Joe and James are undergoing a divorce. Joe previously suffered an accident in which he lost his leg. James took care of Joe after the accident, supporting him financially, emotionally and physically after Joe became disabled and could no longer work. When Joe brought suit for damages, James was named a plaintiff in the personal injury suit, claiming loss of consortium. Both Joe and James received a significant award for damages, which they converted to an annuity.

With the divorce now looming, James wants to know whether – and to what extent – he is entitled to any of the annuity payments that Joe is receiving. Are they considered marital property for purposes of division and alimony?

The controlling Massachusetts case of Dalessio v. Dalessio was decided by the Supreme Judicial Court in 1991. [1]In that case, the husband had suffered a workplace accident in which he lost his arm. He brought suit and recovered a personal injury judgment of $3,000,000, and his wife recovered a $1,000,000 judgment; with interest, the two totaled about $7,000,000. The amounts were awarded by a general jury verdict, meaning that the exact amounts awarded as compensation for various parts of the husband’s damages were unquantifiable. In other words, the jury did not specify which parts of the husband’s awards were attributed to pain and suffering, which parts were attributed to medical expenses, and which parts were attributed to loss of income and earning capacity.

Two years later, the parties divorced. The judge in the Probate and Family Court held that the annuity payments were part of the marital estate, and he admitted actuarial evidence regarding the present value of the annuity. The judge also designated one-third of the proceeds as compensation for pain and suffering and two-thirds as medical expenses and lost earning capacity. In regards to the one-third designated for pain and suffering, the judge acknowledged that parts of the lawsuit proceeds were meant to compensate only the husband for losses and pain which would be experienced only by him. Accordingly, the judge effectively reduced the wife’s award. The husband appealed, claiming that the judge abused his discretion in dividing the tort proceeds.

The Supreme Judicial Court held that no such abuse of discretion occurred. First, the Court noted that proceeds from a personal injury judgment are subject to marital property division, despite the husband having exchanged them for an annuity. “The character of the proceeds as property within his Section 34 assignable estate does not change simply because he used them to purchase an annuity,” the Court noted. “A contrary conclusion could encourage spouses anticipating divorce to purchase annuities with their capital assets in order to insulate them from equitable division.”  [2]

Moreover, the Court noted that there was no abuse of discretion when the judge decided to designate one-third of the lawsuit proceeds as pain and suffering damages. There is no specific formula attached to this issue, the Court noted, and the judge clearly considered the matter of whether the spouse would share in the future losses experienced solely by the husband.

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[1] Dalessio v. Dalessio, 409 Mass. 821 (1991).

[2] Id., at 827.