Kathy, a divorce client in Maryland, writes, “I just got a settlement from a car accident I had in 2020. It’s all non-marital isn’t it because it was for my personal injury?”

My Response

Kathy, I’m afraid not.

In Dearing v. Dearing, 292 Md. 115 (1981), the Maryland Court of Appeals (now Supremember Court of Maryland) established the “analytic approach.” Courts must allocate the award component by component rather than all or nothing.

Personal injury awards in divorce must be broken down with each element classified based on what it replaces or compensates. Income that would have been marital property is marital. Pain and suffering compensate the individual spouse personally. Therefore, it is not a substitute for any marital asset.

In Maryland, personal injury awards are part marital and partially non-marital property. It depends on what the damages compensate for.

Not marital property (exempt from equitable distribution):

• Pain and suffering
• Disability/disfigurement
• Loss of consortium (the injured spouse’s personal claim)

Marital property (subject to equitable distribution):

• Lost wages or earning capacity (income that would have been marital)
• Medical expenses paid with marital funds
• Loss of services to the marital unit

Deering remains the controlling Maryland authority on personal Injury awards in divorce. It also reflects Maryland’s broader equitable distribution philosophy. Courts look through the label to the economic substance of an asset.

Litigation note

Unallocated lump-sum settlements create the biggest headaches under Deering. The burden of tracing falls on the spouse claiming non-marital character.

Practical note

If the award is a lump sum with no itemization, courts will apportion it. Settlement agreements and jury verdicts that break out damages by category are much easier to handle in divorce proceedings. If you’re dealing with an unallocated settlement, expect a fight over what portion represents wage replacement vs. pain and suffering.