Since the inception of equitable distribution in Pennsylvania on July 1, 1980 the law has consistently been that courts have power to divide marital property. With certain exceptions for gifts and inheritances, marital property is all property “acquired” from the date a couple marries to the date they finally separate 23 Pa.C.S. 3501(a). The challenge in several cases has been to determine when property is “acquired.” To that evolving legal concept we now have not only a reported decision in Yuhas v. Yuhas but one decided by a nine judge panel of the Superior Court. The decision was rendered on October 28 by a 6-3 majority.
Husband was a surgeon. He developed Carpal tunnel syndrome during the marriage that effectively ended his career. Fortunately, he had a disability insurance policy that was acquired shortly after he and wife married. At various times the couple paid for this policy from personal funds. Other payments were funded by his practice. In April, 2007 husband applied for his disability benefits. In July, 2007 the application was approved. In that same month the parties separated. The monthly benefit was $10,700 per month and was made effective January, 2007. The policy continues to pay although, it also requires that husband periodically prove he remains unable to practice surgery. Wife claimed that because the policy was acquired during the marriage the benefits arising from the policy were also marital. The special master appointed to hear the case concurred. The case was reviewed on exceptions by the Chester County Court of Common Pleas, which reversed the master and held that the post separation payments were “income” but not marital property. The decision of the trial court appears to have turned on the fact that the payments were not guaranteed but renewable premised upon proof of continuing disability.
In a supplemental opinion the trial court noted that the payments that accrued prior to the July separation were marital. It then analyzed the case in light of the Supreme Court decision in Drake v. Drake, 725 A.2d 717 (1999) where a workers’ compensation award was to a lump sum payment prior to the separation date. Because this was an “ongoing” claim for disability and not a commuted lump sum payment the trial court saw each monthly payment as a separate right accruing post separation.
To this decision, the Wife appealed. Her contention was that the event giving right to the income took place prior to separation as did the approval of the claim. She also noted the 2011 Supreme Court decision in Focht v. Focht 32 A, 3d 668 where a husband was injured in a raceway accident and filed suit with his wife before separation but settled the case after separation. In Focht the Supreme Court held that proceeds from a settlement made after separation are marital because they were acquired in exchange for a chose in action that accrued before separation. Id. At 674.
The Yuhas court noted that a cause of action accrues when the injury was inflicted under both Drake and Focht. But here the disability did not arise from an injury and were not received as the result of an award or settlement for a cause of action or claim.” 23 Pa.C.S. 3501(a)(8). The Superior Court holds that Husband did not “contemplate any legal action, nor did he possess a claim against anyone or any entity.” The Court then refers to the fact that the payments are subject to a condition subsequent. If husband recovers from the parathesia that prevents him from working as a surgeon the disability benefits are lost. For this reason, the Superior Court decided these post separation payments are non-marital.
This makes for an interesting analysis. Husband and wife bought and paid for a policy of insurance. The event covered by the insurance (the loss of the ability to be a surgeon) occurred during the marriage. The right to receive the payment for loss was affirmed before separation as well, albeit subject to the condition subsequent. The opinion state that Husband had no claim against anyone or any entity. Did he not have a claim against the insurer if the insurer had denied the disability claim. His action would have been in contract and not tort but is that a distinction contemplated by Section 3501(a) (8) which speak of “any cause of action or claim”
Yuhas v. Yuhas, 2013 PA SUPER. 283 (10/28/13).