Personal injury settlements are personal and not community property unless the settlement includes damages for economic losses such as earnings or loss of consortium damages.  Husband had an unnecessary pacemaker surgery.  Husband and wife filed suit against the doctor, hospital, and pacemaker manufacturer and recovered $2 million in compensatory and $5.4 million in punitive damages against the pacemaker manufacturer.  (The trial court reduced a $60 million award for punitive damages.)  Case then settles for $6.6 million of which $2.2 million was attributable to personal injuries. (We round out these numbers but wonder how $2 million in compensatory damages became $2.2 million. The court also notes the math does not add up and $1.2 million is missing.)  Most of the funds were used to fund an annuity, and we guess this was structured to avoid taxes. Wife then files for divorce and argues she is entitled to some of the monies not specifically attributable to husband’s personal injury.  The annuity payments went to husband during his lifetime and then to wife for her lifetime.  When payments were made before the divorce, the funds were placed in a joint account. Husband argues the monies are all his as his wife’s interest in the funds was contingent upon his death and this arrangement was a postnuptial agreement. The court holds the underlying settlement agreement with the manufacturer does not provide a specific allocation of the settlement monies and the annuity itself is not a postnuptial agreement. The case is sent back to the trial court, and if the trial court cannot allocate, the court should go with the presumption of community property. We expect an actual settlement agreement between the two will happen before then.  As for the larger question as to whether punitive damages are community or separate property, the suggestion is to closely at the compensatory damage award and go from there. One point on style: Justice Montgomery’s use of footnotes is distracting and raise questions the court is not answering. The footnotes may be there to swat away the flies, but they cause our minds to wonder where they will land.

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