## Facts

- Walter Guy became insured in 1964 under an employer-provided group term disability policy; the employer paid all premiums as part of his compensation.
- Walter and Elizabeth Guy participated in a void marriage ceremony in 1965 and later entered a valid marriage on October 30, 1970.
- Elizabeth was totally physically disabled.
- In 1973 Walter became totally disabled due to vascular damage from advanced arteriosclerosis; his employment ended, and he began receiving monthly disability payments under the policy, payable while totally disabled up to age 65.
- In divorce proceedings, Walter claimed the disability payments were his separate property.
- The trial court ruled the disability payments were community property to the extent they compensated for lost earnings during marriage and divided future payments accordingly.

## Issues

1. Whether disability benefits paid under an employer-funded group disability policy connected to employment during marriage are community property or the disabled spouse’s separate property.
2. Whether, and how, disability payments payable after divorce must be apportioned between community and separate interests based on what the payments replace.

## Decision

- The Idaho Supreme Court held that disability benefits must be characterized by a replacement analysis.
- Benefits replacing earnings during the existence of the marital community are community property.
- Benefits replacing earnings after dissolution of the community are the separate property of the disabled spouse.
- The judgment was affirmed in part and reversed in part, and the case was remanded for allocation consistent with this analysis.

## Legal Principles

- Property acquired during marriage is presumptively community property unless shown otherwise.
- Employer-paid insurance premiums provided as part of compensation are treated as earned compensation; the resulting policy interest is community to the extent earned during marriage.
- Insurance proceeds, including disability benefits, are classified by what they are intended to replace:
  - wage replacement for periods when the community exists is community property; and
  - wage replacement for periods after dissolution is separate property.
- A disability-payment stream may contain both community and separate components and must be apportioned temporally to reflect the period of wage replacement.

## Conclusion

The court required disability benefits to be divided according to their wage-replacement function over time: payments substituting for marital earnings are community property, while payments substituting for post-divorce earnings belong solely to the disabled spouse, requiring remand for proper apportionment.


Guy v. Guy, 98 Idaho 205, 560 P.2d 876 (Idaho 1977)