Opinion ID: 1749705
Heading Depth: 1
Heading Rank: 1

Heading: Workers' Compensation Award as Marital Property

Text: The district court found the proceeds of a workers' compensation award could be marital property and adopted the principles of the analytical approach to be utilized in determining whether the wife is entitled to a portion of the workers' compensation proceeds. The district court noted that the trial court's inquiry should focus on the elements of damages the particular award was intended to remedy or, stated another way, the purpose of the award, 513 So.2d at 1281, and concluded that the trial court was under the mistaken belief that workers' compensation awards are simply not marital property, and directed the trial court to hold hearings to establish what portion of the award is marital property subject to equitable distribution. Id. at 1282. In so holding, the district court set forth the following principles for allocating damage awards: [D]amage awards may be separated into three different components: (1) compensation for the injured spouse for pain and suffering, disability, and disfigurement, (2) compensation for the injured spouse for lost wages, lost earning capacity, and medical and hospital expenses, and (3) compensation for the uninjured spouse for loss of consortium. Compensation paid to a spouse for non-economic and strictly personal loss under (1) and (3) is considered that spouse's personal property, while the portion of damages paid to the injured spouse under (2) as compensation for economic loss during the marriage is marital property. 513 So.2d at 1281 (citations omitted). In Freeman, the Fifth District Court of Appeal recognized that a disability pension, like a retirement pension, may be considered in determining support for a spouse or a minor child, but concluded that it is not a marital asset for the purposes of equitable distribution because a disability pension is designed to compensate an employee for lost earnings and injuries (including pain and suffering) sustained on the job. See In re Marriage of Jones, 13 Cal.3d 457, 119 Cal. Rptr. 108, 531 P.2d 420 (1975). As such, it is personal to the employee. 468 So.2d at 328. Given the fact that workers' compensation benefits are designed to compensate an injured worker for diminution in earning capacity, loss of earnings, and necessary medical expenses, [1] it is in part difficult to reconcile all the factors contained in the opinion of the Third District Court of Appeal in the instant case with Freeman. There is no uniformity among the states concerning the treatment of workers' compensation awards. [2] They are generally considered with other personal injury awards. See 2 Valuation and Distribution of Marital Property § 23.08 (J. McCahey ed. 1988). Three basic approaches exist. The first is the mechanistic approach. In most instances, under this approach, if a personal injury or workers' compensation award was acquired during the marriage, then it must be considered marital or community property and divided as such unless it falls within specific but limited statutory exceptions. The courts are controlled strictly by the statutory definition of what is separate and what is marital property. Arkansas, Colorado, Illinois, Michigan, Missouri, Nebraska, Pennsylvania, and Vermont follow this view. See Liles v. Liles, 289 Ark. 159, 711 S.W.2d 447 (1986); In re Marriage of Fieldheim, 676 P.2d 1234 (Colo.Ct.App. 1983); In Re Marriage of Dettore, 86 Ill. App.3d 540, 42 Ill.Dec. 51, 408 N.E.2d 429 (App.Ct. 1980); Heilman v. Heilman, 95 Mich. App. 728, 291 N.W.2d 183 (Ct.App. 1980); Jobe v. Jobe, 708 S.W.2d 322 (Mo. Ct. App. 1986); Maricle v. Maricle, 221 Neb. 552, 378 N.W.2d 855 (1985); Platek v. Platek, 309 Pa.Super. 16, 454 A.2d 1059 (Super.Ct. 1982); Condosta v. Condosta, 136 Vt. 360, 395 A.2d 345 (1978). The second approach is analytical and looks to the nature of a workers' compensation or personal injury damage award to determine whether the property is separate, belonging to one of the spouses, or marital property subject to distribution. Under this approach, the damage award is allocated in accordance with the following: (a) the separate property of the injured spouse includes the noneconomic compensatory damages for pain, suffering, disability, and loss of ability to lead a normal life and the economic damages which occur subsequent to the termination of the marriage of the parties, including the amount of the award for loss of future wages and future medical expenses; (b) the separate property of the noninjured spouse includes loss of consortium; and (c) the marital property subject to distribution includes the amount of the award for lost wages or lost earning capacity during the marriage of the parties and medical expenses paid out of marital funds during the marriage. The marital property should also include those funds for which no allocation can be made. In adopting this analytical approach, the Third District relied on the principles set forth in Johnson v. Johnson, 317 N.C. 437, 346 S.E.2d 430 (1986). That decision illustrates how the amount awarded for lost wages or lost earning capacity for the period during the marriage and medical and hospital expenses paid out of marital funds is separated from an amount awarded for lost wages and hospital and medical expenses incurred subsequent to the marriage. The former were identified as marital property subject to distribution and the latter the separate property of the injured spouse. While community property states originally followed the mechanistic approach treating a personal injury award as part of a marital couple's community property, Texas was one of the first to change, adopting the analytical approach in Graham v. Franco, 488 S.W.2d 390 (Tex. 1972), in which it reasoned: [T]he body of the wife brought into the marriage was peculiarly her own; and that if any property was involved in a personal injury to the wife, it was peculiarly hers. If her house, her separate property, were set afire and destroyed by a third person, the recovery should be her separate property. If an automobile were owned by the wife before marriage and was injured or destroyed, the recovery should go to repay the loss or damage to her separate property. So, the reasoning continues, if the arm of the wife is cut off, the recovery for the loss because of disfigurement and for the attendant pain and suffering should go to the wife. The reasoning is that the recovery is a replacement, in so far as practicable, and not the acquisition of an asset by the community estate. Id. at 394. New Jersey has followed the same approach in restrictively construing its equitable distribution statute. Amato v. Amato, 180 N.J. Super. 