Opinion ID: 1486920
Heading Depth: 3
Heading Rank: 2

Heading: Workers' Compensation award as replacement of future earnings:

Text: We next address Husband's argument that the commutation award is excludable from marital property because it represents future earnings. This is an issue of first impression and we look to other jurisdictions for guidance. Some jurisdictions exclude a lump sum workers' compensation award from marital property if it replaces future earnings, while others do not so hold. Those that exclude workers' compensation from the divisible estate follow the analytic approach to classify marital property [9] and look to the nature of the underlying loss when classifying the award as marital or separate property. Generally, if the award replaces lost wages during the marriage, then the award is marital property. However, to the extent that the award represents future earnings, disability, or personal injury compensation, the award is separate property. See, e.g., Annotation, Divorce and Separation: Workers' Compensation Benefits as Marital Property Subject to Distribution, 30 A.L.R.5th 139 (1997); Crocker v. Crocker, 824 P.2d 1117 (Okla.1991). While the majority of jurisdictions to consider the issue seem to have followed this analytic view, a number of jurisdictions have rejected it and have adopted either a unitary, mechanistic, or a case by case approach to these payments. [10] See generally Marsh v. Marsh, 313 S.C. 42, 44-45, 437 S.E.2d 34, 35 (1993) (discussing the various methods for classifying personal injury or workers' compensation awards as unitary, analytic or mechanistic); Grace Ganz Blumberg, Marital Property Treatment of Pensions, Disability Pay, Workers' Compensation, and Other Wage Substitutes: An Insurance, or Replacement Analysis, 33 UCLA L.Rev. 1250 (1986). Under the unitary and mechanistic methods, unlike the analytic, it is irrelevant that the award replaces future earnings, personal injury, or other type of loss. Instead, the unitary approach classifies any personal injury award or settlement as personal and therefore separate property of the injured spouse, regardless of the underlying loss that the award replaces. See, e.g., Richards v. Richards, 59 N.M. 308, 283 P.2d 881 (1955); Gloria B.S. v. Richard G.S., 458 A.2d 707, 708 (Del.Fam.Ct.1982). The mechanistic approach looks to when parties obtained the property and if received during the marriage, then the award is marital. Timing of the receipt of proceeds, not the underlying purpose of the award, is the determining factor in deciding whether the monies are marital property. See, e.g., Johnson v. Johnson, 638 S.W.2d 703 (Ky.1982); Blumberg, supra. A careful examination of our statute reveals that it employs a hybrid of the mechanistic and case by case approach; [11] thus, requiring an evaluation similar to that which the Illinois Supreme Court employed in the case of In re Marriage of DeRossett, 173 Ill.2d 416, 219 Ill.Dec. 487, 671 N.E.2d 654 (1996). In DeRossett, the Illinois Supreme Court rejected the analytic method and found that a lump sum workers' compensation award was marital property if the right to receive the award accrued during the marriage. The parties in DeRossett were married from April 1987 through February 1994. The injured spouse suffered a work-related injury on January 18, 1990. At the dissolution hearing in July 1994, the injured spouse had not yet received a lump sum settlement of the compensation award. The DeRossett court held that, although the injured spouse had not received the award, the claim arose during the marriage and was marital property. Id. It was immaterial whether the award replaced wages or future earnings. Rather, the sole issue was when did the right to receive the award accrue. This result appears identical if we take the facts in DeRossett and examine them pursuant to our Divorce Code. Section 3501(a)(8), the subsection of the statute that deals specifically with monetary awards, states that payments may not be marital property if they are the result of: 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. 23 Pa.C.S.A. § 3501(a)(8)(emphasis added); See also Platek v. Platek, 309 Pa.Super. 16, 454 A.2d 1059 (1982); [12] Kozich v. Kozich, 397 Pa.Super. 463, 580 A.2d 390 (1990), app. denied, 527 Pa. 635, 592 A.2d 1302 (1991). [13] The Divorce Code at Section 3501(a)(8) makes no distinction concerning the purpose of the award or settlement, but posits that it applies equally to all claims or causes of action for personal injury, lost wages, disability or other damage. Unlike the analytic approach, it is irrelevant that the settlement or award is for disability payments, personal injuries, lost wages, or future earnings. We look only to the timing of the right to receive it. 23 Pa.C.S.A. § 3501(a)(8). Hence, like the Illinois Supreme Court in DeRossett, we reject the adoption of the analytic scheme. Instead, we look only to the Divorce Code that our legislature enacted. In doing so, clearly our statute does not permit us to look at the purpose of the commutation award. To find whether an award, workers' compensation or otherwise, is marital property under Section 3501(a)(8), we must first evaluate when the right to receive that payment arose. Here, the settlement agreement between Husband and his employer, by its terms, covers workers' compensation for a period of 447 and 1/7th weeks from December 7, 1989. Some wages could be classified as future earnings because they arguably extended through July 1998. However, when Husband entered the commutation agreement he exchanged those future earnings for the right to receive one lump sum monetary award. The critical question is not whether the award represented a benefit period extending past the marriage, but whether the right to seek a commutation of those earnings accrued during the marriage. Here, Husband suffered a work-related injury on July 29, 1985. Soon thereafter, he filed a workers' compensation petition and received biweekly benefits. After that, in October 1990, Husband and his employer entered into an agreement to commute his partial disability payments, effective December 7, 1989, the date agreed to as the effective date of Husband's partial disability. Thus, as of December 7, 1989, Husband certainly had an enforceable right to this lump sum commutation award, and Husband's claim accrued, as that term is used in the Divorce Code, well before the parties separated in July of 1993. See generally Pennsylvania Manufacturers' Association Ins. Co. v. Wolfe, 534 Pa. 68, 626 A.2d 522 (1993) (right to subrogation rights did not vest until a third party tortfeasor offered settlement); Bell v. Brady, 346 Pa. 666, 669, 31 A.2d 547, 549 (1943) (cause of action accrues only when one has the right to institute suit). Therefore, the Superior Court properly affirmed the trial court's finding that the commutation award is marital property. The inquiry does not end here. Once a court concludes that a workers' compensation award is marital property, it has discretion to award all, or a portion, of that award to the injured spouse. Although our Divorce Code does not allow us to consider the purpose of the award in deciding if the award is marital or separate property, it does require an examination of these equitable considerations at the time the court divides the property. Concerns for the injured spouse's financial security, disability, and/or employability are specifically addressed in Section 3502. The Divorce Code directs the courts to consider, among other factors, the age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of the parties, and the sources of income of both parties, including, but not limited to medical, retirement, insurance or other benefits. Sections 3502(a)(3); 3502(a)(6). See also DeRossett, supra . (While rejecting the analytic approach, concerns addressed there were part of the statutory mechanism to divide equitably that property.) It is entirely possible that a court could distribute the entire workers' compensation award solely to the injured spouse, assuming that his or her age, health, vocational skills, employability and access to benefits supported this determination. It is also possible, as here, the court could appropriately distribute the proceeds of the award to the noninjured spouse because the award represented a replacement of wages during the marriage. The court may consider the purposes of the award and the injured spouse's health, employability and injury to equitably divide marital property, in accordance with the mandates of Section 3502.