Sveen v. Melin

Mark Sveen purchased a life insurance policy naming his wife Kaye Melin as beneficiary. After their 2007 divorce, Sveen did not update the policy. He died in 2011, and under Minnesota’s revocation-on-divorce statute, Melin’s beneficiary designation was automatically revoked in favor of Sveen’s children. Melin sued, arguing the 2002 law retroactively impaired her contract rights in violation of the Constitution’s Contracts Clause. The district court and the Eighth Circuit agreed with Melin. The Supreme Court, however, reversed in an 8-1 decision, holding that the statute did not substantially impair contractual relationships; any impairment was reasonable and necessary to serve the significant public purpose of honoring the presumed intent of policyholders. The ruling permitted automatic revocation statutes to apply even to policies predating enactment.

The U.S. Supreme Court reversed the lower courts, holding 8-1 that Minnesota’s revocation-on-divorce statute does not violate the Contracts Clause. The Court found the law imposes at most a minimal burden on contractual expectations and serves the important state interest of carrying out the insured’s likely intent.

Whether a state statute automatically revoking a former spouse’s life insurance beneficiary designation upon divorce violates the Contracts Clause when retroactively applied to a policy purchased before the statute’s enactment.

The decision confirmed that states may enact default rules automatically revoking ex-spouse beneficiary designations without offending the Contracts Clause, even retroactively. It eased the administration of life insurance proceeds and probate, reducing litigation by aligning legal outcomes with common expectations. The ruling provided significant guidance on the limits of the Contracts Clause, distinguishing between substantial impairments and permissible legislative adjustments, and encouraged uniformity in state divorce-related insurance and probate laws.