Personal Injury Awards and Divorce in Arizona
Jurek Personal Injury Award
Under Arizona community property law, all property either spouse “acquires” during the marriage belongs to both spouses as community property. For many years, if one spouse was injured during a marriage and received a personal injury payment, that was considered community property because it was “acquired” during the marriage.
In Jurek v. Jurek, 606 P.2d 812, 124 Ariz. 596 (Ariz. 1980) the Arizona Supreme Court took another look at the issue of whether a spouse’s personal injury award is community property or separate property.
Facts of the Case
James and Sharon Jurek separated in 1976, and James filed for divorce in January 1977. Two days later, James lost his right hand and part of his right forearm in an accident. He filed a personal injury claim. The trial court ruled that the personal injury claim was a community asset and that half of any recovery would belong to Sharon. James appealed this ruling.
Community Property Law Applicable through Dissolution
James argued that when he filed the dissolution action, the community property laws no longer applied to his earnings. The Supreme Court rejected this view, noting that in Arizona, community property laws apply to the couple’s income until the dissolution is final. That rule was later changed by the Arizona legislature by the passage of a statute that now provides that the community is deemed to be terminated upon the service of the divorce petition on the other spouse, but only if the case results in a decree of dissolution of marriage being issued in the case.
Ownership of Personal Injury Awards in Arizona
The Court reviewed case decisions about whether one spouse’s personal injury award is separate property or community property in Arizona. The Arizona rule — pronounced in a 1926 case and consistently followed – was that any amounts of money recovered for injuries to one spouse during marriage are community property.
James urged the Court to rethink this rule, which had at one time been the general rule in community property states, but over time had fallen into disfavor. The Court reviewed and quoted from the Funiak and Vaughn’s text, Principles of Community Property § 82 (2d ed. 1971). Except for gifts clearly made to the marital community, community property only consists of that which is acquired by onerous title, that is, by labor or industry of the spouses…It must be plainly evident that a right of action for injuries to person … is not property acquired by onerous title.
The labor and industry of the spouses did not bring it into being. For that matter, it is not property acquired by lucrative title [gift, succession, inheritance] either. What then, is it? Since the right of action for injury to the person…is intended to bring about compensation for the injury, and the compensation is intended to repair or make whole the injury … the compensation partakes of the same character as that which has been injured or suffered loss.
The trial court stated that the rule that a cause of action for personal injuries is community property was based on the notion that since the cause of action arose during the marriage, it was property “acquired” during the marriage, and thus community property under the statute.
The Court of Appeals reviewed with approval cases from Nevada and New Mexico holding that the part of a personal injury award that compensates for the damage to a person’s body was the injured spouse’s separate property. It finished by adopting that approach for Arizona. In the case at issue, the serious injuries to the appellant are personal to him.
In the same fashion as pointed out in Soto, the body which he brought to the marriage is certainly his separate property. The compensation for injuries to his personal well-being should belong to him as his separate property. Any expenses incurred by the community for medical care and treatment and any loss of wages resulting from the personal injury should be considered the community in nature, and the community is entitled to recover for such losses.
The Supreme Court sent the case back to the superior court to figure out the amount the community actually lost wages and medical expense from the injury, and to give the community fair compensation for these items. The remainder of any recovery, the Court ruled, should be awarded to James as his separate property.
This case was mentioned in Hatcher v. Hatcher, 933 P.2d 1222 (Ariz. Ct. App. 1996) where the Court of Appeals determined that the proceeds from a disability insurance policy for an accident occurring during the marriage may be subject to division at dissolution. During the marriage, the Court said, a disabled spouse’s reduced earning capacity results in a loss to the community. At dissolution, however, any reduced earning capacity becomes the separate loss of the disabled spouse.
In Gersten v. Gersten, 219 P.3d 309 (Ariz. Ct. App. 2009), the Court of Appeals rejected the position that FECA benefits compensate a claimant for injury to personal well-being and are therefore the claimant’s sole and separate property. Rather, FECA benefits compensate a claimant for lost wages, loss of earning capacity, and medical expenses. Benefits paid for wage replacement and to reimburse medical expenses are community assets, and the burden is on the claimant to show what portion of his FECA benefits, if any, constituted compensation for injury to his personal well-being.