If you designate a beneficiary on a life insurance policy, should you expect your intent to be honored upon your death? You may not be able to if you live in Minnesota or more than half of the nation’s other states. So said the Supreme Court today—despite the plain language of Constitution’s Contracts Clause, which categorically prohibits states from passing “any … Law impairing the Obligations of Contracts.” The case was Sveen v. Melin. The decision was 8-1, Justice Elena Kagan writing for the Court. The dissent by Justice Neil Gorsuch goes to the heart of the matter. (For an overview of the Contracts Clause, see chapter 3 in Bob Levy and Chip Mellor’s The Dirty Dozen.)
The decision’s syllabus nicely summaries the facts:
Mark Sveen and respondent Kaye 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, petitioners Ashley and Antone Sveen, as contingent beneficiaries. The Sveen-Melin marriage ended in 2007, but the divorce decree made no mention of the insurance policy and Sveen took no action to revise his beneficiary designations. After Sveen passed away in 2011, Melin and the Sveen children made competing claims to the insurance proceeds. The Sveens argued that under Minnesota’s revocation-on-divorce law, their father’s divorce canceled Melin’s beneficiary designation, leaving them as the rightful recipients. Melin claimed that because the law did not exist when the policy was purchased and she was named as the primary beneficiary, applying the later-enacted law to the policy violates the Constitution’s Contracts Clause. The District Court awarded the insurance money to the Sveens, but the Eighth Circuit reversed, holding that the retroactive application of Minnesota’s law violates the Contracts Clause.
Read more at https://www.cato.org/blog/legislative-presumption-judicial-deference-trump-contracts-clause
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