INNS OF COURT CHARLOTTESVILLE, VIRGINIA APRIL 8, 2010 RONALD R. TWEEL MICHIE HAMLETT LOWRY RASMUSSEN AND TWEEL, PLLC

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1 INNS OF COURT CHARLOTTESVILLE, VIRGINIA APRIL 8, 2010 RONALD R. TWEEL MICHIE HAMLETT LOWRY RASMUSSEN AND TWEEL, PLLC THE INTERSECTION OF PERSONAL INJURY AND EQUITABLE DISTRIBUTION AWARDS: WHAT IS IT AND WHAT SHOULD WE DO?

2 THE INTERSECTION OF PERSONAL INJURY AND EQUITABLE DISTRIBUTION AWARDS: WHAT IS IT AND WHAT SHOULD WE INTRODUCTION DO? If one is a personal injury lawyer handling a personal injury claim and the client is experiencing marital difficulties, is there anything that should be done, or not done, to protect the client? What elements of the case are important? What documents and records should be kept? Has the injury/accident itself caused a strain in the marriage? When exactly did the separation occur and how does this impact the results? In another context family lawyers have been forced to deal with personal injury awards because of the Virginia statute and the case law interpreting same. Virginia Code Ann (h) provides: In addition to the monetary award made pursuant to subsection D, and upon consideration of the factors set forth in subsection D, and upon consideration of the factors set forth in subsection E, the court may direct payment of a percentage of a marital share of any personal injury or worker s compensation recovery of either party, whether such recovery is payable in a lump sum or payable over a period of time. However, the court shall only direct that payment be made as such recovery is payable, whether by settlement, jury award, court award or otherwise. Marital share means that part of the total personal injury or worker s compensation recovery attributable to lost wages or medical expenses to the extend not cover by health insurance accruing during the marriage and before the last separation of the parties, if at such time or thereafter at least one of the parties intended that the separation be permanent.(emphasis added)

3 What does this statute mean for both parties? Who bears the burden of proof as to what is the marital share? How does this play out in actual distributions as to the elements determined to be part of the marital share? Prior to the 1990 statutory amendment as contained in (H) the conclusion or results was not as clear. Prior to that time a classification of personal injury/worker s compensation awards were either: 1. Marital property. In re, marriage of Burt, 144 Ill. A. 3 rd 177, 494 N.E. 2d 868 (1986) and Maricel v. Maricel, 221 Neb. 552, 378 N.W. 2d 885 (1985) 2. Separate property. Unkle v. Unkle, 305 Md. 587, 508 A. 2d 849 (1986), and Spann v. Spann, 852 P. 2d 826 (Oka. 1992). 3. Hybrid property (part marital/part separate). Johnson v. Johnson 259 Ga. 658, 386 S.E. 2d 136 (1989) and Johnson v. Johnson 317 NC 437, 347 S.E. 2d 430 (1986). The intent of our statute was to adopt the hybrid classification of awards and also address the timing of payment and other issues often litigated in other states. Therefore, our statute limits awards to lost wages and unreimbursed medical bills. Further, the focus of the statute is economic losses from the date of the injury to the date of the last separation of the parties, because of the partnership theory of marriage. Furthermore,

4 the statute adopts the if, as and when methodology of division of the marital share where settlement or payment has not occurred as of the date of the equitable distribution hearing. This clearly does not allow payment of any funds until it is actually received by the personal injury claimant. Virginia case law. Fortunately there is a published case, Chretien v. Chretien, 53 Va. App. 200, 670 SE 2d 45 (2008) (see attached). This case was litigated by my partner, William (Scotty) Scott, and by the now Judge John G. Berry. A review of the facts and holding of this case are significant. During the marriage the wife received a personal injury award. The husband appealed the decision of the Circuit Court of Orange County (Judge Daniel R. Bouton) for failing to award him any part of this award. The couple was in a motorcycle accident where the husband was driving and the wife was injured. The wife pursued claims from the insurance company and she received $149, Thereafter, the wife filed for divorce. The first issue for the court to address was whether the court should classify the personal injury recovery as marital or separate property pursuant to Va. Code Ann (A). The wife argued that because explicitly provides that the marital share is marital property all proceeds from the recovery that are not part of the marital share are separate property. The husband argued that nothing in the statute mandated that non-marital

