Sveen v. Melin

Background

Two children from a prior marriage and their father’s former wife disputed life insurance proceeds after the father died. The father had named his ex-wife as the primary beneficiary before Minnesota enacted a 2002 law that automatically revokes spousal beneficiary designations upon divorce. The children argued the later law canceled the ex-wife’s claim; the ex-wife argued applying the law to her existing designation violated the Constitution’s Contracts Clause.

Reasoning

The Court asked whether retroactively applying Minnesota’s automatic-revocation rule to a preexisting beneficiary designation “substantially impaired” the insurance contract. Using the two-step Contracts Clause test, the Court resolved step one in the State’s favor and did not reach step two. It gave three reasons: the statute often matches what a policyholder likely would have wanted after divorce; a purchaser cannot reasonably expect a spousal designation to survive divorce because courts may change property and beneficiary arrangements during divorce; and the statute is merely a default rule that an insured can undo immediately by filing a change-of-beneficiary form or by obtaining a court order or settlement keeping the ex-spouse as beneficiary.

Real world impact

The decision allows Minnesota’s revocation-on-divorce statute to apply to beneficiary designations made before the law, meaning contingent beneficiaries or an estate may receive proceeds when a former spouse is automatically revoked. Policyholders who want an ex-spouse to remain beneficiary must take simple steps—file paperwork or secure a court order—to preserve that choice. The opinion notes dozens of States have enacted similar rules.

Dissents or concurrances

Justice Gorsuch dissented, arguing retroactive application substantially impairs core contract terms, that reliance on existing beneficiary designations should be protected, and that less intrusive alternatives were available.