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Man owes ex-wife a chunk of his $1M ‘bad faith’ settlement with insurer

Divorcing couples can agree to many different things in their separation agreements and property settlements. But sometimes those agreements extend further than expected.

This happened in a recent Missouri case.

In that case, Charles Baker and Kathleen Jo Weaver-Baker got divorced while Charles had a personal injury suit pending (he’d lost part of his hand when a truck hit his motorcycle a couple years earlier). As part of their separation agreement, Charles agreed to pay his wife 20 percent of anything he collected from the lawsuit, minus attorney fees. He ultimately secured a $1.3 judgment. However, the truck driver’s insurer only paid out the driver’s policy limits of a little over $100,000. In keeping with the agreement, Charles paid 20 percent to Kathleen Jo.

A year later Charles sued the insurer, claiming it acted in bad faith by not paying the whole judgment. The insurer settled with him for $1 million. When his ex-wife heard about the settlement, she claimed Charles owed her 20 percent of that too.

Charles disputed this, arguing that their agreement only applied to the personal injury suit itself and that he did his part by paying her 20 percent of the $100,000.

But a state court of appeals disagreed. According to the panel, Charles wouldn’t have had a case against the insurer in the first place without the underlying personal injury judgment. The bad-faith suit he followed up with was simply the way he collected and enforced that judgment.

The court also rejected Charles’s argument that the $1 million settlement wasn’t marital property because the money was meant to compensate him for lost wages and pain and suffering. According to the court, whether it was marital or nonmarital property didn’t matter. The separation agreement was what mattered, and he agreed to pay 20 percent in the agreement.

The law may differ from state to state, however, so talk to a family lawyer where you live.

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