Sveen v. Melin, 138 S. Ct. 1815 (2018).


Life Insurance


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.