Christmas v. Christmas , 1990 Okla. LEXIS 17 ( 1990 )

HODGES, Justice.

This appeal from a certified interlocutory order raises the following question of first impression: Are disability benefits received after divorce joint property subject to equitable division in a divorce action? We answer in the negative.

Bill Christmas (husband) and Suzy Christmas (wife) were married in 1974. On December 7, 1987, wife filed her petition for divorce and the parties separated.

Two weeks later, husband began an approximately three-month stay in a local sanatorium. He sought disability benefits for job stress incurred as Chief of the Sapulpa Fire Department. Pursuant to title 11, section 49-109, the Oklahoma Firefighters Pension and Retirement Board awarded disability in the line of duty benefits at the rate of $1,259.03 per month effective July 1, 1988. In the divorce proceeding, wife claimed entitlement to half of each month’s disability payment. Husband argued the benefits were his separate property.

The trial court held that husband’s disability benefits were jointly-acquired property subject to equal division for the entire time it is paid. That court then certified the holding for interlocutory review stating it “affects a substantial part of the merits of the controversy and that an immediate appeal may materially advance the ultimate termination of litigation.” Certiorari was granted to review the holding. See Okla. Stat. tit. 12, § 952(b)(3)(1981).

Disability benefits are but one form of wage continuation plan. Others include retirement pensions, workers’ compensation and severance pay. Although courts have distinguished pension and pension-like benefits from disability benefits, an analytically persuasive and doctrinally sound basis for the distinction has not been extensively articulated. Instead, courts have tended to look at one salient feature of a wage continuation plan and classify it accordingly.

One commentator, however, has offered a more rigorous approach which “focuses on the replacement nature of the benefits and classifies benefits according to the nature of the assets they replace.” Blum-berg, Marital Property Treatment of Pensions, Disability Pay, Workers’ Compensation, and Other Wage Substitutes: An Insurance, or Replacement Analysis, 33 UCLA L.Rev. 1250, 1294 (1986). That approach is followed in resolving the instant question.

All wage continuation plans are deferred compensation and function as insurance. Retirement pensions insure against superannuation, survival beyond retirement age. They function as a substitute for life savings. If a worker was not provided retirement coverage, the additional wages received would presumably be saved for superannuation. These savings, earned during the marriage, would unquestionably constitute joint property.

Disability benefits, on the other hand, do not substitute for savings. Rather, they insure against loss of wages from disability before superannuation. Disability benefits received after divorce replace post-cover-ture wages that would be the earner’s separate property. Thus, while retirement pensions replace joint property, disability benefits replace separate property. This difference in the replacement nature of the benefits requires that disability benefits be classified as the disabled worker’s separate property.

Wife urges that Rice v. Rice, 762 P.2d 925 (Okla.1988), controls the classification of husband’s disability benefits. Rice reaffirmed the holding in Carpenter v. Carpenter, 657 P.2d 646 (Okla.1983), that, absent a specific statutory exemption, retirement pensions are jointly-acquired property subject to equitable division in a divorce. Carpenter’s classification of retirement pensions as joint property followed the strong majority view. See Blumberg, supra, at 1261 n. 46 (list of jurisdictions taking this view). But today’s question is one of first impression which asks the proper classification of disability pay in Oklahoma. While a strong majority view has not emerged, “most jurisdictions that have considered the issue treat the right to disability pay earned during marriage as the disabled spouse’s separate property insofar as that right generates benefits received after divorce.” Id. at 1253. Thus, replacement analysis follows the majority view of both retirement pensions and disability pay, although non-replacement justifications have been advanced in reaching these classifications.

Applying replacement analysis to the facts of this case, the nature of husband’s benefits determines the classification, not the fact the benefits are termed a “disability pension” in title 11. The Legislature chose to use the designation “pension” to describe firefighters’ retirement, disability and even death benefits. See Okla.Stat. tit. 11, §§ 49-106, 49-109 & 49-112 (1981 & Supp.1989). The benefits awarded to husband replace the wages he would receive but for his disability. Therefore, these earnings received after divorce are his separate property.

The trial court erroneously held that husband’s post-divorce disability benefits were jointly acquired property to be equitably divided. On remand, the trial court shall consider husband’s disability benefits as his separate property. This holding does not prevent the benefits from being treated as income for purposes of alimony or child support.

The question certified to this Court asked only whether disability benefits are jointly acquired or separate property. Wife has not asserted a right to any retirement benefits. To the contrary, in their briefs, both parties state that husband’s disability benefits are received in lieu of retirement benefits. Thus, it may appear that husband is not eligible to receive a retirement pension. If on remand, however, the trial court finds that husband has a right to retirement benefits, the value of that right must be determined. That amount must then be divided as jointly acquired property.

ORDER DIVIDING DISABILITY BENEFITS REVERSED. CAUSE REMANDED WITH DIRECTIONS.

HARGRAVE, C.J., OPALA, V.C.J., and SIMMS, DOOLIN, and SUMMERS, JJ., concur. LAVENDER, ALMA WILSON and KAUGER, JJ., concur in part and dissent in part.