Supreme Court Revocation-on-Divorce Ruling to Affect Majority of States

It is fairly rare for the Supreme Court to decide a family law case raising constitutional issues. The last noteworthy case meeting this criteria was Obergefell v. Hodges (2015) where the Court ruled same-sex couples have a constitutional right to marry. Sveen v. Melin isn’t as groundbreaking.  

In this case the Supreme Court held 8-1 that applying Minnesota’s revocation-on-divorce statute to a life insurance beneficiary designation made before the statute’s enactment does not violate the Constitution’s Contracts Clause.

Mark Sveen and Kaye Melin married in 1997. In 1998 Sveen purchased life insurance and named Melin as his primary beneficiary and has two children from a previous marriage as contingent beneficiaries. In 2002 Minnesota adopted a revocation-on-divorce statute that cancelled beneficiary designations of a spouse upon divorce. Sveen and Melin divorced in 2007. His divorce decree made no mention of the life insurance policy, and he never revised the beneficiary designation. In 2011 Sveen died.

Sveen’s children and his ex-wife both claim they are entitled to the insurance proceeds. The children claim that Minnesota’s revocation-on-divorce statute canceled Melin’s beneficiary designation. Melin notes that the law didn’t even exist when her ex-husband bought the policy. She also argues that applying the later-enacted revocation-on-divorce statute to the policy would violate the Contracts Clause.

In an opinion written by Justice Kagan the Supreme Court concluded that the Contracts Clause does not prevent a revocation-on-divorce law from applying to a preexisting beneficiary designation. The Contract Clause provides that “[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts.” Laws affecting pre-existing contracts violate the Contracts Clause only if they “operate[] as a substantial impairment of a contractual relationship.”

The Court concluded that Minnesota’s revocation-on-divorce statute does not substantially impair pre-existing contractual arrangements for three reasons. “First, the statute is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme.” Revocation-on-divorce statutes support the presumption that “the average Joe does not want his ex inheriting what he leaves behind.”  “Second, the law is unlikely to disturb any policyholder’s expectations because it does no more than a divorce court could always have done.” In other words, divorce courts can change beneficiary designations so reasonable people cannot expect a beneficiary designation to survive a divorce. “And third, the statute supplies a mere default rule, which the policyholder can undo in a moment.” After a divorce the insured can restore his or her former spouse as a beneficiary “with the stroke of a pen.” The Court noted:  “In cases going back to the 1800s, this Court has held that laws imposing such minimal paperwork burdens do not violate the Contracts Clause.”

Twenty-six states have adopted revocation-on-divorce statutes like Minnesota’s. As a practical matter, this case likely bars in these states as well Contracts Clause challenges to applying revocation-on-divorce statutes to beneficiary designations made before the statutes were adopted.