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The Supreme Court has voted 8-1 to uphold a 2002 Minnesota law that revokes the life insurance benefits of a spouse upon divorce.
The case stemmed from a woman, Kaye Melin, who sought to claim benefits on the life insurance policy of her deceased ex-spouse. According to court documents, Mark Sveen and Melin were married in 1997. The next year, Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his two children from a prior marriage as contingent beneficiaries.
Melin and Sveen divorced in 2007, but the divorce decree made no mention of the insurance policy and Sveen took no action to revise his beneficiary designations.
Sveen passed away four years later, and Melin and Sveen’s children subsequently made competing insurance claims and the dispute was brought to court. The Sveen children cited the Minnesota law, and the District Court decided in their favour. However, the Eight Circuit reversed the decision and held that the 2002 law should not retroactively apply to the 1997 marriage, because it violates the Constitution’s Contracts Clause.
In her opinion released Monday, Associate Justice of the Supreme Court Elena Kagan shot down the Eight Circuit’s decision. She said the law does not substantially impair pre-existing contractual arrangements.
“The law is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme,” said Kagan. She added that the law is unlikely to disturb any policyholder’s expectations at the time of contracting, because an insured cannot reasonably rely on a beneficiary designation staying in place after a divorce. For the Associate Justice, the law supplies a mere default rule, which the policyholder can undo in a moment.
“The Minnesota law places no greater obligation on a contracting party than these laws - while imposing a lesser penalty for noncompliance,” said Kagan.