5 share of the personal injury award is separate property. He took the position that such proceeds are subject to the presumption that all property acquired during the marriage are presumed to be marital. The trial court held that the personal injury recovery are presumptively separate property and that the husband had failed to overcome the presumption. In a very wise move Judge Bouton also ruled that even if he was incorrect in classifying the property as separate property, the wife should be awarded the entirety of the personal injury award because of the factors contained in (E). These factors are as follows: 1. The contribution, monetary and non-monetary, of each party to the well being of the family. 2. The contributions, monetary and non-monetary, of each party in the acquisition and care and maintenance of such marital property of the parties. 3. The duration of the marriage. 4. The ages and physical and mental condition of the parties. 5. The circumstances and factors which contributed to the dissolution of the marriage, specifically including any ground for divorce under the provisions of subdivisions (1), (3), or (6) of or

6 6. How and when specific items of such marital property were acquired. 7. The debts and liabilities of each spouse, the basis for such debts, and the property which may serve as security for such debts and liabilities. 8. The liquid and non-liquid character of all marital property. 9. The tax consequences of each party. 10. The use or expenditure of marital property by either of the parties for a non-marital separate purpose of the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties. 11. Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award (see Va. Code Ann (E). a. Opinion of the court The Court agreed with the husband that the circuit court erred by classifying the personal injury award as totally separate. The Court held that the statute expressly provides that the personal injury recovery is part marital and part separate, i.e., hybrid. Further the statute clearly mandates that the remainder is clearly separate. The Court concluded that the trial

7 court must first determine what part of the recovery is attributable to lost wages and medical expenses not covered by health insurance and classify this portion as marital. The major issue was the issue of burden of proof. The Court of Appeals held that the wife (Plaintiff in the personal injury case) bore the burden of proving that some or all of the personal injury recovery was separate property. This is a major decision based upon what personal injury lawyers representing injured parties and family lawyers representing injured parties must understand. The wife did not offer any specific proof as to that which was attributable to loss wages and unreimbursed medical expenses and, therefore, the Court of Appeals found that the entire amount was marital property. This could have been avoided if the Plaintiff s lawyer and the family lawyer were aware of how the courts would determine the burden of proof. However, the wife ultimately prevailed because the trial court next considered the factors cited above and determined that she was entitled to all of the proceeds anyway after a careful analysis of each factor. Therefore, she lost the battle (burden of proof), but she won the war (she retained all of the personal injury award).

8 What should the lawyer do? As the attorney for the non-injured spouse one needs to conduct discovery as to the underlying losses, claims and settlement statements. Information from employers as to wage losses and the status of medical bills are generally found in the plaintiff s personal injury lawyers file or obtainable from the employer, medical provider or insurer. If you are the plaintiff s personal injury lawyer, what do you do to protect your client? a. Destroy the file? b. Give all of the file documents to the client? c. Keep the file for the period of the statute of limitations? d. Return selected portions of the file documents to the client? e. None of the above? f. Call the Virginia State Bar? Are there ethical considerations for any or all of the positions? Is the divorce court bound by the settlement statement signed by one spouse awarding benefits to both spouses? This issue has not been decided by Virginia courts but in Georgia it was decided that the divorce court must exercise its own independent judgment in classifying and dividing the award ( see Johnson v. Johnson 259 Ga. 658, 386 S.E. 2d 136 (1989)). As the plaintiff s personal injury lawyer one could attempt to settle the case, in the

