Sveen v. Melin, 138 S. Ct. 1815 (2018).
Mark Sveen married Kaye Melin in 1998. Sveen had
previously purchased a revocable life insurance policy from Metropolitan
Life Insurance Company (MetLife). Sveen named Melin as the primary
beneficiary and his children, Ashley Sveen and Antone Sveen, from a
previous relationship as contingent beneficiaries if Melin were to die
first. Sveen and Melin divorced in 2007. Sveen never updated the Metlife
policy to reflect Sveen and Melin’s divorce so Melin remained as the
designated beneficiary when Sveen died in 2011.
After Sveen purchased the insurance contract but
before he died, Minnesota enacted a revocation upon divorce statute in
2002. Minnesota Statute § 524.2-804 operates to automatically revoke an
ex-spouse as the beneficiary. The ex-spouse is treated as if he or she
predeceased the insured. This remains true unless the policyholder
redesignates the ex-spouse as the beneficiary or reaffirms the ex-spouse
as the beneficiary after the divorce.
After Sveen died, Melin filed a claim with Metlife
for the insurance proceeds as she was still named as the primary
beneficiary on the policy. MetLife filed an interpleader to determine
the identity of the proper beneficiary: Melin, the originally-named
beneficiary, or Antone and Ashley Sveen, the contingent beneficiaries.
The United States District Court for the District
of Minnesota granted summary judgment and awarded the Sveen children the
proceeds of the policy. Sveen v. Melin, Civ. No. 14-5015, 2016 WL
9000457 (D. Minn., Jan. 7, 2016). The Eighth Circuit reversed holding
that the retroactive application of the revocation-upon-divorce statute
violated the Contracts Clause of the U.S. Constitution Article 1,
Section 10, Clause 1. Sveen v. Melin, 853 F.3d 410 (2017). The
Eighth Circuit explained that the Minnesota statute violated the
Contracts Clause when applied retroactively because the policyholder’s
rights and expectations were violated by not allowing the policyholder
to rely on the law at the time the contract—the insurance policy—was
made.
The Eighth Circuit relied heavily on its earlier
ruling involving a revocation-upon-divorce statute from Oklahoma that it
found violated the Contracts Clause. In the Oklahoma case, the court
held that the statute, when applied retroactively, would substantially
impair a life insurance contract and would undermine the purpose of the
contract itself—“to provide for the financially needs of a person[]
designated by the insured.” The court explained that the statute would
be a fundamental change to the very essence of the contract itself and
could not be justified as a “reasonable means of effectuating an
important public purpose.” The court also stated it would be possible
that the policyholder would want his or her ex-spouse to remain as the
beneficiary and would have taken steps to change the beneficiary
designation if the insured no longer desired the ex-spouse to be the
beneficiary.
The Supreme Court of the United States reversed in
an 8-1 decision holding that the statute’s automatic revocation on
divorce feature did not substantially impair pre-existing contractual
arrangements. Accordingly, applying the statute to void a pre-enactment
life insurance beneficiary designation did not violate the Contracts
Clause of the United States Constitution.
Moral: The Texas equivalent statutes,
Family Code §§ 9.301 (life insurance) and 9.302 (retirement benefits),
will be effective even if the designation of the ex-spouse as a
beneficiary occurred prior to the effective dates of the statutes.