Disability Benefits Are Not Considered Marital Property and Not Subject To Equitable Division in Divorce

 

June 26, 2017

This week, the Georgia Supreme Court ruled that when disability benefits are issued pursuant to an insurance policy after the insured is catastrophically injured, those benefits are considered non-marital property and are not subject to equitable division in the unfortunate case of a divorce. The case is Hardin v. Hardin, No. S17F0576, 2017 Ga. LEXIS 539 (June 19, 2017).

 

The insurance company, AMEX Assurance Company, issued an accident protection plan insurance policy to the insured Mr. Hardin. The insurance policy included an accidental permanent total disability benefit of $1,500,000 to be paid in the event that an accidental bodily injury directly caused Mr. Hardin to become totally and permanently disabled. The policy was procured after Mr. Hardin married his wife Mrs. Hardin.

 

Throughout the marriage, Mr. and Mrs. Hardin paid the policy premiums out of marital funds. Mr. Hardin was catastrophically injured in 2011 when he fell from a platform over twenty feet tall. After his injuries it became necessary for the Hardins to hire a caretaker to prepare meals, bathe him, roll him during the night, and assist in other physical needs. After the injury AMEX determined that he was permanently and totally disabled and paid the full policy benefit that was deposited into the Hardin's joint checking account. The Hardins separated three years later and Mr. Hardin soon filed for divorce.

 

In court, Ms. Hardin claimed that a majority of the disability insurance proceeds should have been classified as retirement income based on expectations that Mr. Hardin would have retired at age sixty-five and the couple did not have retirement accounts or investment plans. The court said that the insurance policy had been purchased by Mr. Hardin as an individual, not a work-associated plan as are most retirement plans, and that it was “simply not an appropriate vehicle to provide for retirement”.

 

Mr. Hardin claimed that the purpose of the insurance proceeds was to compensate him for his disability and they are not marital assets, therefore not subject to equitable division. In Georgia, where this case occurred, disability benefits that don't include retirement benefits should be divided into two portions (1) compensation for lost marital wages and (2) given as compensation for lost post-marital wages or pain and suffering, and that the first portion is considered marital property while the second is considered separate property.

 

All in all the court stated that the purpose of the disability insurance was to compensate the insured person under the policy, and the policy's definition of “injury” does not include non-bodily injury to the spouse of the insured. The court also found that the amount spent during the marriage exceeded the amount of compensation for lost marital wages that would have been considered marital property, and the remaining benefits were Mr. Hardin's separate property according to the law.

 

Editor's Note: Calculating the allocation of marital and non-marital property can become a very arduous business with definitions that vary state by state. The Court decided for the husband in this case because the disability that he suffered does not end with the divorce, so his benefits should extend past the life of the marriage.