Justices Take Up Fight Over Ex-Spouse’s Insurance Benefits

(CN) – The Supreme Court agreed Friday to decide whether retroactively applying a state law that automatically revokes a former spouse’s life insurance beneficiary designation is a violation of the U.S. Constitution’s Contracts Clause.

Mark Sveen named his then-wife Kaye Melin as the primary beneficiary of his life insurance policy in 1998. The couple divorced nine years later, but Sveen never changed his policy’s beneficiary designation.

In 2002, five years before the divorce, Minnesota amended its probate law to include life insurance beneficiary designations in the revocation-upon-divorce statute. The amendment law stated, “The dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse.”

Sveen died in 2011 and Melin was still the primary beneficiary on the policy. Melin and Sveen’s adult children both made claims for the proceeds.

A federal judge ruled for the children, but the Eighth Circuit reversed in April.

A three-judge panel found that retroactively applying the 2002 amendment to Minnesota’s revocation-upon-divorce law to Sveen’s life insurance contract is a violation of the U.S. Constitution’s Contracts Clause, which bars a state law from breaching a contract.

“What matters are the policyholder’s rights and expectations, not any interest of the beneficiary,” U.S. Circuit Judge William Benton wrote for the Eighth Circuit panel.

Sveen’s children appealed to the U.S. Supreme Court, arguing in a petition for a writ of certiorari filed in June that Melin was automatically removed as Sveen’s life insurance beneficiary when the 2002 law was applied to the policy.

“This case is also unusually important,” the petition states. “A decision invalidating a state statute on federal constitutional grounds has inherent jurisprudential significance. And that significance is heightened because Minnesota’s statute is not unique. At least twenty-eight other states have adopted revocation-upon-divorce statutes that are substantively the same.”

On Friday, the justices agreed to decide whether applying a revocation-upon-divorce statute to a contract signed before the statute was enacted violates the Contracts Clause.

Per its custom, the high court did not comment on its decision to take up the case.

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