It is an unfortunate reality that divorce, or a relationship breakdown, can occur when someone is going through personal injury litigation. The stress of being injured in an accident and missing work can often cause strain and tension in a relationship. In such cases, clients often wonder if their upcoming settlement will need to be shared with their spouse in a separation or divorce.
Section 85 of the Family Law Act (the “FLA”) sets out what is considered excluded property, meaning, property that is not subject to division on a divorce or relationship breakdown. Section 85(1)(c) specifically excludes “a settlement or an award for damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for (i) loss to both spouses; or (ii) lost income of a spouse.”
A personal injury settlement is typically broken down into five main heads of damage:
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- Pain and suffering damages (also known as non-pecuniary damages);
- Past wage loss;
- Future wage loss;
- Special damages (out of pocket costs for treatment, medication, etc.); and
- Future care costs.
Any income that a person loses as a result of their injury during their relationship, will be considered family property.
With respect to future wage loss, this can be considered income when calculating child and spousal support payments. This means that even if an injured spouse is precluded from working in the future (or working at a reduced capacity), they could still be required to pay child and spousal support based on what they receive as future income.
When a settlement is reached for a personal injury claim, the settlement is often reached on an “all-inclusive” basis. This means that when negotiating, the parties do not break down each head of damage. This can often lead to issues in a family law action when trying to determine what part of the settlement may be family property and what part may be excluded property.
In Jackson v. Jackson, 2015 BCSC 2114, the claimant husband argued that $100,000 of the $365,000 settlement he received was excluded property. Mr. Justice Burnyeat found at para. 12, that because the claimant was not able to show which part of the settlement compensated him for lost income, and which part related to his injury or loss, no part of the settlement could be excluded from family property. A similar decision was reached in A.A.P v. G.T.F., 2015 BCSC 662.
85(1)(c) of the FLA puts the onus of proving what portion of a settlement is excluded property on the spouse trying to exclude the property.
Receive the Legal Guidance You Need
If you are going through a relationship breakdown and a personal injury settlement at the same time, it is important to discuss with your lawyers in each action the pros and cons of structuring your personal injury settlement in a particular way.
For more information, please contact me, Katharine Hennebery, at 604.609.3088 or email me at khennebery@watsongoepel.com.
About The Author
Katharine is an Associate in our Personal Injury and Family Law Groups. She has experience conducting all aspects of a personal injury and family law files, including examinations for discovery, mediation and settlement negotiations, drafting separation, marriage, and cohabitation agreements, preparing for and attending complex chamber applications, and preparing for and attending trials. Katharine has appeared at both the Provincial and Supreme Courts of British Columbia for both family and personal injury matters.
