Disability Benefits in a Divorce
The Superior Court of Pennsylvania recently weighed in on how, or even whether, disability payments are divisible upon divorce in the matter of Yuhas v. Yuhas, 2013 WL 5783117 (Pa.Super. 2013).
The husband in the Yuhas matter was a board certified vascular surgeon who developed carpal tunnel syndrome which left him unable to operate any longer.
The husband maintained a disability income insurance policy for which he had been paying premiums for several years. The parties had been married since 1988, and separated in 2007, and marital funds were used to pay the aforesaid premiums in 1988 through 1993 and 2006 and 2007. The premiums for the other years were paid through husband’s personal funds.
Husband applied for and was approved for benefits in 2007, before the parties separated, and received a lump sum retroactive payment for the first half of 2007. The parties agreed that this sum was marital property. After then parties separation husband continued to receive benefits based upon husband’s continued disability, but ongoing benefits could only be received through a continued proof of loss on an annual basis.
In 2007 a complaint in divorce was filed, which culminated in a divorce master’s hearing in 2009. The parties litigated the issue of the post-separation disability payments through master’s hearings, exceptions, and trial court rulings, until ultimately appealing the matter to the Superior Court of Pennsylvania. At the Superior Court level, the issue to be ruled upon was whether the post-separation disability benefits were marital property.
In making its ruling, the Superior Court looked to 23 Pa.C.S.A. Section 3501(a) regarding property division and cases decided thereunder. The Court noted that the law is clear that property acquired during the marriage is marital property and property acquired before or after the marriage is not. In saying that, the Court also looked to Section 3501(a)(8) which establishes an exception to the above that states that “any payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was received” is not marital. The Court, relying on well-established case law, further expanded on the law, indicating that the relevant time of accrual is “when the right to receive that payment arose.”
Based on the above, the Court ruled that the critical question in its analysis of this matter “was whether the husband’s right to seek damages for his personal injury by filing a suit accrued during his marriage, not whether his suit was settled during the marriage.”
In reviewing the facts and law at play in this matter, the Superior Court ruled that the husband’s post-separation benefits are not marital as they do not arise from an injury which occurred during the marriage. Instead, the Court recognized that the monthly disability benefits are not based upon legal action or a claim against someone. Rather, the benefits are based on an insurance contract based on husband’s inability to work. Furthermore, the monthly payments were contingent upon proof of continuing disability, and not merely disability during the course of the marriage.
Based on the above, the Court ruled that the husband’s post-separation benefits were not marital.
Originally published in The Legal Intelligencer Blog on May 26, 2015 and can be seen here and reprinted in Volume 37, Issue No. 3, September 2015 edition of the “Pennsylvania Family Lawyer” (see here).