The recent Pennsylvania Supreme Court case of Focht v. Focht, 613 Pa. 48, has clarified Pennsylvania case law regarding the status of a court and/or litigation settlement and/or verdict in the context of equitable distribution in a divorce. The obvious question for divorce litigants is this: if one has a potential settlement/verdict, when, if at all, is it divisible in equitable distribution?
23 Pa.C.S.A. Section 3501(a)(8) specifically states that a "cause of action or claim which accrued prior to the marriage or after the date of final separation" is not divisible in equitable distribution. The courts, in the cases of Drake v. Drake, 555 Pa. 481, and Pudlish v. Pudlish, 2002 PA Super 95, made attempts to address actions and claims during the marriage (before separation), with the question at issue being "when does an action or claim accrue exactly?"
In Drake, one of the spouses had a worker´s compensation claim which included an injury and litigation settlement for the same, occurring during the marriage. The issue for the Drake Court was to determine whether the spouse´s claim for lost future wages, which extended to a time period beyond the dissolution of the marriage, would be subject to equitable distribution. The Court ruled that as the injury and its settlement both occurred during the marriage, any funds to be paid out in that settlement were to be included in equitable distribution. In other words, the entire settlement was considered to have accrued during the marriage.
In Pudlish, the Court ruled that a claim or action does not accrue until a verdict and/or settlement is entered. Practically speaking, then, an injury and its entire litigation could take place during a marriage, but if the verdict/settlement just happened to take place after marital separation, it would be considered separate property not subject to equitable distribution.
With the Drake and Pudlish cases in full view, the Supreme Court of Pennsylvania in Focht took the opportunity to clarify the issue of exactly when an action/claim accrues by laying out what is now the definitive rule in Pennsylvania. In Focht, the husband was injured during the marriage and brought an action for his injury which was not settled until after an action in divorce was filed.
The Pennsylvania Supreme Court extended Drake, and specifically overruled Pudlish, by ruling that a settlement and/or verdict and/or any proceeds from litigation accrues under 23 Pa.C.S.A. 3501(a)(8) as soon as the party has the right to file suit. Therefore, if an injury (or similar legally actionable issue) occurs during the marriage, regardless of when it settles or reaches a verdict, any funds flowing from any said action will be subject to equitable distribution.