Property Division Issues Related to Insurance in Divorce Cases

Characterization of Marital Property in Florida

In Florida, all marital property is subject to equitable distribution between the parties upon divorce. Under Florida Statutes § 61.075, marital property includes any property and assets acquired by the parties during the marriage and “[a]ll vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs.”

Thus, one would think that any benefits from an insurance policy would simply be treated as marital property subject to equitable distribution between spouses at divorce. However, the treatment of insurance benefits for purposes of property division is a little more complicated.

Characterizing Insurance Benefits

Florida courts take what is known as an “analytical approach” to characterizing insurance benefits. Under the analytical approach, the characterization of benefits under insurance policies depends on the nature of the loss for which those benefits are compensating. If insurance proceeds benefits compensate for personal losses, they are nonmarital assets of the aggrieved party. If insurance proceeds pay for losses sustained by the marital estate, they constitute marital property subject to division upon divorce.

Bodily Injury Insurance Benefits

When benefits cover personal injury damages, courts will distinguish between the losses accordingly:

  • Proceeds compensating for noneconomic losses for pain, suffering, disability, and diminished ability to live a normal life constitute the separate nonmarital property of the injured spouse;
  • Proceeds covering medical expenses paid with marital funds lost wages, and lost earning capacity during marriage constitute marital property subject to equitable distribution;
  • Proceeds for loss of consortium are the separate property of the non-injured spouse; and
  • Proceeds that cannot be allocated are considered marital property

As a result, proceeds from insurance policies and programs that cover personal injury losses will be characterized based on an allocation of damages and who incurred those damages—the injured spouse, the non-injured spouse, or the marital estate.

Insurance benefits that can be allocated for losses sustained by either spouse include:

  • Disability insurance
  • Workers compensation disability
  • Automobile insurance personal injury protection benefits
  • Automobile uninsured or underinsured motorist benefits

Property Damage Insurance Benefits

Insurance proceeds for property damage typically cover losses resulting from the owner’s loss of use and costs for replacement or repair. Therefore, the character of property damage insurance is derived from the character of the covered property. For example, homeowner’s insurance proceeds for property damage to the marital home will be marital property. In contrast, car insurance proceeds for property damage to a car a spouse acquired before the marriage, or through inheritance, will qualify as separate nonmarital assets of the spouse who owned the car.

Insurance policies covering property damage include:

  • Homeowners insurance
  • Title insurance
  • Automobile insurance
  • Flood insurance

Life Insurance Benefits

Life insurance benefits cover losses sustained by individuals who survive the death of the policy’s owner. Under Florida Statutes § 732.703, divorce voids a nonowner-spouse’s status as a beneficiary of a life insurance policy. However, the statute also recognizes specific exceptions that will avoid the automatic revocation of a spouse’s beneficiary status.

Exceptions to the automatic revocation of a spouse’s beneficiary designation upon divorce include:

  • The owner spouse died before finalizing the divorce
  • The owner spouse designates the nonowner spouse as a beneficiary after divorce
  • The court ordered the owner spouse to buy and maintain the policy for the nonowner spouse’s benefit or their children
  • The parties remarry

Consult an Experienced Attorney at The Virga Law Firm, P.A.

If you are going through a divorce involving complicated property division issues, such as the division of certain insurance benefits, you should consult The Virga Law Firm, P.A. for legal advice. Our attorneys have experience handling various divorce matters, including complex property division issues. We can help ensure your property rights determined according to Florida law.

For a consultation exploring your legal options, call us at (800) 822-5170 or contact us online today.

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