The majority of states use the analytic approach to classifying and dividing a worker's compensation settlement or award in a divorce case. Under the analytic approach, the portion of the settlement that represents the injured spouse's pain and suffering is the separate property of the injured spouse and not subject to division in a divorce. The portion of the settlement that represents lost wages, though, is marital property and subject to distribution. The idea is that the wages you would have earned but for your injury would have been marital funds; as such, the money that replaces those funds will be treated as marital, also.
A minority of states use the mechanistic approach in which the entire settlement is considered marital property, distributable between spouses in a divorce. In these states, courts look at the statutory definitions of marital property and any specified exceptions. If worker's compensation or personal injury settlements don't fit into any of the exceptions -- and mechanistic states hold that they don't -- the court distributes the proceeds of the settlement just like any other asset acquired during the marriage. Courts derive this reasoning from statutes that typically specify that property acquired during the marriage is marital. Exceptions are generally made for inherited property, gifted property or property brought into the marriage by either spouse. A worker's compensation settlement usually won't qualify.
In the unitary approach, which very few courts recognize, the entire settlement is the separate property of the injured spouse and is not distributed as an asset in a divorce. This philosophy of worker's compensation distribution doesn't require consideration of when the injury occurred or what the settlement is meant to replace.
Equitable Distribution vs. Community Property
Even if you live in a mechanistic approach state, where the entirety of your settlement will be considered marital property, this doesn't necessarily mean your spouse will get half. Only community property states have to divide the marital portion of the settlement equally. In equitable distribution states, courts must divide marital property equitably, or fairly. Since "fair" and "equitable" don't always mean the same thing, an equitable distribution court might award the uninjured spouse much less than 50 percent of the settlement.