9 context of an existing or potential divorce, for nothing more than pain and suffering in order to defeat the claim of the non-injured spouse our equitable distribution. More than likely the divorce court will not allow such subterfuge and will pierce this pretext, See, L. Golden, Equitable Distribution of Property, Section Is the loss of sick time, vacation pay or unused leave time resulting from the injury an element for consideration in an equitable distribution award? This question has not been answered in Virginia, but most non- Virginia cases have held that such economic losses are property and are compensable in an equitable distribution award. Therefore, the loss from the date of the injury to the date of the separation may well be an element of the equitable distribution award (see, Nuss v. Nuss, 828 Pac. 2d 627 (Washington) (1992) (sick leave)); Grund v. Grund, supra (unused leave); Broughtman v. Broughtman, 528 S 2d 550 (Fla) (1988) (vacation pay)). Case example. If one is representing the injured party in a personal injury case who is about to undergo or who has already settled a personal injury case, what will happen. Assume that the plaintiff settled his claim for a total of $90,000 based upon special damages as set forth which was based upon a 60% rating of permanent injury by the defenses independent medical examiner. The damages can be summarized as follows:

10 Special Damage Amount Collateral Source Payment Lost wages $10,000 $0 Hospital bill $15,000 $12,000 Dr. Jones $4,000 $3,000 Therapy Services, LLC $1,800 $1,500 Prescriptions $425 $425 What is the non-injured spouse s claim on interest in the spouse s personal injury settlement? a. As per the statute the interest is limited to the marital share as defined above. b. This would mean that the financial losses of the family from the date of the accident until the date of the separate are the pertinent part. c. The marital share of the injury claim or award in this case example would be as follows: i. Wages the wages lost up until the time of the separation were $2,000, and therefore this would be the marital share. Post separation wages would be the injured party s separate property. ii. Unpaid hospital bills since all of the unpaid hospital bills were incurred before the last separation of the parties then

11 the entire amount of $3,000 ($15,000 - $12,000) would be the marital share. Of course the collateral source payment is not part of the claim. iii. Unpaid doctor s bill once again this would be determined upon that which was incurred before the last separation of the parties. If all of the doctor s bills were incurred prior to that time, then the entire differential would be marital property. iv. Unpaid therapy bills the same analysis would apply with the therapy bills as with the doctor s bills. v. Prescription cost since all of these costs were covered by health insurance, no part of this would be considered marital property. vi. Pain and suffering any amount attributable to pain and suffering is clearly separate property by case law and statute. Other issues If the non-injured spouse deserted the injured spouse or committed adultery, does this preclude her recovery? Although (E)(5) permits the court to consider the grounds for divorce, this will have little bearing on the amount of the marital share. However, one should

12 not negate an attempt to paint the non-injured spouse as a bad person in light of Judge Bouton s ruling in Chretien where 100% of the award was provided to the injured party. What if the $3,000 still owed to the hospital was not paid during the period prior to settlement, but paid directly from the settlement proceeds? Since there was no loss to the marital estate it is suggested that the $3,000 would not be included in the marital estate. This relates to the but for test. CONCLUSION This type of issue presents quite a problem for the personal injury lawyer. Claims are best received by insurance companies when they have specific data as to lost wages and medical expenses. It will be fairly easy to detect whether they have been reimbursed by insurance or not. The meticulous work of the plaintiff s personal injury lawyer may ultimately benefit the injured person s equitable distribution case since this will clearly delineate the marital share. The personal injury plaintiff will have the benefit of being able to bare his burden or proof in the divorce action to show that which is marital, (i.e., loss wages and unreimbursed medical expenses) and his separate claim. As for the divorce lawyer discovery will be important for both of them. Interrogatories, request for production of documents, request for admission and subpoena duces tecums will be of

13 great value in presenting the case. If one represents the non-injured spouse, then the presumption under the law is that the entire loss that was incurred during the marriage is marital. Therefore, your discovery may not be as vigorous as opposing counsel. Hopefully this will give personal injury lawyers and family lawyers some guidance as to what the law is, what factors to consider, and how to handle their cases.