Personal Injury Settlements and Divorce
Settlement payments for accident victims are normally made by way of lump sum payment by an insurance company once you or a loved one has signed a release (i.e., a contractual promise to release all defendants from your personal injury lawsuit).
If you suffer severe life-changing injuries, you can also be paid by way of structure, which is when some or all of the settlement monies are paid to you as the injured individual (or your guardian) by providing periodic payments rather than a single lump sum.
The structure is typically purchased from a life insurer through a structured settlement company. Your payments are provided periodically, generally on a monthly basis. The payments are tax-free and can be personalized to a personal or family budget.
If You Get Divorced, What Happens to Your Monthly Settlement Payments?
The Court of Appeal answered this question in a 2017 case called Hunks v. Hunks. Mrs. Hunks was injured in 1996 in a grocery store and suffered very serious injuries. She lost her job because she was not able to return to work. She sued the store and settled her case in the late 90s for just under $600,000.
Mr. and Mrs. Hunks separated in 2011. On the separation date, there were about thirteen years of guaranteed monthly payments that were still to be provided to Mrs. Hunks from her structured settlement.
A Settlement Is Income—Not an Asset
A few issues arose with respect to equalization. One issue was whether the structured settlement payments that Mrs. Hunks received were to be treated as income or property under the Family Law Act. If they were income, the payments were to be taken into consideration when determining spousal support. If the payments were property acquired during the marriage, would the structured settlement be split between the parties?
The original family court judge who heard the case determined that the structured settlement payments were similar to a pension. Even if Mrs. Hunks decided to work one day, she would still receive the settlement monies on a monthly basis from the settlement structure.
A pension is an asset and a form of savings that replaces lost future earnings. Because Mrs. Hunks received the structured settlement before their separation, she was obligated to share the structured settlement, just like a pension.
The Ontario Court of Appeal decided differently. They found that the structured settlement was similar to “disability benefits.” The structured settlement was to replace, in whole or in part, the employment income that Mrs. Hunks would have earned had she not been injured.
The structured payments gave her financial support because she was hurt and could not work. For these reasons, the structured settlement payments were treated as income and not as property (i.e., they were a replacement for future lost income). Mrs. Hunks’ income from the structured settlement would be considered part of her spousal support claim against her husband; however the value of the structure is not shared between the spouses.
Hamilton Personal Injury Lawyers
If you have questions about a personal injury settlement, please do not hesitate to contact Lalande & Company Lawyers by filling out a contact form at the bottom of this page or by calling 903-333-888 for a free, no-obligation consultation.