210, 434 A.2d 639 (Super.Ct.App.Div. 1981). With the exception of California, all community property states and a number of equitable distribution states have adopted the analytical approach. The following cases reflect the adherence to the analytical approach by the community property states: Jurek v. Jurek, 124 Ariz. 596, 606 P.2d 812 (1980); Rogers v. Yellowstone Park Co., 97 Idaho 14, 539 P.2d 566 (1974); Placide v. Placide, 408 So.2d 330 (La. Ct. App. 1981); Frederickson & Watson Constr. Co. v. Boyd, 60 Nev. 117, 102 P.2d 627 (1940); Luxton v. Luxton, 98 N.M. 276, 648 P.2d 315 (1982); Graham v. Franco, 488 S.W.2d 390 (Tex. 1972). The following cases represent equitable distribution jurisdictions which have adopted the analytic approach: Campbell v. Campbell, 255 Ga. 461, 339 S.E.2d 591 (1986); Van de Loo v. Van de Loo, 346 N.W.2d 173 (Minn. Ct. App. 1984); In Re Marriage of Blankenship, 210 Mont. 31, 682 P.2d 1354 (1984); Rich v. Rich, 126 Misc.2d 536, 483 N.Y.S.2d 150 (Sup.Ct. 1984); Johnson v. Johnson, 317 N.C. 437, 346 S.E.2d 430 (1986). See generally 2 Valuation and Distribution of Marital Property § 23.08[1][b] (J. McCahey ed. 1988). The third approach we characterize as unitary. It simply determines that the entire award made is the separate property of the injured spouse because it is uniquely personal to that individual. See, e.g., Unkle v. Unkle, 305 Md. 587, 505 A.2d 849 (1986); Izatt v. Izatt, 627 P.2d 49 (Utah 1981). Both the petitioner and the respondent take the position that we should adopt the analytical approach. However, the petitioner asserts that each case should be determined upon its own peculiar facts and in accordance with the factors set forth in an article by Marsha B. Elser and Jared G. Anton, as follows: (1) Any allocation set forth in the jury verdict making the personal injury award. (2) The proximity in time of the dissolution action from the accrual of the personal injury cause of action. (3) The severity of the injury and the permanence of any physical handicap. (4) Whether the injury sustained affected the duration of the marriage. (5) The effect of the injury on the conduct of the parties. (6) Any other factors which should be considered to bring about an equitable result. Distribution of Personal Injury Awards upon Divorce, 56 Fla.Bar J. 552, 557 (1982). Petitioner also asserts that, in applying these principles to the instant case, the monumental medical and related health expenses faced by the petitioner for the rest of his life make it an exercise in judicial futility to remand this cause to the trial court for a determination of the respondent wife's interest in this award. We adopt the analytical approach as outlined above in accordance with the Johnson principles. While factors (2) through (6) in the Elser article would be appropriate in determining the distribution of marital property, they should not be used to determine what is separate and what is marital property. As noted, application of this approach requires an understanding by the trial judge of the purpose of the damage award. We note that calculation of past and future loss of wages and earning capacity, as well as past and future medical expenses, should be governed by when the marriage has ended. Past lost wages and loss of earning capacity and past medical expenses paid from marital funds are marital property. Damages for future loss of earnings and loss of earning capacity and future medical expenses are the separate property of the injured spouse. Of course, the amount received by the injured spouse for future loss of wages may be taken into account in determining alimony and support awards. In the instant case, the injuries were catastrophic and, within three years of the injury and two years of the settlement, this dissolution was initiated by the wife. The only testimony regarding the purpose of the workers' compensation award was from the husband, who stated the award was for both current and future medical expenses. No testimony was presented by the wife to rebut this evidence. The wife contended that the entire award was marital property and that she was entitled to one-half the award. The husband, on the other hand, argued it was all his separate property. The mechanistic, analytical, or unitary approaches were not presented as such to the trial court. In reality, the wife argued for the result of the mechanistic approach, while the husband asserted the unitary approach. As noted above, the trial court, on the evidence and arguments presented, ruled that the monies received were derived as a result of the injuries the husband sustained and ... belong to the husband alone. The district court rejected this finding and characterized the trial court's ruling as a conclusion that workers' compensation awards may never be marital property. That is a reasonable interpretation of the trial court's ruling under these circumstances. However, the trial court's holding cannot be faulted because it was never presented with the analytical approach adopted by the district court and now approved by this Court. The trial judge addressed this particular settlement award of workers' compensation proceeds within the context of the claims made by the wife in her pleadings that she was entitled to one-half the husband's workers' compensation settlement award and the response by the husband that she was entitled to nothing. We have, by this opinion, approved the analytical approach in determining what part, if any, of this workers' compensation award is marital property. Unquestionably, Florida law was unsettled at the time the trial court considered this matter, and, consequently, we agree with the district court that the trial judge should now re-examine such interest as the wife may have in this workers' compensation award under the analytical approach set forth in this opinion.