million is community property under section 780. In this situation, A and B are not separated or living apart and there is no divorce. Further assume that Spouse B has no reimbursement claim and that Spouse A and B are not suing one another for anything. Because of these assumptions, section 781 does not apply.
Now suppose that Spouse A and B separate and a divorce is filed. When it comes time to determine how that $1 million is to be divided, section 2603(b) provides that Spouse A — remember, A was the one who was injured in the car accident — shall receive the entire $1 million even though it is community property. However, there is an exception to this. Many things — or perhaps most things — in the law have exceptions (and exceptions to the exceptions… but I digress). The exception in section 2603(b) is the following: if for some reason the court or the judge is convinced that the interests of justice or fairness require it, those personal injury damages (i.e. the $1 million Spouse A received in my hypothetical) can be ordered divided with Spouse B. If such a split is ordered, Spouse A (i.e. the injured spouse) has to receive at least half of the personal injury damages. In other words, in my hypothetical, Spouse A has to get at least $500,000 of the $1 million.
So, if you have followed all of what I’ve said in this post, here’s the general rule:
- Damages received for personal injuries the claim for which arose during the marriage are community property. The time at which the personal injuries arose is important. If you were injured during the marriage, but only received compensation for it after the marriage ended, that compensation is still community property. Conversely, if the personal injury occurred before the marriage, but by the time the compensation was finally paid (e.g. by the time the insurance companies and lawyers worked it out) you had gotten married, that compensation is separate property.
- Even though compensation for personal injuries that arose during the marriage is community property, the general rule is that during a divorce in California, all of that money is given to the injured spouse unless, for some reason, the interests of justice and fairness require that money be split. If a court determines that such a split is necessary in a particular case, the injured spouse must receive at least half of that money.
Hopefully all of that makes sense.
As always, this post and the information contained in it is not meant to be an exhaustive treatment of the topic presented. If you have a situation involving how money received for personal injuries should be handled in a divorce, I would recommend finding a lawyer in your area with whom you can discuss the intricacies of your situation.
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