Generally, marital property is “all property acquired by either party during the marriage.” 23 Pa. C.S. § 3501(a). The law recognizes several classifications of property that are not considered marital property. For example, “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.” 23 Pa. C.S. § 3501(a)(8). However, not all settlement payments are marital property subject to distribution in a Pennsylvania divorce case.
In Yuhas v. Yuhas, 2013 Pa. Super. 283 (Pa. Super. 2013), Husband and Wife were married on June 4, 1988. A Disability Income Policy was issued in 1988 after the marriage. The parties paid the premiums from personal funds from 1988 until April 1993 and then in August 1993, November 2006 and April 2007. All other premiums were paid through Husband’s medical practice. Husband was a board certified vascular surgeon who had practiced for 13 years before undergoing surgery for carpal tunnel syndrome. He was unable to operate after the surgery. He applied for benefits in April of 2007 and was approved in late July 2007. Husband received a retroactive payment on the policy and was approved for monthly disability payments in the amount of $10,200.00. Wife filed for divorce on October 8, 2007. In the divorce proceedings, the parties agree that Husband’s retroactive lump sum payment from the policy was marital property. However, the parties could not agree whether Husband’s monthly disability checks constituted marital property.
The Divorce Master initially determined that Husband’s monthly disability payments were marital property. Husband filed exceptions to the Master’s Report. The trial court determined that the monthly disability insurance payments received by Husband starting on the date of the first six-month renewal after the parties’ separation on July 20, 2007 are income but not marital property. Following a remand Master hearing on an issue concerning Husband’s earning capacity, the Master incorporated the trial court’s determination concerning Husband’s disability payments. Wife filed exceptions, which were overruled. She then filed an appeal to the Pennsylvania Superior Court.
On appeal, the Superior Court determined that the disability payments received by Husband were not payments received as a result of an award or settlement for any cause of action or claim because Husband did not contemplate any legal action nor did he possess a claim against anyone or any entity. Instead, “the monthly disability payment is based upon a contract of insurance and is an insurance benefit from a policy that ensured replacement of income if Husband became unable to work at his former occupation as a surgeon.” Yuhas, 2013 Pa. Super. 283 (Pa. Super. 2013). Husband’s right to receive monthly payments was contingent upon his continuing disability. Therefore, the monthly disability payments were not marital property and Wife was not entitled to a portion of them in equitable distribution.